Words help us unlock the world. But if the words swirling around in your head are about health insurance, there’s a chance they’re just leaving you utterly confused. When you offer health care, understanding the lingo is what enables you and your team to make the best possible choices. And that’s why we’re here today. In this article, we’ve simplified the top employer-related health care terms so you can legally (and lovingly!) continue to make benefits a meaningful experience for your team.
Whenever you need to understand the basics of your plan, this is the blueprint you’ll unroll. Inside, you’ll find the terms and conditions that spell out how your plan is managed, along with a description of your benefits, the name of the person administering the plan, and other vital details.
Summary plan description (SPD)
While the plan document is your guide for how to run the plan, the summary plan description is where your team can turn for information. Nicknamed the “four-page summary,” the document lays out how the plan works, what’s offered, how to file claims, and more specifics. If anything changes, you’re required to give employees a new version that reflects those updates. Generally, the carrier certificates alone do not satisfy the SPD requirement.
Summary of benefits and coverage (SBC)
Remember those Nutrition Facts slapped on the sides of packaged foods? Well, the health care industry has its own wholesome version. The SBC was designed with that chart in mind, and is intended to provide a quick look into coverage options so people can easily understand the pros and cons of each.
Here’s a template from the Department of Labor that will help you get a feel for what you’ll see on your own SBC. And be sure to check out this overview for more guidelines on how to actually read one. Is your team trying to compare different plans? As either a shopper or a plan participant, they have the right to request a copy directly from their carrier — no strings attached.
There’s a nifty law called the Employee Retirement Income Security Act, or ERISA for short, that was created because of concerns about the labor and tax aspects of employee benefit plans. The law standardizes benefit plans for workers, and helps champion increased access to plan information for participants. All business owners who provide health care have to abide by the rules outlined in ERISA.
Premium-only plan (POP)
Snap, crackle, POP plans. The most basic kinds of Section 125 plans, POP plans enable employees to pay for their health insurance before taxes are taken out. This translates into a hefty chunk of tax savings for the benefits you already provide to your team. POP plans are an important component of the Section 125 program, and once they’re set up, the upkeep is minimal.
Medicare summary notice (MSN)
Every three months, people who receive Medicare benefits get a little letter in their mailbox that breaks down all the services they received during that window. The MSN also includes a list of any outstanding balances they might owe. If they didn’t use any, no notice is sent — simple as that.
Notice of creditable coverage (Medicare part D)
Part D is a big part of Medicare you should know about. If you offer a plan that contains drug coverage for those enrolled in Medicare, then you have to tell those folks by October 15th if your plan’s coverage is considered “creditable.” Or in other words, if it matches Medicare’s Part D plan, which many participants can also use to receive prescription drug benefits. Make sure your employees hold on to that notice, because there’s a chance they’ll need to refer to it if they join a Medicare plan later on.
The four COBRA notices
COBRA is a program that provides temporary (and pricey!) health coverage for people who lose their job. Why is it named after a snake, you ask? Well, it actually stands for the Consolidated Omnibus Budget Reconciliation Act of 1985, which was created to ensure employees and their dependents could continue their health insurance after losing their jobs. It just so happens to have the best reptilian acronym ever.
Do you have 20 or more people on staff? Then you’re required to offer COBRA. Do you have less than 20 people on staff? You may still be subject to your state’s mini-COBRA laws. When you first roll out a group health plan, there needs to be an explanation in the SPD about what employees’ rights are under COBRA. If your team has any questions, they can get in touch with the plan administrator or refer to their handy SPD.
In total, there are four notices you should know about:
- COBRA General Notice: Within 90 days of coverage on your group health plan, all employees need to receive an overview that describes their rights under COBRA.
- COBRA Election Notice: Within 14 days of a qualifying life event (QLE), each plan has to explain how a person can continue their health insurance coverage under COBRA.
- Notice of Unavailability of Group Health Coverage: If someone doesn’t qualify for COBRA, the plan must tell them why within 14 days after their QLE.
- Early Termination Notice: If a plan needs to end coverage early, they need to tell the beneficiaries why, what their options are, and when their coverage will come to a close.
Have any other COBRA questions? Make your way over to this guide from the DOL.
HIPAA business associate agreement (BAA)
Being a HIPAA business associate is a badge of honor. Basically, this agreement enables organizations covered by HIPAA to hire others to help them out. The BAA itself is designed for those who deal with Personal Health Information (PHI), and serves as a promise that they’ll agree to follow the same HIPAA rules that you do. For example, anyone who works on patient billing, claims, or benefits management needs a BAA in order to comply with the labyrinth of HIPAA regulations out there.
Check out this sample agreement from the Centers for Medicare & Medicaid Services to get a taste of what an actual agreement looks like.
Marketplace notice to new hires
Since October 1st, 2013, the Affordable Care Act has required businesses to coach their new employees about the health exchanges available in their state. This notice can be sent by email or paper to both part-time and full-time employees.
You have the option of either using the sample notice issued by the Department of Labor, or you can create your own if you stick to the points below:
- You have to tell your team about the Marketplace, describing the actual services offered, and how to get in touch for more information.
- If you do not offer minimum essential coverage, you have to tell your worker that they might be able to obtain a Marketplace tax credit.
- Communicate that if an employee buys a plan through the Marketplace, they may lose the contribution they get from you.
Now that you have this starter glossary in your hands, you’ll stop feeling flummoxed whenever an obscure health insurance term comes your way. Your stress levels will plummet, and you’ll be more equipped to support your team as they steer through one of the most important areas of their lives.