A Helpful Guide to Stop Loss Insurance Industry Jargon

Insurance industry terminology can be confusing and overwhelming. In addition, Stop Loss insurance has its own set of jargon that can add to the potential confusion.

Below is a list of terms you may come across when researching Stop Loss insurance. If you would like to discuss more about how your business can benefit, please contact us.

Actuary

A professional who measures and manages risk and uncertainty using financial theories, mathematics and statistics, and who develops pricing for products, evaluates trends, reports loss ratio results and provides loss ratio projections.

Aggregate Claim Auditor

An auditor who reviews total paid claims for a group that has exceeded the annual aggregate deductible.

Aggregate Factor

The dollar figure that is multiplied by the number of covered persons each month during the contract period to calculate the annual aggregate deductible.

Aggregate Stop Loss Insurance

The form of stop loss coverage that provides protection for the employer against the accumulation of total claims for the group as a whole exceeding a stated level. This is protection against abnormal frequency of claims in total rather than abnormal severity of a single claim (Specific stop loss).

Beneficiary

The person(s) who will be paid life insurance benefits under the policy due to the death of the insured person.

Claims Corridor

The area that represents the risk corridor above expected claims. For level funding products, this corridor is typically 10% except where state mandates require it to be higher.

Claim Cost Negotiation

Negotiation with a healthcare provider either for a pre-determined rate (prospective negotiation) or a reduction in charges (retrospective negotiation).

Contract Period

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

Contract Type

The type of Stop Loss contract written over a self-funded plan and administered by a Third Party Administrator (TPA).

Cost Containment

The features in a plan of benefits or in the administration of a plan designed to reduce or eliminate certain charges to the plan such as charges for unnecessary surgery or hospital days.

Disclosure

A statement an employer must complete which identifies all employees who are not “actively-at-work,” all individuals who are an in institution, all large claims and all potentially catastrophic losses.

EDI (Electronic Data Interchange)

The electronic exchange of data, such as medical claim information.

Employee Retirement Income Security Act of 1974 (ERISA)

The 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.

Health Care Reform

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

ICD-9 and ICD-10 CM (International Classification of Disease-Clinical Modification)

The list of official disease descriptions and their universally accepted numeric codes used for provider billings.

Laser

The practice of assigning a higher Specific deductible for an individual with a known condition that is likely to exceed the Specific deductible.

Loss Limit

Maximum amount of covered expenses incurred by each covered person, which can be used to satisfy the aggregate deductible.

Loss Ratio

The ratio used to measure the amount of claims reimbursed by the Stop Loss insurer vs. the premium collected to reimburse all claims.

Net Premium

The premium remaining after commission fees are deducted.

PPO

Group (network) of preferred healthcare providers that have agreed to provide their services to member groups of the PPO for a discounted fee.

Risk Management

The process of applying strategies to assess a large claim’s potential cost.

Rider

An attachment to a certificate that provides additional benefits not contained in the certificate.

Run-In Claims

Incurred prior to the first contract year and received after the new effective date. These claims can be paid under a “current year” contract that includes a run? in provision.

Run-Out

The run?out period refers to the period of time immediately following termination, during which time all claims incurred prior to the termination date are being paid.

Self-Administration

The administration of the group policy by the policyholder, who enrolls eligible members, maintains insurance records and beneficiary designations, collects the required contributions from the members and pays the premium to the insurance company.

Self-Funding

The method of providing employee benefits in which the group does not purchase conventional health insurance but rather elects to pay claims directly and purchase stop loss insurance to cover abnormal risks and claim fluctuations.

Shock Loss

A large loss that significantly affects the experience of a group.

Subrogation

The process that allows an insurance company to seek recovery or reimbursement when it has paid claims for injury or illness that may have been caused by a third party.

Terminal Liability

A stop loss product that provides the employer with additional coverage upon termination of the self-funded plan for claims paid within three months after the end of the policy.

Third Party Administration (TPA)

This refers to the third party/entity administering a plan.

Underwriter

An individual responsible for evaluating whether or not an insurer should assume a particular risk.

 

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In 2011, the top 5 most expensive medical conditions treated in US hospitals were: Septicemia, Osteoarthritis, Complication of device, implant or graft, Liveborn, and Acute myocardial infarction

From 2010 to 2013, the number of claims that were individually $1 million or above rose by 1,000%

In 2017 approximately 18% of the American public will purchase insurance through exchanges, radically transforming the health insurance landscape.

In 2014, 98% of large firms (= 200 Workers) offer 1+ wellness programs to their employees.

The most costly 1% of patients account for 20% of national health expenditures – accruing average annual expenses of nearly $90,000 per person.

6% of firms offering fully-insured plans report they intend to self-insure because of Obamacare.

In 2014, PPO plans remained the most common plan type, enrolling 58% of covered workers.

In 2012, 93% of businesses with 5,000+ employees and 80% of companies with 1,000-4,999 employees were self-funded

Massachusetts has the third-highest prevalence of self-funded insurance in the small-group market (Fewer than 50 employees).

In 2013, the average deductible was $2,906 for individuals selecting plans from marketplaces. This compares with average deductibles of $1,135 for an individual with employer coverage.

In 2013, the average annual premiums for employer-sponsored health insurance are $5,884 for single coverage and $16,351 for family coverage, up 5% and 4% respectively from 2012.

From 2010 – 2013, cancer followed by chronic/end stage renal disease and leukemia accounted for the top 3 costliest illnesses.