Disability — An individual's physical or mental inability to perform the major duties of his or her occupation because of an illness or injury.

Disability Insurance — A form of health insurance which provides periodic payments when the insured is unable to work as a result of sickness or injury.

Disability Buy-Sell — A disability income policy used to fund a disability buy-sell agreement whereby the business interest of a disabled stockholder following the elimination period. The policy's benefits may be paid in a lump sum or in installments.

Disability Income Insurance — A form of health insurance that provides periodic payments to replace income, actually or presumptively lost, when the insured is unable to work as a result of illness or injury.

Dependent — A covered person who relies on another person for support or obtains health coverage through a spouse, parent or grandparent who is the covered person under a plan.

Diagnostic and Treatment Codes — Codes that consist of a brief, specific description and number associated with each diagnosis or treatment.

Dividend — In a permanent life insurance policy, the return of part of the life insurance premium that is based on the insurer's investment, mortality, and expense experience. Dividends are not guaranteed.

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E

Earned Income: Gross salary, wages, commissions, fees, etc., derived from active employment. This does not include investment income, rents, or amounts received from annuities or insurance policies.

Effective Date — The date insurance coverage begins.

Eligible Dependent — a dependent of a covered person (spouse, child, or other dependent) who meets all requirements specified in the contract to qualify for coverage and for who premium payment is made.

Eligible Expenses — The lower of the reasonable and customary charges or the agreed upon health services fee for health services and supplies covered under a health plan.

Elimination Period — In a disability income policy, this is the period of time between the date the disability commences and the beginning of the benefit payment period. It is sometimes referred to as the waiting period. In a residual disability income policy, often referred to as a qualification period. Under a long-term care policy, the elimination period is the number of days after long-term care begins that an insured must wait before benefit payments begin. This period is also known as the waiting period.

Employee Assistance Programs (EAPs): Mental health counseling services that are sometimes offered by insurance companies or employers. Typically, individuals or employers do not have to directly pay for services provided through an employee assistance program.

Employee Retirement Income Security Act (ERISA) — A law that establishes the rights of pension plan participants, standards for the investment of pension plan assets, and requirements for the disclosure of plan provisions and funding.

Endorsement — A written agreement attached to a policy expanding or limiting the benefits otherwise payable under the policy. Same as a "rider."

Entity Arrangement — An arrangement between the business entity and the business owners that in the event of an owner's death or disability, the business entity will purchase the business interest of the diseased or disabled owner.

ERISA — See Employee Retirement Income Security Act.

Evidence of Insurability — Group disability coverage is generally sold as "guaranteed issue" which means that evidence of insurability is not required. However, under certain circumstances (e.g., late enrollment or a high benefit maximum), an employee must provide medical or financial information as proof to the insurance company that he or she is insurable.

Exclusions: Medical services that are not covered by an individual's insurance policy.

Expenses — The regular business expenses which an insured may deduct from gross earned income for federal tax purposes.

Explanation of Benefits (EOB) — The statement sent to an insured by their health insurance company listing services provided, amount billed, eligible expenses, payment made by the health insurance company and what the client must pay.

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F

Formulary — A listing of drugs, classified by therapeutic category or disease class, that are considered preferred therapy for a given population.

Fully Funded Plan — A health plan under which an insurer or MCO bears the financial responsibility of guaranteeing claim payments and paying for all incurred covered benefits and administration costs.

Future Increase Option — In a disability income policy an optional benefit which allows the insured to purchase additional coverage up to a stated age, regardless of health, as long as his or her income warrants the increase.

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G

Gatekeeper — A term used to describe the primary care physician’s role in a managed health care plan. In this role the physician authorizes all medical services delivered to the insured by other physicians or health care providers.

Generic Drug — A drug which is a "twin" to a brand name drug and which is allowed to be produced after the brand name drug's patent has expired. It is also called a "generic equivalent."

Grace Period — The time - usually 31 days - during which a policy remains in force after the premium is due but not paid.

Guaranteed Issue — An insurance policy provision under which all eligible persons who apply for insurance coverage and who meet certain conditions are automatically issued an insurance policy.

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Health Maintenance Organizations (HMOs) — Health Maintenance Organizations represent "pre-paid" or "capitated" insurance plans in which individuals or their employers pay a fixed monthly fee for services, instead of a separate charge for each visit or service. The monthly fees remain the same, regardless of types or levels of services provided, Services are provided by physicians who are employed by, or under contract with, the HMO. HMOs vary in design. Depending on the type of the HMO, services may be provided in a central facility, or in a physician's own office (as with IPAs.)

HIPAA — A Federal law passed in 1996 that allows persons to qualify immediately for comparable health insurance coverage when they change their employment or relationships. It also creates the authority to mandate the use of standards for the electronic exchange of health care data; to specify what medical and administrative code sets should be used within those standards; to require the use of national identification systems for health care patients, providers, payers (or plans), and employers (or sponsors); and to specify the types of measures required to protect the security and privacy of personally identifiable health care. Full name is "The Health Insurance Portability and Accountability Act of 1996."

HMO — See Health Maintenance Organization.

Home Health Agency — A certified facility approved by a health plan to provide services under contract.

Home Health Services — Health care services provided by a licensed home health agency in the patient's home which is a covered expense under Part A of Medicare.

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I

Income — Gross earned income, less business expenses, but before any other deductions. Income includes salaries, wages, fees, commissions, bonuses, business profits or other payments for personal services. It does not include unearned income from savings, investments, or real property.

Indexing — A provision which increases the insured's pre-disability earnings every year according to a given formula, so residual disability benefits will not lose purchasing power because of inflation.

Inflation Factor — A premium loading to provide for future increases in medical costs and loss payments resulting from inflation.

Inflation Protection — Provisions in a disability or long-term care insurance policy that increase benefit levels to account for anticipated increases in the cost of covered services.

Initial Eligibility Period — The time period during which prospective members can apply for coverage without providing evidence of insurability.

Insured — a person who has obtained health insurance coverage under a health insurance plan.

Intermediate Care — A level of care associated with a skilled nursing facility which provides nursing care under the supervision of physicians or a registered nurse. The care provided is a step down from the degree of care described as skilled nursing care.

Incontestability — A provision that places a time limit - up to two years - on a company´s right to deny payment of a claim because of suicide or a material misrepresentation on your application.

Irrevocable Beneficiary — A named beneficiary whose rights to life insurance policy proceeds are vested and whose rights cannot be canceled by the policy owner unless the beneficiary consents.

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J

Joint Life Insurance — Insurance policies that offer benefits for two or more lives, payable on the first death, the second death, or upon each death. Also known as first-to-die life insurance and joint-and-last survivor insurance.

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K

Key Person — Any person or employee whose continued participation in a business is necessary to the success of the business and whose death or disability would cause the business a significant financial loss.

Key Person Insurance — A type of life insurance or disability insurance that protects a business from the financial losses that occur when a key person dies or becomes disabled.

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L

Lapse — Termination of a policy due to non-payment of premiums.

Level Premium Life Insurance — Life insurance for which the premium remains the same from year to year. The premium is normally more than the actual cost of protection during the earlier years of the policy and less than the actual cost in the later years. The building of a reserve is a natural result of level premiums. The payments in the early years, together with the interest that is to be earned, serves to balance out the underpayment of the later years.

Limitations — There may be specific provisions included in group disability plans that limit coverage in certain situations. Often only limited benefits are payable for specific conditions or under specific circumstances (e.g., mental illness and pre-existing conditions).

Loan (Policy Loan) — A loan made by a life insurance company from its general funds to a policyowner on the security of the cash value of a policy.

Long-Term Care (LTC) — Care which is provided for persons with chronic diseases or disabilities. The term includes a wide range of health and social services provided under the supervision of medical professionals.

Long-Term Disability Insurance — A group or individual policy which provides coverage for longer than a short term, often until the insured reaches age 65 in the case of illness and for the remainder of his lifetime in the case of accident.

Loss of Income — The difference between an insured's prior income and current income. In better policies, if the loss of income is more than 75% of prior income, the loss is deemed to be 100% for purposes of the Residual Disability Rider.

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M

Managed Care — a health care system under which physicians, hospitals, and other health care professionals are organized into a group or “network” in order to manage the cost, quality and access to health care. Managed care organizations include Preferred Provider Organizations (PPOs) and Health Maintenance Organizations (HMOs).

Major Medical Insurance — A type of Health Insurance that provides benefits up to a high limit for most types of medical expenses incurred, subject to a large deductible. Such contracts may contain limits on specific types of charges, like room and board, and a percentage participation clause sometimes called a coinsurance clause. These policies usually pay covered expenses whether an individual is in or out of the hospital. (H) Managed Care A system of health care where the goal is a system that delivers quality, cost effective health care through monitoring and recommending utilization of services, and cost of services.

Mandatory Rehabilitation — Based on the premise that most people want to work in order to lead active, productive lives, a "mandatory" rehabilitation provision encourages disabled employees to participate in rehabilitation efforts whenever appropriate. Such a provision allows for termination of benefits if the employee refuses to cooperate or participate with a rehabilitation plan.

Maximum Monthly Benefit — This is the highest dollar amount a disabled employee can receive on a monthly basis under the LTD plan.

Member — Anyone covered under a health plan (enrollee or eligible dependent).

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N

Noncancellable ("Non-Can") — A contract of disability income insurance in which the insured has a right to continue in force by payment of premiums, as set forth in the contract, for a substantial period of time, also as set forth in the contract. During that period of time, the insurer has no right to make any change in any provision of the contract. Note that this is in contrast to Guaranteed Renewable, in which the premium may be increased by classes. The premium for noncancellable policies must remain as stated in the policy at the time of issue.

Non-Occupational Policy — A policy or provision of a policy which excludes accidents occurring on the job, when such employment is covered by workers compensation.

Nursing Home — A licensed facility which provides general nursing care to those who are chronically ill or unable to take care of necessary daily living needs. May also be referred to as a Long Term Care facility.

O

Office Visit — Services provided in the physician's office.

Open Access — Allows a participant to see another participating provider of services without a referral. Also called open panel.

Open Enrollment Period — A period during which members can elect to come under an alternate plan, usually without providing evidence of insurability.

Optional Benefit — An additional benefit offered by the insurance company to certain occupational classes which may be included in a policy at the applicant's request, for an additional premium.

Other Income Benefits (Benefit Integration) — While disabled, an insured may be eligible for benefits from other sources. Benefits payable under a long-term disability plan may be offset (reduced) by other sources of disability income such as Social Security, workers compensation, or disability benefits received from other employer-sponsored plans.

Out-of-Pocket Costs — The amounts the covered person must pay out of his or her own pocket. This includes such things as coinsurance, deductibles, etc.

Out-of-Pocket Limit — The maximum coinsurance an individual will be required to pay, after which the insurer will pay 100% of covered expenses up to the policy limit.

Outpatient — A patient who is not a bed patient in the hospital in which he or she is receiving treatment.

Overhead Expense Insurance — Insurance which covers such things as rent, utilities, and employee salaries when a business owner becomes disabled. The insurance benefit is generally not a fixed amount, but pays the amount of expenses actually incurred.

Over-The-Counter Drug (OTC) — A drug that can be purchased without a prescription.

Own Occupation (Own Occ) — Under this definition of disability, an insured will be considered disabled only if he or she is unable to perform the duties of his or her occupation.

Out-of-Pocket Maximum — the total payments that must be paid by a covered person (i.e., deductibles and coinsurance) as defined by the contract. Once this limit is reached, covered health services are paid at 100% for health services received during the rest of that calendar year.

Owner — As named in the policy schedule page, the owner's rights include, but are not limited to, the right to renew the policy and to request any change in benefits.

Own Occupation (Own Occ) — A definition of disability which states that as long as the insured is unable to perform the duties of his or her regular occupation (or occupations, if more than one) at the time of disability, the insured will be considered eligible to receive the full benefit under the policy. return to top P

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P

Paid-Up Additional Insurance Option — An option, available to the owners of participating life insurance policies, that allows the policyowner to use policy dividends to purchase additional insurance on the insured’s life; the paid-up additional insurance is issued on the same plan as the basic policy and in whatever face amount the dividend can provide at the insured’s attained age.

Partial Disability — A condition in which, as a result of injury or sickness, the insured cannot perform all of the duties of his occupation but can perform some. Exact definitions vary from policy to policy.

Participation — The number of employees enrolled compared to the total number eligible for coverage. Many times, a minimum participation percentage is required.

Pension Plan — An agreement under which an employer or employee organization establishes a plan to provide covered employees with a lifetime monthly income benefit that begins at their retirement. The covered employees are pension plan participants. The entity that establishes or maintains the pension plan is the pension plan sponsor.

Permanent and Total Disability — Total disability from which the insured does not recover. When used as a definition in a policy (usually a life insurance policy rider), "permanent" is presumed after a stated period of time, commonly six months.

Permanent Partial Disability — A condition where the injured party's earning capacity is impaired for life, but he is able to work for reduced pay.

Policyholder — In group insurance, the employer or other type of organization that decides what kind of coverage to purchase for the group, negotiates the terms of the master contract, enters into a group insurance contract with the insurer, and usually administers part or all of the coverage.

Policy Owner — The person or party who owns an individual insurance policy. This person may be the insured, the beneficiary or another person. The policy owner usually is the one who pays the premium and is the only person who may make changes to a policy.

Policy Period — The period a policy is in force, from the beginning or effective date to the expiration date.

Policy Rider — An addition to an insurance policy that becomes a part of the insurance contract and that is as legally effective as any other part of the policy. Riders usually expand or limit the benefits payable under the contract. Sometimes called and endorsement.

Point-of-Service Plan — This type of plan is a hybrid between an HMO and a PPO and allows a choice of whether to receive services from a participating or nonparticipating provider.

Portability — The degree to which an individual’s insurance coverage or pension benefits can be continued when the participating individual leaves the providing benefit plan.

Practical Nurse — A licensed individual who provides custodial type care such as help in walking, bathing, feeding, etc. Practical nurses do not administer medication or perform other medically related services.

Pre-Admission Authorization — A cost containment feature of many group medical policies whereby the insured must contact the insurer prior to a hospitalization and receive authorization for the admission.

Preexisting Condition — A physical condition that existed prior to the effective date of a policy. In many Health policies these are not covered until after a stated period of time has elapsed.

Preferred Provider Organization (PPO) — An organization of hospitals and physicians who provide, for a set fee, services to insurance company clients. These providers are listed as preferred and the insured may select from any number of hospitals and physicians without being limited as with an HMO. Coverage is 100%, with a minimal copayment for each office visit or hospital stay. Contrast with Health Maintenance Organization.

Prescription Medication — A drug which can be dispensed only by prescription and which has been approved by the Food and Drug Administration.

Presumptive Disability — A disability involving the loss of sight, hearing, speech, or any two limbs, and which is presumed to be a permanent and total disability. In such cases, the insurer does not require the insured to submit to periodic medical examinations to prove continuing disability.

Preventive Care — This type of care includes routine physical examinations and immunizations. The emphasis is on preventing illnesses before they occur.

Primary Care — Basic health care provided by doctors who are in the practice of family care, pediatrics, and internal medicine.

Primary Care Physician — Some health insurance plans require members to select and seek treatment from a primary physician who either provides treatment or refers the member to an appropriate specialist within the approved health care network.

Primary Coverage — Primary coverage pays expenses first, without consideration whether or not there is any other coverage. See also Coordination of Benefits.

Provider — Any individual or group of individuals that provide a health care service such as physicians, hospitals, etc.

Participating Provider — A medical provider who has been contracted to render medical services or supplies to insureds at a pre-negotiated fee. Providers include hospitals, physicians, and other medical facilities.

Paid-up Insurance — Insurance that will remain in force with no need to pay additional premiums.

Participating Policy — A life insurance policy that is eligible for the payment of dividends by the insurer.

Permanent Life Insurance — Any form of life insurance except term insurance; generally insurance that builds up a cash value, such as whole life.

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Q

Qualifying Event — An occurrence (such as death, termination of employment, divorce, etc.) that triggers an insured's protection under COBRA or Continuation, which requires continuation of benefits under a group insurance plan for former employees and their families who would otherwise lose health care coverage.

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Rated Policy — A policy issued at a higher premium to cover a person classified as a greater-than-average risk, usually due to impaired health or a dangerous occupation.

Reasonable and Customary (R &C) — A term used to refer to the commonly charged or prevailing fees for health services within a geographic area. A fee is generally considered to be reasonable if it falls within the parameters of the average or commonly charged fee for the particular service within that specific community. This term can also be referred to as "Prevailing Rate", "Covered Charge", "Allowable Charge" and/or "Usual" "Reasonable" and "Customary" amount.

Recurrent Disability — The recurrent disability provision is designed to protect an employee who tries to return to work but becomes disabled again from the same or a related cause. If this happens within a certain period of time, the employee will be considered disabled from the original disability, and will not be subject to a new elimination period. This encourages an employee to return to work without fear of losing benefits.

Rehabilitation — Rehabilitation refers to the restoration of or improvement in an employee's health and functionality. It usually involves a program of clinical and vocational services with the goal of returning a disabled employee to an active, productive life, and a meaningful occupation if possible.

Renewable Term Insurance — Term insurance which can be renewed at the end of the term, at the option of the policyowner and without evidence of insurability, for a limited number of successive terms. The rates generally increase at each renewal as the age of the insured increases.

Residual Disability — The form of disability which becomes defined as partial disability when an insured has returned to work immediately following a period of total disability.

Residual Income — A clause used with disability income policies that provides for benefits to be paid when the insured can do some but not all of his/her normal duties. For instance, if the insured suffers a disability that causes him or her to lose a third of his or her earning power, the residual disability clause would provide one-third of the benefit that the policy would provide for total disability.

Respite Care — Normally associated with long-term or Hospice care, respite care is a benefit to family members of a patient whereby the family is provided with a break or respite from caring for the patient. The patient is confined to a nursing home for needed care for a short period of time.

Restoration of Benefits — An provision in some long-term care plans which restores a person's lifetime maximum benefit amount in small increments after a claim has been paid. Usually, only a small amount ($1,000 to $3,000) may be restored annually.

Return to Work Provision — In a disability policy, to encourage employees to return to work as soon as they become physically able, an additional incentive is usually provided for a certain period of time, and is called a return to work provision. Under this provision, the employee can receive up to 100 percent of pre-disability earnings based on a combination of disability benefits and return-to-work earnings.

Return of Premium — A rider or provision in an insurance policy agreeing to pay a benefit equal to the sum of all the premiums paid, minus claims paid, if claims over a stated period of time do not exceed a fixed percentage of the premiums paid.

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S

Section 125 Plan — A plan which provides flexible benefits. This plan qualifies under the IRS code which allows employee contributions to meet with pre-tax dollars.

Self-Funded Plan — Plan of insurance where an employer, which has fairly predictable claim costs, pays the claims rather than an insurance company. See also Administrative Services Only.

Short-Term Disability Insurance — A group or individual policy usually written to cover disabilities of 13 or 26 weeks duration, though coverage for as long as two years is not uncommon. Contrast with Long-Term Disability Insurance.

Skilled Nursing Facility (SNF) — A facility designed to qualify for treatment to Medicare eligible people. Included is treatment for rehabilitation and other care such as 24-hour nursing coverage, physical, occupational, and speech therapies, etc.

Split Dollar Coverage — An arrangement of Disability Income Insurance in which the employer and employee each pay a portion of the premium. The employer purchases coverage for the sick pay or paid disability leave provided as an employee benefit. The employee pays for disability coverage beyond what the employer provides as a benefit.

Summary Plan Description — This is a recap or summary of the benefits provided under the plan. It is used most often with employees covered by self-funded plans.

Survivor Benefit — The survivor benefit is a lump sum payment that will provide benefits to the insured's eligible survivors in the event the insured dies while receiving disability payments. This is an optional benefit in most policies.

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T

Term Insurance — Life insurance that does not build up cash value and where the premium normally increases as the insured gets older.

Total Disability — A degree of disability from injury or sickness that prevents the insured from performing the duties of any occupation from remuneration or profit. The definition in any given case depends on the wording in a covering policy.

Trend Factor — The factor applied to rates which allows for such changes as increased cost of medical providers, the cost of new and expensive medical technology, etc.

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U

Underwriting — the act of reviewing and evaluating prospective insureds for risk assessment and appropriate premium.

Universal Life Insurance — A flexible premium life insurance policy under which the policyowner may change the death benefit from time to time (with satisfactory evidence of insurability for increases) and vary the amount or timing of premium payments. Premiums (less expense charges) are credited to a policy account from which mortality charges are deducted and to which interest is credited at rates which may change from time to time.

Usual, Customary, and Reasonable (UCR) — See Reasonable and Customary.

Utilization — Utilization refers to how much a covered group uses a particular health plan or program.

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Variable Universal Life (VUL) Insurance — A form of permanent life insurance that combines the premium and death benefit flexibility of universal life insurance with the investment flexibility and risk of variable life insurance. With this type of policy, the death benefit and the cash value fluctuate according to the contract’s investment performance.

Vested — The status of a retirement plan participant who has met requirements giving him or her the right to receive partial or full retirement benefits even if he or she terminates employment prior to retirement.

Vision Care Coverage — Supplemental medical expense coverage that provides benefits for expenses incurred in obtaining eye examinations and corrective lenses.

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W

Waiting Period — In order to become eligible for coverage under the policy, an individual must satisfy a certain number of continuous days of service as an active, full-time employee. This is known as the waiting period. (In addition, a waiting period can also be the time period between when a disability occurs and when payments from the disability insurance policy begin. This is called an elimination period.)

Waiver of Premium — When an individual becomes disabled and eligible for benefits, no further disability premium payments are required as long as benefits are being paid out.

Whole Life Insurance — Life insurance that is kept in force for a person's whole life as long as the scheduled premiums are maintained. All whole life policies build up cash values. Most whole life policies are guaranteed as long as the scheduled premiums are maintained. The variable in a Whole life Policy is the dividend which could vary depending on how well the insurance is doing. If the company is doing well and the policies are not experiencing a higher mortality than projected, premiums are paid back to the policy holder in the form of dividends. Policyholders can use the cash from dividends in many ways. The three main uses are: it can be used to lower or vanish premiums, it can be used to purchase more insurance or it can be used to pay for term insurance.