Employee Benefits Compliance, Laws, Regulations & FAQs, Resources


Additional Definitions added on 2/4/15

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  • ARRA — American Recovery & Reinvestment Act
  • CHIP — Children’s Health Insurance Program
  • CHIPRA — Children’s Health Insurance Program Reauthorization At of 2009
  • DOL — Department of Labor
  • EMR — Electronic Medical Record
  • EHB — Essential Health Benefits
  • FSA — Flexible Spending Account
  • GF — Grandfathered
  • GINA — Genetic Information Nondiscrimination Act of 2008
  • HCR — Healthcare Reform
  • HHS — US Department of Health and Human Services
  • HRA — Health Reimbursement Arrangement
  • HRA — Health Risk Assessment (for Wellness Programs)
  • HRP — High Risk Pools
  • HSA — Health Savings Account
  • IFR — Interim Final Rule (regulation from federal government)
  • MEC  – Minimum Essential Coverage
  • MLR — Medical Loss Ratio
  • NGF — Non-Grandfathered
  • PPACA — Patient Protection and Affordable Care Act of 2010
  • SHOP — Small Business Health Options Program (a type of exchange)



Accountable Care Organization (ACO):

A health organization in which provider payment is tied to quality metrics and reduction in overall cost of an assigned population. The ACO model seeks to improve beneficiary outcomes and promote value while slowing the growth in overall costs for a population of patients. It brings together coordinated networks of providers with shared responsibility to provide high quality care to their patients.

Actuarial Value:

The percentage of total average costs for covered benefits that a plan will cover. Often referred to as a measure of the plan’s generosity.  For example, a plan with an actuarial value of 70% will pay, on average, 70% of the costs of all covered benefits, and the plan participant would be responsible for 30% of the costs of all covered benefits. However, for any particular individual, the individual could be responsible for a higher or lower percentage of the total costs of covered services for the year, depending on the individual’s actual health care needs and the terms of the insurance policy.

Adverse Selection:

Occurs when sick individuals purchase health insurance in greater proportions than healthy individuals, thus raising the cost of health insurance premiums for everyone in a risk pool.

Advance Payments of the Premium Tax Credit:

Advance payments of the premium tax credit means payment of the tax credits specified in section 36B of the Code (as added by section 1401 of the Affordable Care Act) which are provided on an advance basis to an eligible individual enrolled in a QHP through an Exchange in accordance with sections 1402 and 1412 of the Affordable Care Act.

Affordable Care Act:

Enacted in March 2010, the federal Patient Protection and Affordable Care Act, commonly referred to as “Obamacare,” provides the framework, policies, regulations and guidelines for implementation of comprehensive health care reform by the states. The Affordable Care Act will expand access to high-quality affordable insurance and health care.

Allowed Amount:

Maximum amount on which payment is based for covered health care services. This may be called “eligible expense,” “payment allowance” or “negotiated rate.” If your provider charges more than the allowed amount, you may have to pay the difference. (See Balance Billing.) from healthcare/gov http://www.healthcare.gov/glossary/a/allowedcharge.html

Ambulatory Patient Services:

Medical care provided without need of admission to a health care facility. This includes a range of medical procedures and treatments such as such as blood tests, X-rays, vaccinations, nebulizing and even monthly well-baby checkups by pediatricians.

Annual Household Income:

The total amount of income for a family in a calendar year.

Annual Limit:

A cap on the benefits your insurance company will pay in a year while you’re enrolled in a particular health insurance plan. These caps are sometimes placed on particular services such as prescriptions or hospitalizations. Annual limits may be placed on the dollar amount of covered services or on the number of visits that will be covered for a particular service. After an annual limit is reached, you must pay all associated health care costs for the rest of the year.

Annual Open Enrollment Period:

Annual open enrollment period means the period each year during which a qualified individual may enroll or change coverage in a QHP through the Exchange.


Your share of the costs of a covered health care service, calculated as a percentage (for example, 20 percent) of the allowed amount for the service, is called coinsurance. You pay coinsurance plus any deductible you owe. For example, if the health insurance plan’s allowed amount for an office visit is $100 and you have met your deductible for the year, your coinsurance payment of 20 percent would be $20. The health plan pays the rest of allowed amount.


A fixed amount (for example, $15) you pay for a covered health care service, usually when you receive the service. The amount can vary by the type of covered health care service.


The share of costs covered by your insurance that you pay out of your own pocket. This term generally includes deductibles, coinsurance and copayments, or similar charges, but it doesn’t include premiums, balance billing amounts for non-network providers, or the cost of noncovered services. Cost-sharing in Medicaid and Children’s Health Insurance Program also includes premiums.

Cost-sharing Reductions:

Cost-sharing reductions means reductions in cost sharing for an eligible individual enrolled in a silver level plan in the Exchange or for an individual who is an Indian enrolled in a qualified health plan(QHP) in the Exchange. (45CFR 155.20)

Covered California:

Covered California is the marketplace that will connect Californians to accessible, high-quality health coverage.


The amount you owe for health care services your health insurance or plan covers before your health insurance or plan begins to pay. For example, if your deductible is $1,000, your plan won’t pay anything until you have met your deductible for covered health care services. The deductible may not apply to all services.

Essential Benefits:

Health care service categories that must be covered by certain plans, starting in 2014. These service categories include ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, behavioral health treatment, prescription drugs, rehabilitative and habilitation services and devices, laboratory services, preventive and wellness services and chronic disease management, and pediatric services, including dental and vision care. Insurance policies must cover these benefits in order to be certified and offered in the marketplace, and all Medicaid state plans must cover these services by 2014.

    • Ambulatory patient services
    • Emergency services
    • Hospitalization
    • Maternity and newborn care
    • Mental health and substance use disorder services, including behavioral health treatment
    • Prescription drugs
    • Rehabilitative and habilitative services and devices
    • Laboratory services
    • Preventive and wellness services and chronic disease management
    • Pediatric services, including oral and vision care

Exchange or Marketplace:

Exchange means a governmental agency or non-profit entity that meets the applicable standards and makes QHPs available to qualified individuals and qualified employers. Unless otherwise identified, this term refers to State Exchanges, regional Exchanges, subsidiary Exchanges, and a Federally-facilitated Exchange. (45CFR 155.20)

Exchange Blueprint:

Exchange Blueprint means information submitted by a State, an Exchange, or a regional Exchange that sets forth how an Exchange established by a State or a regional Exchange meets the Exchange approval standards established in § 155.105(b) and demonstrates operational readiness of an Exchange as described in § 155.105(c)(2).

Exchange Subsidies:

Under the ACA, households that are below 400 percent but above 133 percent of the federal poverty line who have purchased health insurance in the exchanges are eligible to receive federal subsidies. The subsidies cover the premium amount above what these households are limited by the ACA to contribute to their health insurance premiums.

Excise Tax (also known as Cadillac tax):

Is a 40 percent excise tax on High Premium Insurance Plans, that will be applied to the value of health insurance benefits exceeding a certain threshold ($10,200 for individual coverage and $27,500 for family coverage). The excise tax takes effect in 2018 and is designed to discourage individuals and families from buying unusually high-cost insurance plans.

Federal Poverty Level:

A measure of income level issued annually by the Department of Health and Human Services. Federal poverty levels are used to determine your eligibility for certain programs and benefits. In 2012, the federal poverty level for an individual was $11,170 per year and $23,050 for a family of four. To see a chart with more information on federal poverty levels, please visit http://www.familiesusa.org/resources/tools-for-advocates/guides/federal-poverty-guidelines.html

Full-Time Equivalent Employees:

The federal government has not yet defined “full-time” or “full-time equivalent” for purposes of determining whether a business is small or large. More information will be forthcoming in the months ahead.

Grandfathered Health Plan

An insured or self-insured health plan that was inexistence on or before March 23, 2010 and that has not made changes since that date that cause it to lose its grandfathered status. Changes that will cause a plan to lose its grandfathered status include:

    • Eliminating all benefits to diagnose or treat a particular condition.
    • Raising participant co-insurance charges (any percentage increase in cost-sharing).
    • Raising co-payment charges by an amount that exceeds 15 percentage points (or, if greater, $5 plus medical inflation).
    • Raising deductibles or out-of-pocket maximums by an amount that exceeds medical inflation plus 15 percentage points.
    • Lowering the employer contribution rate toward the cost of coverage by more than 5 percentage points.
    • Adding an annual limit to a plan that did not previously have one, or decreasing an existing annual limit below allowable minimum levels.
    • Changing insurance companies or policies, prior to November 15, 2010.

Group Health Plan (IRC section 5000(b)(1)):

The term “group health plan” means a plan (including a self-insured plan) of, or contributed to by, an employer (including a self-employed person) or employee organization to provide health care (directly or otherwise) to the employees, former employees, the employer, others associated or formerly associated with the employer in a business relationship, or their families.” § 144.103

Health Insurance:

A contract that requires your health insurer to pay some or all of your health care costs in exchange for a premium.

Health Insurance Exchange (Marketplace):

A structured marketplace in which individuals would be able to purchase insurance from their choice of participating issuers. As part of the ACA , states can either be a state-based exchange, state partnership exchange, or federally-facilitated exchange. The responsibilities of both state and federal government differ in each scenario.

Health Insurance Issuer (IRC 9832(b)(2)):

“The term “health insurance issuer” means an insurance company, insurance service, or insurance organization (including a health maintenance organization, as defined in paragraph (3)) which is licensed to engage in the business of insurance in a State and which is subject to State law which regulates insurance (within the meaning of section 514(b)(2) of the Employee Retirement Income Security Act of 1974, as in effect on the date of the enactment of this section). Such term does not include a group health plan.”

Independent Payment Advisory Board (IPAB):

A government agency established by the ACA that is tasked with achieving specified savings in Medicare without affecting coverage or quality. Beginning in 2015, IPAB is required to make recommendations to reduce Medicare spending if per capita Medicare spending exceeds the specified target growth rate as set by CMS. From 2015 to 2017, the target growth rate is based on CPI. Beginning in 2018, the target growth rate is the increase in GDP per capita plus one percentage point.

Lawfully Present:

For purposes of determining eligibility for the refundable premium tax credit (IRC section 36B), an individual shall be treated as lawfully present “only if the individual is, and is reasonably expected to be for the entire period of enrollment for which the credit under this section is being claimed, a citizen or national of the United States or an alien lawfully present in the United States.”  IRC 36B(e)(2).

Large Employer:

Large employer means, for purposes of Exchanges, an employer who employed an average of at least 101 employees on business days during the preceding calendar year and who employs at least 1 employee on the first day of the current plan year. In the case of plan years beginning before January 1, 2016, a State may elect to define large employer by substituting “51 employees” for “101 employees.” For purposes for the Large Employer Mandate (aka Employer Shared Responsibility), the definition or “large employer” is slightly different.

Legal Resident of California:

A person who is lawfully present is determined in accordance with federal law. You can find out if you meet the requirements of being lawfully present by visiting the Resources Page.

Major medical coverage:

is defined in the regulations at 45 CFR § 153.20 to  include:

(a) catastrophic plans;

(b) individual or small group market plans subject to the actuarial value requirements under § 156.140; and

(c) “health coverage for a broad range of services and treatments provided in various settings that provides minimum value as defined in § 156.145.”


California’s Medicaid health care program. This program provides free medical services for children and adults with limited income and resources. Your local County Welfare/Social Services Department manages Medi-Cal eligibility determinations. You can get Medi-Cal as long as you meet the eligibility requirements.

Medical Loss Ratio Provisions

Require health insurance issuers offering group or individual health insurance coverage to submit annual reports to the Federal government on the percentages of premiums that the coverage spends on reimbursement for clinical services and activities that improve health care quality, and to provide rebates to enrollees if this spending does not meet minimum standards for a given plan year. Medical loss ration provisions are applicable to insured plans as of January 1, 2011.

Minimum Essential Coverage:

IRC section 5000A, subsection (f)  [Added by PPACA § 1501]

Beginning in 2014, individuals must pay a tax if they do not have “minimum essential coverage,” and large employers will be subject to a potential penalty if they do not offer at least “minimum essential coverage” to at least 95% of their full-time  employees.  “Minimum essential coverage” is broadly defined as:

  • Employer-sponsored plans including plans by governmental, not-for-profit and for-profit private sector employers; grandfathered plans and non-grandfathered plans; and plans offered in the small or large group market
  •          This includes COBRA coverage and retiree coverage
  • Individual market plans, including grandfathered and non-grandfathered plans
  • Government sponsored programs including: Medicare (including Medicare Part A and Medicare Advantage), Medicaid, Children’s Health Insurance Program coverage (CHIP), TRICARE, coverage through the Veterans Administration, and Health Care for Peace Corps volunteers, coverage under the Defense Department’s Nonappropriated Fund Health Benefit Program
  • Other coverage designated as minimum essential coverage by HHS and/or the Dept. of the Treasury

 Minimum essential coverage does not include coverage that provides only “excepted benefits,” which are limited benefits  such as coverage only for vision care or dental care, Medicaid covering only certain benefits such as family planning, workers’ compensation, or disability policies.

Minimum Value:

A health plan provides minimum value (MV) if the plan’s share of the total allowed costs of benefits provided under the plan is at least 60% of the costs.  IRC section 36B(c)(2)(C)(ii).   For plans required to cover the essential health benefits (EHB), the HHS regulations define the percentage of the total allowed costs of benefits as (1) the anticipated covered medical spending for EHB (as defined in 45 CFR 156.110(a)) paid by a health plan for a standard population, (2) computed in accordance with the plan’s cost-sharing, and (3) divided by the total anticipated allowed charges for EHB coverage provided to a standard population. 45 CFR 156.20.  (These HHS regulations were published on February 25, 2013 (78 FR 12834), effective on April 26, 2013. Also, employer-sponsored plans that are required to cover EHBs are insured health plans offered in the small group market subject to PHSA section 2707(a).)

Nondiscrimination Rules

Rules similar to IRC section 105(h) (which in the past applied only to self-insured plans), that prohibit fully-insured group health plans from discriminating in favor of highly compensated individuals with respect to eligibility and benefits. The penalty for failure to meet the nondiscrimination rules is not the same as under 105(h), which results in taxation of highly-compensated employees. Instead, under HCR, the penalty is that the plan (sponsor) must pay an excise tax equal to $100 per day per employee who is discriminated against, to a maximum of $500,000 annually.

Open Enrollment:

A designated period of time each year – usually a few months – during which insured individuals or employees can make changes in health insurance coverage.

Out-of-Pocket Limit:

The most you pay during a policy period (usually a year) before your health insurance or plan begins to pay 100% of the allowed amount. This limit never includes your premium, balance-billed charges or health care your health insurance or plan doesn’t cover. Some health insurance or plans don’t count all of your co-payments, deductibles, co-insurance payments, out-of-network payments or other expenses toward this limit. In Medicaid and CHIP, the limit includes premiums.

Patient Protections

ACA requirements that group health plans and health insurance issuers offering group or individual health insurance coverage must:

    • Permit an enrollee to select a participating primary care provider, or pediatrician in the case of a child;
    • Provides direct access to obstetrical or gynecological care without a referral
    • Not require prior authorization or increased cost sharing for out-of-network emergency services


The contract (agreement) between the person buying health insurance and the company providing it, describing specific health care services that will be covered, any coverage limitations and any out-of-pocket costs (copays) that might be required.

Pre-existing Medical Condition:

Any illness or condition a patient has prior to obtaining insurance.

Preventive Services

    • U.S. Preventive Services Task Force “A” or “B” rated items/services
    • Immunizations for routine use in children, adolescents, & adults recommended by Advisory Committee on Immunization Practices of CDC
    • For children, preventive care & screenings included in guidelines supported by Health
    • Resources and Services Administration (“HRSA”)


The amount that must be paid for your health insurance or plan. You and/or your employer usually pay(s) it monthly, quarterly or yearly.

Qualified Employee:

Qualified employee means an individual employed by a qualified employer who has been offered health insurance coverage by such qualified employer through the SHOP.

Qualified Employer:

Qualified employer means a small employer that elects to make, at a minimum, all full-time employees of such employer eligible for one or more QHPs in the small group market offered through a SHOP. Beginning in 2017, if a State allows large employers to purchase coverage through the SHOP, the term “qualified employer” shall include a large employer that elects to make all full-time employees of such employer eligible for one or more QHPs in the large group market offered through the SHOP.

Qualified Health Plan:

An insurance product that is certified by a marketplace, provides Essential Health Benefits, follows established limits on cost-sharing (like deductibles, copayments and out-of-pocket maximum amounts) and meets other requirements. A Qualified Health Plan will have a certification by each marketplace in which it is sold.

Qualified Health Plan Issuer:

Qualified health plan issuer or QHP issuer means a health insurance issuer that offers a QHP in accordance with a certification from an Exchange.

Qualified Individual:

Qualified individual means, with respect to an Exchange, an individual who has been determined eligible to enroll through the Exchange in a QHP in the individual market.

Scope of Practice Laws:

State laws that define the clinical services that nurses, pharmacists, and other non-physician health professionals can provide.

Seasonal Worker:

“Seasonal worker” means a worker who performs labor or services on a seasonal basis as defined by the Secretary of Labor, including workers covered by section 500.20(s)(1) of title29, Code of Federal Regulations and retail workers employed exclusively during holiday seasons. IRC section 4980H (c)(2)(B)(ii)


SHOP means a Small Business Health Options Program operated by an Exchange through which a qualified employer can provide its employees and their dependents with access to one or more QHPs.

Small Employer:

Small employer means, for purposes of Exchanges, an employer who employed an average of at least 1 but not more than 100 employees on business days during the preceding calendar year and who employs at least 1 employee on the first day of the current plan year. In the case of plan years beginning before January 1, 2016, a State may elect to define small employer by substituting “50 employees” for “100 employees.”

Special Enrollment:

The opportunity for people who experience a life-changing event, such as the loss of a job, death of a spouse or birth of a child, to sign up immediately in an employer’s health plan, even if it is outside of the plan’s specified enrollment period.


Starting in 2014, cost-sharing subsidies and tax credits will lower the cost of premiums and out-of-pocket expenses for health coverage that qualifying families purchase through Covered California.

Tax Credit:

One of the largest subsidy programs for health insurance, starting in 2014, to help consumers pay health insurance premiums. Tax credits will also be available to small businesses with no more than 25 full-time equivalent employees to help offset the cost of providing coverage.

Tax Exclusion for Employer Provided Health Insurance:

Excludes employer-provided health insurance benefits from taxable income and is considered a tax expenditure because it costs the federal government approximately $250 billion in lost revenue each year.

Uniform Explanation of Coverage:

An explanation of coverage format that must describe any cost sharing, exceptions, reductions, and limitations on coverage, and give examples to illustrate common benefits scenarios. The ACA requires the Federal government to develop a uniform explanation of coverage for use by group health plans and health insurance issuers in compiling and providing an accurate summary of benefits and explanation of coverage for applicants, policyholders or certificate holders, and enrollees.

Value-Based Purchasing:

Features additional payments to providers when they perform well on measures of value, such as improved preventative screenings or chronic disease management, and greater efficiency in care. By tying the financial incentives with quality measures, providers are expected to improve quality and achieve better health outcomes.