The terms that decide what your plan costs.

The vocabulary of a renewal, a stop loss contract, and a pharmacy agreement, defined the way we would explain it across a table. Most of these terms never appear on the rate sheet, and most of them move the price.

Aggregate stop loss

Stop loss coverage that caps the plan's total claims for the year. It pays once total claims exceed an aggregate attachment point, which is typically set at a corridor around 125 percent of expected claims. In practice it rarely pays, because it needs a broad and sustained increase across the whole population.

See also: Specific stop loss, Corridor

Contract basis

The stop loss term that decides which claims belong to which policy year, written as two numbers: months of incurred claims covered, then months in which they must be paid. Common forms are 12/12, 12/15, and 24/12.

See also: Run out, Run in coverage, Terminal liability

Corridor

The margin above expected claims at which aggregate stop loss attaches, expressed as a percentage such as 125 percent.

See also: Aggregate stop loss

Credibility weighting

How much weight an underwriter gives a group's own claims experience compared with pooled data from similar groups. Smaller groups receive lower credibility, which means more of their renewal comes from other employers' data and less from their own.

See also: Trend

Experience period

The window of claims an underwriter uses to price a renewal, often nine to twelve months of a recent year. Which months are chosen, and whether a concluded large claim sits inside them, can move the renewal significantly.

See also: Credibility weighting

Fully insured plan

A health plan where the employer pays a fixed premium and the insurance company carries the claims risk. The premium includes a carrier margin, which is the price of certainty.

See also: Level funding, Self funded plan

Group captive

An insurance vehicle owned collectively by a group of employers who pool a layer of medical stop loss risk. Members keep their own claims below the pooled layer and share in the results above it. It is a multi year commitment with collateral requirements.

See also: Self funded plan, Specific stop loss

Laser

An individual claimant carved out of a stop loss contract's standard specific deductible and assigned a higher one. A laser shifts known cost from a fixed premium line to a variable claims line that the employer carries.

See also: Specific stop loss

Level funding

A funding arrangement where the employer pays a fixed monthly amount containing a claims fund, an administrative fee, and stop loss premium. If claims come in below the claims fund, some or all of the surplus may be returned, depending on the settlement terms. It usually fits groups of roughly 25 to 150 enrolled employees with stable claims.

See also: Surplus settlement, Fully insured plan, Self funded plan

Pharmacy benefit manager (PBM)

The company that administers a health plan's prescription drug benefit: it builds the pharmacy network, negotiates with drug manufacturers, sets the formulary, and processes pharmacy claims. Its contract defines discount guarantees, dispensing fees, rebate sharing, and specialty drug pricing.

See also: Prescription drug rebates, Specialty drugs

Plan sponsor

The employer that establishes and maintains a self funded health plan. The plan sponsor takes on fiduciary duty, plan document maintenance, and compliance obligations that a fully insured carrier would otherwise carry.

See also: Self funded plan

Pooling point

In a fully insured renewal, the claim level above which an individual's claims are removed from the group's experience and charged to a shared pool instead.

See also: Experience period

Prescription drug rebates

Payments drug manufacturers make, usually to the PBM, in return for formulary placement. How rebates are defined, calculated, and passed through decides how much reaches the employer. A renewal that lists the rebate credit as not stated is not the same as one that lists zero.

See also: Pharmacy benefit manager (PBM)

Risk Analysis Plan

Trinity Risk Partners' five part methodology for rebuilding a renewal: underwriting review, large claim review, stop loss audit, pharmacy benefit audit, and plan design analysis, run in that order.

Run in coverage

Stop loss coverage that reaches back to claims incurred before the policy year began, such as in a 24/12 contract. It matters most when an employer is switching carriers or moving into self funding.

See also: Contract basis

Run out

The period after a policy year ends during which claims incurred in that year can still be paid and covered. A 12/15 contract has three months of run out.

See also: Contract basis, Terminal liability

Self funded plan

A health plan where the employer pays claims as they are incurred, plus an administrator's fee and stop loss premium to cap large claims. There is no carrier margin on claims dollars and the employer keeps what it does not spend, in exchange for lumpier cash flow and plan sponsor responsibilities.

See also: Plan sponsor, Specific stop loss

Specialty drugs

High cost medications, often for complex or chronic conditions, that are usually priced and managed separately from standard prescriptions. How a PBM contract classifies a drug as specialty affects what the plan pays.

See also: Pharmacy benefit manager (PBM)

Specific stop loss

Stop loss coverage that caps what the plan pays for any one person in a year. Claims above the specific deductible, for example $50,000, are reimbursed by the stop loss carrier. The specific deductible is the number that decides an employer's real exposure.

See also: Laser, Aggregate stop loss

Surplus settlement

The terms that decide what a level funded employer gets back when claims run below the claims fund. Some contracts return 100 percent, some a percentage, some nothing unless the employer renews, and some hold the settlement for months while claims run out.

See also: Level funding

Terminal liability

Stop loss coverage that extends payment of claims incurred during the contract after the contract ends, protecting the employer if it terminates or changes carriers.

See also: Run out, Contract basis

Trend

An assumption about how much medical and pharmacy costs will rise between the experience period and the coming plan year. Trend is a forecast, not a measurement, and it can be discussed.

See also: Credibility weighting, Experience period