Glossary of Terms

Search for specific terms or browse through the HM Insurance Group glossary to learn more about common insurance terms and keywords in Stop Loss insurance. Click on hyperlinked terms for additional information.

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Actuary: A person who develops pricing for products, evaluates trends that may require changes, reports loss ratio results and provides loss ratio projections.

Administrator: The person designated by the policyholder to be responsible for the administration of a group insurance plan.

Advance Funding: Also called “coordinated reimbursement,” this HM option provides groups with cash flow assistance for Specific Stop Loss claims by providing funds for claims payment in advance instead of reimbursement at a later date. Prior to any claims being considered for Advance Funding, the Specific deductible must be paid in full by the policyholder.

Aggregate Attachment Point: The percentage of anticipated eligible claims expenses that the policyholder must pay before Aggregate benefits will become payable to the policyholder. The Aggregate attachment point is used to determine the amount of the Aggregate monthly deductible per covered unit.

Aggregate Stop Loss Insurance: A form of Stop Loss insurance that indemnifies (reimburses) the employer when claims from all plan participants exceed the aggregate Stop Loss limit; provides protection against abnormal frequency of claims.

Aggregating Specific: Stop Loss coverage option when specific billed premium is reduced in exchange for the policyholder assuming liability for a set dollar amount (Aggregating Specific fund) of Specific claims in excess of the deductible.

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Broker: An licensed insurance specialist who usually places business with several insurance companies. Brokers represent the employer that is buying insurance and receive commissions paid by the insurance company.

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Captive Insurance Company: A limited purpose insurance company established with the specific objective of financing risks, or an in-house, self-insurance vehicle.

Carrier: The insurer that issues the insurance contract.

Contract Period: The time covered under the contract when a claim is incurred and must be paid to qualify for reimbursement.

Contract Type: Refers to the type of Stop Loss contract written over a self-funded plan and administered by a Third Party Administrator (TPA). Typical contract types are 12/12, 12/15, 12/18 or 12/24; the first number refers to the incurred period and the second to the paid period.

Cost Containment: The act of reviewing potential claimant notices for savings opportunities, pursuing potential third party recovery situations and adding competitive out-of-network discount programs and Centers of Excellence to maximize cost savings for catastrophic claims.

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Disclosure Statement: Statement an employer must complete to identify all employees who are not “actively-at-work,” all individuals who are institutionally-confined, all large claims and all potential catastrophic losses.

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Employee Retirement Income Security Act of 1974 (ERISA): Federal law that sets minimum standards for most employer health plans to provide protection for the plan’s participants. ERISA does not require an employer to provide health insurance to its employees or retirees, but regulates the operation of a health benefit plan if an employer chooses to establish one.

Experience Underwriting: Method of underwriting both at presale and renewal that considers the client's previous year's claims experience to predict future claim costs.

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Fully Insured: A type of insurance coverage in which the employer is responsible for paying premium per employee to an insurance company in exchange for that coverage. The insurance company assumes all of the risk in providing health coverage for plan participants.

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Group: The employer or group of individuals covered under a single insurance contract.

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Health Care Reform: General term referencing major creation or changes to governmental policy affecting health care, including the Patient Protection and Affordable Care Act (PPACA) and Health Care and Education Reconciliation Act of 2010 (HCERA).

HIPAA: Health Insurance Portability and Accountability Act of 1996; protects health insurance coverage for workers and their families when they change jobs; also includes electronic data interchange and privacy and security rules.

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IBNR: Incurred but not reported; claims that are in a "lag" period that occurs between the claim's incurred date and its paid date.

In-Network: Providers or health care facilities that are part of a health plan's contracted network of providers with which it has negotiated a discount for services; also refers to services rendered by such providers.

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Lasering: Either setting a higher Specific deductible for an individual, or excluding an individual with a known medical condition that is likely to result in a large claim for the Stop Loss policy.

Leveraged Trend: As first-dollar medical costs increase, clients reach their Specific deductible level sooner in the second year as compared to the first year for the same claim; if the premium rate for Stop Loss insurance does not increase similarly to the cost growth for medical treatment or if the Specific deductible is not raised in relation to cost growth, it results in greater financial impact on the Stop Loss carrier.

Loss Ratio: A measure of claims experience where incurred claims (including reserves) are divided by premiums.

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Monthly Aggregate Accommodation: An HM option where the employer can make partial payments to the Stop Loss Aggregate coverage during the policy year versus waiting until the end of the policy year, and the carrier reimburses the employer monthly for claims that exceed the monthly Aggregate deductible throughout the contract period.

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Out-of-Network: Providers or health care facilities that are not part of a contract with a PPO network that is in place for a group; also refers to services rendered by such providers.

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Paid Contract: A contract with a self-funded group that provides Stop Loss protection for all claims incurred under the life of the policy that are paid during the 12-month contract period.

Plan Year: The period toward which deductibles and coinsurance accumulate (generally 12 months).

Policy: A contract for coverage issued to a group or individual; Stop Loss policies are issued on a group basis.

Premium: The amount to be paid for an insurance policy.

Producer: An individual licensed to sell insurance in a specific state(s); also referred to as an agent or broker.

Provider Network: A network of physicians and medical practices that will provide treatment at a reduced cost to those with which a contract has been established. It is common for insureds to utilize these networks in an effort to lower costs.

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Rider: An attachment to a certificate of insurance that provides additional benefits not contained within the body of the policy.

Run-In: Claims incurred prior to the first contract year and paid after the new effective date.

Run-Out: The period of time immediately following termination of the contract when all claims incurred prior to the termination are being paid.

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Self-Administration: Administration of the group policy by the policyholder, who enrolls eligible members, maintains insurance records and beneficiary designations, collects the required contributions (if any) from the members and pays the premium to the insurance company.

Self-Funding: A method of providing employee benefits where the employer pays claims as they are presented, assuming the financial risk of paying the company's claims in exchange for flexibility in coverage options and potential savings. The plan is often administered by a Third Party Administrator (TPA) or by an insurance carrier functioning in an Administrative Services Only (ASO) capacity. Self-funded employers can purchase Stop Loss insurance to protect their finances against the risk of catastrophic claims or higher utilization that results in high claim costs.

Shock Loss: A large loss that significantly affects the experience of a group and generally reflects the claims of a single claimant during a single contract period totaling more than 50 percent of the Specific Stop Loss deductible or $50,000, whichever is less.

Specific and Aggregate Terminal Liability: An HM option where the employer may extend Specific and/or Aggregate coverage for paid claims for three or six months following termination of the policy to reduce the risk of uncovered claims when a Stop Loss policy ends.

Specific Stop Loss Insurance: Coverage that reimburses the employer for a catastrophic claim on any covered individual during a contract period. The employer must first satisfy the “per person” deductible before reimbursement of claims in excess of the deductible begins; Specific coverage protects the employer against abnormally severe claims.

Stop Loss Insurance: An agreement between a carrier and an employer which, in conjunction with a self-funded plan, limits the employer's loss to a specific amount and is designed to protect the employer from catastrophic claims.

Subrogation: The process for an insurer to pursue a third party that caused an insurance loss to the insured. This is done as a means of recovering the amount of the claim paid to the insured for the loss. Typically the claimant must initiate the subrogation process in order for the insurer to take recourse with the third party.

Summary Plan Description (SPD): The document that communicates the plan’s rights and obligations to the plan’s participants. It summarizes the material provisions of the plan document (i.e., eligibility, coverage descriptions, plan exclusions and limitations, etc.) and is typically prepared by the TPA. 

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Third Party Administrator (TPA): A person or organization, often licensed by the state in which it does business, that contracts with an insurer or employer to perform part of the administration of a benefits program, such as enrollment and collection and remission of premiums, or payment of claims. Special legal and underwriting review is required when a TPA is involved.

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Underwriting: The process of evaluating a group to determine if the insurer should assume the risk and provide coverage.

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