Glossary of Drug Plan Terms

Glossary of Commonly Used Private Drug Plan Terms

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Administrative Service Only (ASO): A claims adjudicator administers and manages the drug plan but the clients/employers are responsible for the cost of the drug program. These plans require employers to supply a drug card so there are on-line adjudications.

Annual Benefits Statement: A report containing specific information about the status of a participant’s projected pension income or account balance. Can include a description of the value and cost of health and welfare benefits, and is often distributed to employees to promote awareness and appreciation of benefits.

Beneficiary: The person who is to receive the insurance benefits as a member of an insurance plan.

Benefit: The rights of the participant or beneficiary to either cash or services after meeting the eligibility requirements of the benefit plan.

Benefit Package: A listing of specific benefits provided by an employee benefit plan. The total value of noncash compensation.

Benefits Specialist: An individual in an organization, typically in the human resource management function, whose responsibility it is to administer the employee benefits program.

Brand-Name Drug: A drug protected by a patent issued to the original innovator or marketer. The patent prohibits the manufacture of the drug by other companies as long as the patent remains in effect. See also Generic Equivalent Drugs.

Chronically Ill: A person unable to perform two of six activities of daily living for at least 90 days, or who is severely cognitively impaired is said to be chronically ill. Under this term, qualification for long-term care expenses is determined.

Claim: An itemized statement of services rendered by a healthcare provider for a given patient. The claim is submitted to a health benefits plan for payment. A request for payment under an employee benefits plan or insurer by a plan participant or beneficiary for the payment of certain benefits. The right to any debts, privileges or other things in possession of another; also, the titles to anything which another should concede to, or confer on the claimant.

Claim Administrator: Any entity that reviews and determines whether to pay claims to enrollees or physicians on behalf of the health benefit plan. Claim administrators may be insurance companies or their designated claims review organizations, self-insured employers, management firms, third-party administrators or other private contractors.

Claimant: Plan participant who files a claim for benefits.

COB: Co-ordination of Benefits. If you and your spouse or partner are both group plan members, co-ordination of benefits permits coverage of up to 100 per cent of your eligible expenses. Industry-wide procedures determine which plan considers a claim first, after which the other plan considers any amount that has not been reimbursed by the first one.

Coinsurance: A policy provision, frequently found in major medical insurance, by which the insured person and the insurer share the hospital and medical expenses resulting from an illness or injury in a specified ratio (e.g., 80%: 20%), after the deductible is met. A form of cost sharing.

Consultant: A person or firm offering expert business, professional or technical advice to an organization for a salary or fee.

Coordination of Benefits (COB): A group health insurance policy provision designed to eliminate duplicate payments and provide the sequence in which coverage will apply (primary and secondary) when a person is insured under two contracts.

Co-payment: A predetermined, flat fee an individual pays for a prescription drug or other medical services, in addition to what insurance covers. Co-payments do not reduce your annual deductible or out-of-pocket maximums.

Critical Illness Insurance: A limited form of health insurance that pays for treatment of specified diseases, such as cancer.

Deductible: The amount of covered expenses that must be incurred and paid by the insured before benefits become payable by the insurer.

Direct Costs: Direct costs are those costs directly associated with the absence of an employee from the workforce. They also include salary of the absent employee (or, in the case of LTD, the cost plus expenses), and rehabilitation or medical costs as charged back through the insurance carrier or WCB (see also Indirect Costs).

Disability: A condition that renders an insured person incapable of performing one or more duties of his or her regular occupation. Benefits plan definitions of disability vary.

Disability Benefits: Periodic payments, usually monthly, payable to participants under some retirement plans if such participants are eligible for the benefits and become totally and permanently disabled prior to the normal retirement date. Includes short-term and long-term disability benefits.

Disability Management: The proactive employer-centered process of coordinating the activities of labor, management, insurance carriers, healthcare providers and vocational rehabilitation professionals in order to minimize the impact of injury, disability or disease on a worker’s capacity to successfully perform his or her job.

Drug Utilization Management (DUM): A set of utilization management techniques for determining whether a prescribed drug therapy is the most appropriate form of therapy and also which drug is both medically appropriate and financially cost-effective for the presenting condition.

Drug Utilization Review (DUR): A review system to monitor usage of prescriptions by enrollees, to identify potential interactions with other medications, or to identify alternative effective or cost-effective therapies.

E.H.C.: Extended Health Care. A form of health insurance that provides, in one policy, protection for hospital and medical expenses not covered by government programs and usually other health care expenses, such as prescribed drugs, medical appliances, ambulance, private duty nursing, etc.. The policy may contain a deductible amount, coinsurance and high maximum benefits. Also called "major medical expense insurance."

Eligibility Requirements: Conditions that an employee must satisfy to participate in a plan or obtain a benefit.

Enrollment: Any process by which an individual and/or dependents become subscribers to health plan coverage, flexible benefit plans, etc. May be done either through an actual “signing up” of the individual, by virtue of a collective bargaining agreement or by conditions of employment.

Flexible Spending Accounts (FSAs): Many flexible benefit programs include flexible spending accounts, which give employees the opportunity to set aside pretax funds for the reimbursement of eligible tax-favored welfare benefits. FSAs can be funded through salary reduction, employer contributions or a combination of both. Employees can purchase additional benefits, pay health insurance deductibles and copayments, or pay for child-care benefits with the money in their FSAs. See also Debit Cards; Dependent Care Flexible Spending Account; Healthcare Flexible Spending Account.

Generic Equivalent Drugs: Prescription drugs that are equal in therapeutic power to the brand-name originals because they contain identical active ingredients at the same doses.

Gen Sub.: Generic Substitution.

Government Plan/Managed Formularies: Under a government plan, new drugs are only added to the plan when the provincial government has granted full coverage. Groups that subscribe to this type of plan usually have employees/member within only one province.

Group insurance: Insurance issued, usually without medical examination, on a group of people under a master contract. It is usually issued to an employer for the benefit of employees. The individual members of the group hold certificates as evidence of their insurance.

Healthcare Flexible Spending Account: Allows employees to set aside pretax funds for eligible healthcare benefits such as vision care and dental care, including deductibles and copayments.

Indirect costs: all other costs (over and above direct costs) associated with an employee's absence and usually include replacement, administrative, and treatment and rehabilitation costs, plus a decreased productivity factor. Indirect costs are assumed to be anywhere from 50-300% greater than direct costs. Where applicable, the business case assumes that indirect costs make up an additional 75% over and above direct costs.

Individual insurance: Insurance purchased on an individual basis, covering only one person or, in some cases, members of his or her family as well.

Infertility Benefits: Insurance coverage for treatments to enable human reproduction where that capacity is reduced or absent. Can range from diagnostic tests, to treatment of underlying causes of infertility to in vitro procedures.

Inpatient: A person who occupies a hospital bed, crib or bassinet while under observation, care, diagnosis or treatment for at least 24 hours.

Insured: In these plans a claims adjudicator administers the plan for an insurance company who is responsible for the cost of the drug program. However, the clients/employers are charged a monthly premium to offset the cost of the drug program.

Integrated Disability Management (IDM): Single management systems for occupational (workers’ compensation) and nonoccupational (short-term and long-term) disability. Aspects of an IDM program include a single claims intake and notification process, a single claims management system, a common medical case management process, a common return-to-work program and a single database.

L.T. D.: Long Term Disability. Insurance issued to an employer (group) or individual to provide a reasonable replacement of a portion of an employee's earned income lost through serious and prolonged illness or injury during the normal work career, lasting two or more years.

Mg’d Form: Managed Formulary.

Mbr Pay: See co-pay.

Major Medical Insurance: Supplementary insurance coverage (beyond basic medical) intended to cover the costs associated with a major illness or injury. Although characterized by large maximum limits, some limitations apply. The term can also refer to the catch-all portion of a medical plan that picks up payment for miscellaneous charges.

Maximum Allowable Cost (MAC) List: A list health plans distribute to their participating pharmacies describing the maximum amount the plan will pay for specific medications.

Maximum Out-of-Pocket Payment: The maximum amount of money a person will pay in addition to premium payments. The out-of-pocket payment is usually the sum of the deductible and coinsurance payments.

Non-profit insurers: Bodies organized under provincial laws to provide hospital, medical or dental insurance on a co-operative basis. They are exempt from certain types of taxes.

Open: An open formulary prescription plan covers most drugs legally requiring a prescription that are used for their life-sustaining properties or for the treatment of life threatening illnesses. These drugs are automatically added to the plan once approved by Health Canada.

Outpatient: A person who visits a clinic, emergency room or health facility and receives healthcare without being admitted as an overnight patient.

Outpatient Services: Medical and other services provided by a hospital or other qualified facility or supplier, such as a mental health clinic, rural health clinic, mobile X-ray unit or freestanding dialysis unit. Such services include outpatient physical therapy services, diagnostic X-ray and laboratory tests, X-ray and other radiation therapy.

PPN Fee Cap: Preferred Provider Network Fee Cap means that employees who have prescriptions filled at a specific pharmacy or chain are charged a negotiated, discounted dispensing fee.

Pharmacy Benefits Manager/Management (PBM): Refers either to an individual or to a company that manages pharmacy benefits. Company services typically include development of formularies and drug utilization review to help contain costs.

Policy: The contract between the insurance company and the policy owner under which the insurance company agrees to pay the policy benefit when specific losses occur, provided the insurer receives the required premiums.

Prescription Drug Formulary: A listing of prescription medications that will be covered by a plan or insurance contract that often fosters substitution of generic or therapeutic equivalents on a cost-effective basis.

Prescription Drug Plan: Usually a provision under medical coverage plans whereby the beneficiary can obtain prescription drugs without incurring potentially large out-of-pocket expense. Different types of prescription drug plans are available. Examples are discount plan, closed panel drug plan, service-delivered plan, mail-order plan and maintenance drug option with major medical plan.

Short-Term Disability (STD): Often considered to be a disability lasting usually not longer than two years.

Sick Leave: Plans that provide employees protection against short-term disability and typically specify a maximum number of benefit days per year or per disability that an employee may take at full pay before insured short-term or long-term disability benefits are initiated.

Surviving Spouse Benefits: Payments to the spouse of a deceased participant.

Therapeutic Substitution: The practice of substituting one drug for another when both are thought to produce the same therapeutic effects.

Third-Party Administrator (TPA): The party to an employee benefit plan that may collect premiums, pay claims and/or provide administrative services. Usually an out-of-house professional firm providing administrative services for employee benefit plans.

Wellness (Health Promotion) Programs: A broad range of employer- or union-sponsored facilities and activities designed to promote safety and good health among employees. The purpose is to increase worker morale and reduce the costs of accidents and ill health such as absenteeism, lower productivity and healthcare costs. May include physical fitness programs, smoking cessation, health risk appraisals, diet information and weight loss, stress management and high blood pressure screening.