Group Benefits Terminology A-Z

Actively at Work - The employee is at work for the employer (not disabled or on leave). Detailed definition is included in the group contract.
AD&D - Accidental Death & Dismemberment - pays for accidental death, or for loss of limb, eyesight, etc.
Agent of Record - The Agent of Record is the advisor appointed by the plan sponsor. An AOR letter is required on the plan sponsor’s letterhead in order for the insurer to pay commission and to release information to the advisor.
ASO - Administrative Services Only - a non-insured plan where the Employer is paying for all the claims plus an administration fee for the Insurer’s claim payment services.
Assignment – When used in the context of health or dental claims, it means the employee can “assign” payment to the Insurer. This is done, for example, with a dentist so that the dentist can bill the Insurer direct and not require payment up front from the patient.
Anti-Selection – A situation where only the individuals in poor health join the plan and health individuals do not; where the option is available for employees to opt in or out; the smaller the group, the less “choice” there needs to be to avoid anti-selection.
 
Benefit or Benefit Amount - More correctly called the “volume”, this is the amount of insurance. For example, an employee insured for $50,000 of Life insurance has a benefit of $50,000 or a volume of $50,000.
 
CI - Critical Illness Insurance – pays a lump sum tax free amount to the insured on diagnosis of serious illness such as cancer, stroke, etc.
Class – When referring to employee benefits, “class” is a group of employees that have identical benefits. Example: Class A could be Executives, Class B could be Office Staff, and
Class C could be Yard Workers. Each would enjoy a different level of benefits.
COLA – Cost of Living Adjustment - usually a benefit that can be added to Long Term Disability, it allows the benefit to increase each year based on a defined formula that is usually tied to CPI (Consumer Price Index).
CPP - Canada Pension Plan (and QPP Is Quebec Pension Plan).
Conversation Privilege- Contractual right for plan members to apply to replace group coverage the lose with individual coverage without a need to submit evidence of insurability.
COB – Coordination of Benefits - This clause helps insurers determine the order of payment when both the employee and the spouse have group insurance through their employers. COB order is as follows:

1. The individual employed
2. The spouse plan
3. Spending account if applicable

For a dependent child where both parents have a group insurance plan, the plan of the parent whose birthday is first in the year is the first payor.
 
Cost-Plus – is a Private Health Services Plan. This is an arrangement to provide a facility for payment of legitimate expenses as listed by the income tax act under the medical expense category.
 When used in reference to offering health or dental benefits, is a facility to have the employer pay for health or dental expense, and pay an administration fee for the privilege. Running the expense through an Insurer creates a tax-free payment to the employee. If the Employer were to reimburse the employee directly for the expense, then it would be considered “salary” and would be taxable to the employee.
Credibility - Degree of reliability that the group's own experience can predict future claims.

​DEN – Dental
Dependent - Members of the employee’s family who are eligible for benefits.
DIN - Drug Identification Number (shows on prescription receipt).
DPL - Dependent Life Insurance - nominal amounts of life insurance on an employee’s spouse and children.
 
EAP / EFAP - Employee & Family Assistance Plan - provides confidential counselling or resources to employees and usually their family members as well.
EHB - Extended Health Benefits - Coverage for health expenses incurred by the employee (and his dependents if applicable) not covered by the provincial health care plans such as semi-private hospital, prescription drugs and medical services and supplies.
EHC - Extended Health Care - means exactly the same as EHB.
EP3 Statement - Certificate issued by the insurer to confirm the drug plan is eligible for national drug industry pooling and is protected by the insurer's Extended Drug Policy Protection Plan pooling.
EP - Elimination Period (used with Long Term Disability). This refers to the waiting period an
employee must be totally disabled before LTD benefits become payable.
“Evidence of Good Health” – Refers to a medical questionnaire an employee must complete
to disclose medical history. Also referred to as “health evidence”, for example: “the employee
must supply evidence of health…”
Experience - Certificate issued by the insurer to confirm the drug plan is eligible for national drug industry pooling and is protected by the insurer's Extended Drug Policy Protection Plan pooling.
 
Generic Drugs - Generic drugs contain the same active medical ingredients as the corresponding brand name and there therefore considered therapeutic equivalents. Generic products generally cost less and if purchased instead of brand name drugs, can reduce drug plan costs.
Grandfather – In insurance terms means taking on the same level of benefits as an employee
had with a previous carrier, so that the employee does not lose benefits. This is standardly
done for Life and LTD. It is important an employee not use a valuable (and possibly
irreplaceable) benefit because the employer changed Insurers. See also the term “takeover”.
Gross or Net Rates - Net rates are the premium rates charged by the Insurer; gross rates are
the rates the TPA charges the client. The difference is the TPA’s commission and fees.
 
HSA or HCSA– Healthcare Spending Account – A healthcare spending account is a fund of money provided to employees by the employer. The employee can use these funds to pay for anything that CRA has deemed a medical expense. Employers pay an admin fee, that may or may not include commission to the HSA provider to administer the claims
 
IBNR – Incurred but not Reported - The insurer is required to set funds aside to fund claims that may be made but are not yet known to the insurer, in the event that the plan terminates. It is most often a per cent of claims.
 
LAP – Large amount pooling – pooling – stop loss - Level over which a plan member's claims are directed to a pool with other large claimants and replaced by a pooling change to reduce claims volatility.
Late Applicant - Eligible plan member who applies to join the plan after the application period (usually 31 days after becoming eligible) has expired.
LTD - Long Term Disability - A monthly insurance payment made to a disabled employee after a period of illness or injury.
 
Medical Evidence - A health statement an employee completes to show he is in good health.
The Insurer reserves the right to order other medical evidence as a result of what is disclosed
on the health statement.
MGA – Managing General Agency – an organization that does back office work for financial advisors and group benefit advisors.
 
NEL - Non-Evidence Limit – maximum amount of insurance an employee can receive without
medical evidence of good health.
NEM - Non-Evidence Maximum – exactly the same as NEL.
Net Rates or Gross Rates - net rates are the premium rates charged by the Insurer; gross
rates are the rates the TPA charges the client. The difference is the TPA’s
commission and fees
Non-Smoker – Has not used any tobacco products at all (including snuff, marijuana, Nicorette
gum) for 12 consecutive months. NOTE: Voluntary (optional) benefits may include
smoker/non-smoker rates, however basic group insurance benefits do not, and employees are
not asked if they are smokers unless applying for excess coverage or optional coverages for which they are eligible to apply.
NPC – No prior coverage - a group that has never had a group benefits program.
 
OL - Optional Life Insurance – an employee may purchase additional insurance, with medical
evidence (that is, a health questionnaire).
OM- Overall maximum – the maximum insurance an individual can apply for, even with
medical evidence.
OOC - Out-of-Country - refers to being covered for Extended Health while traveling outside
Canada.
 
Paramedical Services – Chiropractor, psychologist, massage therapist, naturopath, speech
therapist, and more (covered under Extended Health).
PDD - Pay-Direct Drug Card - use it at the pharmacy and the pharmacist can bill the insurer
direct.
Plan Member - An employee or their dependent who are covered under a group
Plan Sponsor - The Employer who holds the Group Insurance contract
Pre-Ex - Pre-Existing Condition
Pre-determination of benefits - An estimate submitted by a dentist for certain major dental expenses (such as crowns, bridges, dentures or braces) before the dental work begins.
Preferred Provider – the Insurance Companies an advisor prefers to deal with.
Provider - Insurance Company/Insurer - occasionally the insurer is called the “underwriter”.
 
R&C - Reasonable and Customary - if a benefit has an R & C limit it means the insurer doesn’t
name a limit in the contract but would not pay unlimited amounts for an expense. The
reimbursement would be limited to what the insurer considers reasonable.
Rate (or unit rate) - multiply the rate by the volume (benefit) to get the premium.
Renewal Date – The policy anniversary. Group Insurance contracts usually renew one year
after the inception date, although occasionally the first renewal will be longer (e.g. 15 months).
Once the policy has had its first renewal it will renew annually thereafter. For example, if a plan
has a renewal date of September 1, then the rates are subject to change (renew) September 1
every year.
RFP / RTP / RTQ - Request to Quote - Facts submitted to the insurer on a group prospect by a licensed adviosr in order to obtain a quotation.
 
SIC – Standard Industry Code – a list of business categories compiled by Dun & Bradstreet (in
the US) or Stats Canada (in Canada). Most Insurers use D&B. A code is assigned to each
business type. Example: 8600 would be Health; 8620 is non-hospital institutional health
services; 8663 is Practical nurses. Code 6300 is Retail; 6311 would be auto dealers, 6330 gas
stations; and so on.
STD - Short Term Disability - pays an employee an income while unable to work due to accident
or sickness. When used in the world of Group Insurance it hardly ever means “sexually
transmitted disease”.
 
Takeover – Refers to “grandfathering” of benefits as in, “we will take over your existing benefits with no loss of coverage”. Legislation requires this of all Insurers for Life and LTD. A copy of the prior Insurer’s billing statement must be sent to the new Carrier to ensure no employee loses coverage. NOTE: some Carriers have limits as to how much benefit they will take over, and will refuse to take the case if those limits are exceeded. Underwriter – is another term for the Insurer, although it is not commonly used. Another definition of Underwriter is an employee who works in the Underwriting department. This department is responsible for assessing whether a risk is a good one, deciding whether an exception can be made on rates, provision of benefits, or liberalizing the rules if the reason for the exception makes sense.
TLR – Target Loss Ratio - Portion of the premium that is used to cover the projected claims, equals 100% - expense level in % of premium.
TPA – Third party administrator – an organization that does billing and administration
TPP – Third party payor – an organization that pays claims. Not an insurance provider.
Trend - Level by which that claims are expected to grow due to price inflation, increase in utilization, introduction of new expensive treatment
TSA - taxable spending account, aka wellness spending account - Just like the healthcare spending account, the TSA is a fund of money provided to employees, paid for by the employer. Just like with the HSA, the employers pays an admin fee to the provider to administer the claims. With the TSA employees can use it for literally anything. Yes anything. Most providers will set a contract with the employer to narrow down anything to most things, divvied up into categories to help drive employee behaviour with a goal of health and wellness in mind. These are commonly used for fitness memberships and sports equipment. It can also be used to buy insurance products like optional insurance, pet insurance and virtual care

Underwriting - The process of assessing risk and determining the required rates for the group.

Vol. AD&D - Voluntary Accidental Death & Dismemberment - the terms “Voluntary” and
“Optional” are interchangeable - usually available to both the employee and the spouse, and
sometimes on the children as well.
Volume of Insurance - the amount of insurance an employee is insured for. If his Life is
$50,000 then the volume is $50,000. This can also be called the “benefit amount”
 
Waiver of Premium - When an employee becomes disabled, his life insurance premium may be waived for the duration of his disability.
WI - Weekly Indemnity or Weekly Income - means exactly the same as STD
Important note about calculation of benefits:
Life Insurance and AD&D are rounded up to the next highest $1,000 if not already an even multiple of $1000.
WI and LTD are rounded up to the next $1.00 if not already an even multiple of $1.
Life, AD&D, WI, and LTD unit rates are usually rounded to 3 decimal places.
Dependent Life, Extended Health, and Dental are 2 decimal places, since all are a “cost per person”.

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