Beyond Benefits

September 2021

A glossary of group benefits terms you need to know to navigate all things insurance

When it comes to insurance, more specifically group benefits, advisors can easily get carried away using terminology that may seem like a different language to those who don’t regularly think about group benefits. While it’s important for an advisor to explain things clearly, here are a few key terms to get you  feeling a bit more comfortable:

Adjusted premium: The billed premium plus any adjustments that are made to reflect the change in demographics, as well as any plan changes throughout the claims period. 

Billed premium: The premium amount that gets billed to the client by the insurer. 

Cost sharing: Employers have the option of splitting the cost with employees. It’s mandatory that an employer pays a minimum of 50% of the total premium (excluding Health Spending and Lifestyle/Wellness Accounts). Some benefits have tax advantages if employees pay the premium. 

Coverage status: Employee selects the type of coverage they need. Some common options are: single, couple, or family. 

Credibility: The portion or percentage of the premium rates derived from a group's utilization experience. 

Dependent: An individual that will also utilize the employee’s plan.This can include a spouse, common-law partner or children.

Effective or Inception Date: The date that the benefits plan takes effect. 

Employee class: The group of plan members within a class who have the same benefit plan that may or may not differ from the rest of the plan members in a separate class. Classes can be created based on eligible common denominators. Some examples include “Owners class” or “Management class.”

Experience period: Can also be referred to as the “claims period.” This is the length of time in which data is collected and reported on. This often consists of a 12-month period.

Incurred But Not Reported Reserve (IBNR): A reserve collected by the insurer to cover the insurer's liability for claims that were incurred during the claims period, but submitted late and as a result, is included and paid in the following claims period. 

Incurred claims: These are the claims that were paid out by the insurer that also include the IBNR reserve. 

Incurred loss ratio: The ratio of the incurred claims by group members to the premium paid to the insurer within the claims period. 

Late applicant: An employee or dependent can be deemed a late applicant if they have not completed and submitted an enrolment form to the insurer within 30 days of being hired or fulfilling the waiting period. Dependents can be deemed a late applicant if they are not added to the employee’s enrolment at time of initial submission or within 30 days of a life event.

Life event: Life events may include the change of status from single to common law, married, widowed, divorced, or birth of a child. These life events can allow a plan member to change their coverage without having to go through medical underwriting so long as the insurer is notified within 30 days of the life event.

Medical underwriting: When a plan member completes a medical questionnaire and provides medical information to insurers for review. In reviewing this information, insurance underwriters have the ability to approve or decline coverage for that individual.

Paid claims: This is the actual amount paid by insurers based on the claims submitted by plan members.

Plan administrator:  This is the person who manages the benefits plan. This does not have to be the business owner.

Pooled claims: These are the claims that exceed the large amount pooling threshold and are therefore removed from the paid claims and claims experience.

Target loss ratio (TLR): Also referred to as the “breakeven point.” For every dollar spent, this percentage goes towards paying plan members claims.  The remaining percent goes towards the cost of having a plan. This is the comparative number that insurers use when determining whether or not there are sufficient funds to accommodate the claims paid out by the insurer.

Waiting period: This is how long an employee must work for the company before they are eligible for company benefits. This may also be referred to as the probationary period. When implementing a benefits plan, employers have the option of choosing a waiting period.

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Beyond Benefits
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