Elizabeth Anderson

By Elizabeth A. Anderson, Jumpstart:HR



As you browse through your employer health insurance plan information, do you ever feel baffled by health benefit terminology and jargon? Well, Jumpstart:HR is here to help! We have compiled a list of commonly used employee benefit and insurance terms, along with the definition, to help ease your understanding of important aspects regarding employee coverage. Be sure to print, bookmark and share this page with other people who might find the info useful!


Brand-Name Drug*: A prescription drug which is marked with a specific brand name by the company that manufacturers it.

*May cost insured individuals a higher co-pay than generic drugs on some health plans.

Carrier: The insurance company who is insuring the plan.

Claims: Formal requests made by an insured person for the benefits provided by a policy.

COBRA (Consolidated Omnibus Budget Reconciliation Act): Federal legislation that requires group health plans to provide health plan members the opportunity to purchase continued coverage in the event their insurance is terminated.

Co-Insurance: The percentage of covered expenses an insured individual shares with the carrier. For example, in an 80/20 plan, the plan member’s co-insurance is 20%. If applicable, co-insurance applies after the insured employee pays the deductible and is only required up to the plan’s stop-loss amount.

Co-Pay: The amount an insured individual must pay toward the cost of a particular benefit.

Deductible: The dollar amount an insured individual must pay for covered expenses during a calendar year before the plan begins paying co-insurance benefits.

Dependents: Usually the spouse and the unmarried children (adopted, step, or natural) of an employee. As of the repealing of DOMA (Defense of Marriage Act) in 2013, this now can include dependents of same-sex marital spouses.

Donut Hole Coverage: The temporary limit, or coverage gap, on what the drug plan will cover for drug prescriptions, as with most Medicare Prescription Drug Plans.

Effective Date: The date requested by an employer for insurance coverage to begin.

Exclusions: Expenses which are not covered under an insurance plan.

Explanation of Benefits (EOB): A carrier’s written response to a claim for benefits.

Generic Drug: The chemical equivalent to a “brand name drug”. These drugs cost less, and the saving is passed onto health plan members in the form of a lower co-pay.

Group Insurance: An insurance contract made with an employer or other entity that covers individuals in the group.

Health Maintenance Organization (HMO): An alternative to commercial insurance that stresses preventive care, early diagnosis, and treatment on an outpatient basis. HMOs are licensed by the state to provide care for enrollees by contracting with specific health care providers to provide specific benefits. Many HMOs require enrollees to see a particular primary care physician (PCP) who will refer them to a specialist if deemed necessary.

HIPAA: Health Insurance Portability and Accountability Act of 1996. This law relates to underwriting, pre-existing limitations, guaranteed renewal, COBRA, and certification requirements in the event someone terminates from the plan.

Indemnity Insurance Plans: Traditional insurance plans (not HMOs or PPOs) which permit insured individuals to choose their doctors and hospitals. Insured individuals do not have to choose doctors or hospitals from a specific list of providers, which is also called “fee-for-service” plans.

In-Network: Describes a provider or health care facility which is part of a health plan’s network. When applicable, insured individuals usually pay less when using an in-network provider.

Lifetime Maximum Benefit: The maximum amount a health plan will pay in benefits to an insured individual.

Limitations: A restriction on the amount of benefits paid out for a particular covered expense.

Long-Term Disability (LTD): Insurance which pays employees a percentage of monthly earnings in the event of disability.

Managed Care: The coordination of health care services in the attempt to produce high quality health care for the lowest possible cost.

Multiple Employer Trust (MET): An arrangement created to obtain health and other benefits for participating employer groups. Small employers can pool their contributions to receive the advantage of large group underwriting.

Network: A group of doctors, hospitals, and other providers contracted to provide services to insured individuals for less than their usual fees. Provider networks can cover large geographic markets and/or a wide range of health care services. If a health plan uses a preferred provider network, insured individuals typically pay less for using a network provider.

Out-Of-Network: Describes a provider or health care facility which is not part of a health plan’s network. Insured individuals usually pay more when using an out-of-network provider, if the plan uses a network.

Out-Of-Pocket Maximum: The total of an insured individual’s co-insurance payments and co-payments.

Plan Administration: Overseeing the details and routine activities of installing and running a health plan, such as answering questions, enrolling new individuals for coverage, billing and collecting premiums, etc.

Point-Of-Service (POS): A health plan which allows the enrollee to choose HMO, PPO, or indemnity coverage at the point of service (time the services are received).

Pre-Certification: An insurance company requirement that an insured obtain pre-approval before being admitted to a hospital or receiving certain kinds of treatment

Preferred Provider Organization (PPO): A network or panel of physicians and hospitals that agrees to discount its normal fees in exchange for a high volume of patients. The insured individual can choose from among the physicians on the panel.

Premiums: Regular and frequent payments made by an employer (often split with the employee) to an insurance company providing coverage.

Provider: Any person or entity providing health care services, including hospitals, physicians, home health agencies, and nursing homes, usually licensed by the state in which they practice.

Referral: Within many managed care plans, transfer to specialty physician, or specialty care by a primary care physician.

Rider: A modification to a Certificate of Insurance policy regarding clauses and provisions of a policy. A rider usually adds or excludes coverage.

Short-Term Medical: Temporary health coverage for an individual for a short period of time, usually from 30 days to six months.

Small Employer Group: Groups with 1-99 employees. The definition of small employers groups may vary between states.

State Mandated Benefits: State laws requiring that commercial health insurance plans include specific benefits.

Stop-Loss: The dollar amount of claims filed for eligible expenses at which the insurance begins to pay at 100% per insured individual. Stop-loss is reached when an insured individual has paid the deductible and reached the out-of-pocket maximum amount of co-insurance.

Third Party Administrator (TPA): An organization responsible for marketing and administrating small group and individual health plans. This includes collecting premiums, paying claims, providing administrative services, and promoting products.

Underwriter: The entity that assumes responsibility for the risk, issues insurance policies, and receives premiums.

Waiver of Coverage: A section on the enrollment which states that an employee was offered insurance coverage but opted to refuse this coverage.

Worker’s Compensation Insurance: Insurance coverage for work-related illness and injury. All states require employers to carry this insurance.


What are other benefit terms that commonly cause confusion? Was this helpful? Let us know!