A
Applicable large employers (50+ full-time equivalents) must offer minimum essential coverage to 95% of full-time employees, and it must be affordable and minimum value. For 2026, the (a) penalty is $3,340 per full-time employee minus the first 30; the (b) penalty is $5,010 per subsidized employee.
Why it mattersThe IRS enforces this with Letter 226-J, often years later, based on your own 1095-C filings. Clean measurement and clean filings are the whole defense.
Related:ALEAffordability Safe HarborsMinimum ValueMEC
Coverage is affordable in 2026 if the employee-only contribution for your cheapest minimum value plan stays under 9.96% of income, measured by one of three proxies: W-2 wages, rate of pay, or the federal poverty line. The FPL harbor for calendar-year 2026 plans: $129.89 a month.
Why it mattersPick a safe harbor deliberately and document it. The FPL harbor is the only one with a single bright-line number, which is why CFOs like it.
Related:ACA Employer MandateALEMinimum Value
Whole-plan protection. The carrier projects your expected annual claims, multiplies by a corridor (usually 125%), and that's your aggregate attachment point. If total plan claims pass it, the carrier reimburses the excess.
Why it mattersAggregate coverage is what caps your worst-case year. Check the corridor, the monthly accommodation terms, and whether the attachment point resets if enrollment drops.
Related:Specific Stop-LossAttachment PointStop-Loss Insurance
An employer averaging 50 or more full-time equivalent employees in the prior calendar year, counted across the entire controlled group. ALEs face the employer mandate and 1094-C/1095-C reporting.
Why it mattersCommon ownership across several small companies can quietly add up to one ALE. Run the controlled group analysis before the IRS runs it for you.
Related:ACA Employer MandateAffordability Safe Harbors
The negotiated price the plan and member actually owe for a service, as opposed to the provider's billed charges. The gap between billed and allowed is the 'discount.'
Why it mattersAll real cost analysis runs on allowed amounts. Billed charges are fiction. Any report bragging in billed dollars is selling you something.
Related:Network DiscountEOBReference-Based Pricing
The same administrative service as a TPA, but sold by a major carrier. Your self-funded plan rents the carrier's network and claims engine. The carrier carries no claims risk.
Why it mattersASO gets you big-network access while self-funded. The trade: carriers are notoriously stingy with claims detail, and their ASO fees often hide revenue streams. Ask what they keep.
Related:TPASelf-Funded PlanNetwork Discount
A health plan sponsored by a bona fide group of employers, letting members buy or self-fund coverage as one larger unit. The 2018 rule that loosened the standards was struck down in court and formally rescinded in 2024, so the older, stricter test governs: the association needs a real purpose beyond insurance, genuine commonality among members, and member control of the plan.
Why it mattersA well-run AHP through a strong trade association can deliver real scale to small employers. The structure shares DNA with MEWAs though, and that history is rough. Ask who regulates it, who holds the risk, and what happens to you if the pool sours.
Related:MEWAGroup Medical CaptiveFully-Insured Plan
The dollar threshold where stop-loss coverage kicks in. For specific stop-loss, it’s the per-person deductible. For aggregate, it’s expected claims times the corridor, typically 125%.
Why it mattersEverything below the attachment point is your money. Price the trade between premium savings and retained risk every single year, not just at installation.
Related:Specific Stop-LossAggregate Stop-Loss
The sticker-price benchmark drug discounts are quoted against. It's a published list price, not what anyone actually pays. The industry joke is that AWP stands for 'Ain’t What’s Paid.'
Why it matters'AWP minus 18%' sounds like a deal until you learn AWP can run 20% above acquisition cost. Discounts off a fake number are fake discounts.
Related:NADACMAC ListSpread Pricing
B
A provider billing the member for the gap between billed charges and what the plan paid. The No Surprises Act banned it for emergencies and for out-of-network providers at in-network facilities. It remains possible elsewhere, including under RBP plans without good member defense.
Why it mattersOne viral balance-bill story can sink an otherwise sound plan strategy. Whatever model you run, know exactly who defends the member and how fast.
Related:No Surprises ActReference-Based PricingAllowed Amount
Comparing your plan’s costs, design, and utilization against peers: same size, industry, region. Sources range from carrier books to KFF survey data.
Why it mattersBenchmarks tell you if a number is normal. They don't tell you if it's good. The average employer overpays, so 'at benchmark' means average waste. Aim better.
Related:PEPM / PEPYClaims DataMedical Trend
An FDA-approved, clinically equivalent version of a brand biologic, like a generic for complex drugs. Humira biosimilars arrived in 2023 at fractions of the brand price.
Why it mattersIf your formulary still prefers the original brand over its biosimilars, ask why. The honest answer is usually spelled r-e-b-a-t-e.
Related:Specialty DrugsFormularyRebates
All the clients a broker, carrier, or vendor holds. Book rates are averages across that population. A broker's book mix tells you who they really work for.
Why it mattersAsk an advisor what share of their book is self-funded, in captives, or on transparent PBM contracts. The answer predicts the advice you'll get better than any pitch deck.
Related:Broker of RecordCommission vs. Fee-Based CompensationCredibility
Since the CAA, brokers and consultants expecting $1,000 or more in compensation must disclose, in writing and before engagement, all direct and indirect compensation they’ll receive on your plan.
Why it mattersRead it next to your renewal. Overrides, bonuses, and contingents explain a lot of advice. As a fiduciary, you're required to evaluate whether that comp is reasonable. No disclosure means the arrangement is a prohibited transaction.
Related:FiduciaryCAA 2021Commission vs. Fee-Based Compensation
The advisor officially designated, via a BOR letter, to represent you with carriers and receive the compensation on your account. Signing a new BOR letter transfers the relationship, usually within days.
Why it mattersThe BOR letter is your leverage. Advisors respond to the possibility of losing it. Carriers honor the new one fast, because they have to.
Related:Commission vs. Fee-Based CompensationBroker Compensation Disclosure
Industry shorthand for the national carriers: Blue Cross Blue Shield, UnitedHealthcare, Cigna, Aetna. Each also owns or is owned by adjacent businesses: PBMs, TPAs, provider groups, data firms.
Why it mattersWhen your carrier owns your PBM and your "independent" data vendor, every fee you pay has a sibling somewhere in the family. Map the ownership before you negotiate.
Related:CarrierPBMASO
C
The law that rewired plan sponsor accountability. It banned gag clauses on cost data, required broker compensation disclosure, created RxDC drug reporting, strengthened mental health parity analysis, and built the No Surprises Act.
Why it mattersThe CAA assumes you, the sponsor, can see your data and police your vendors. Courts and the DOL now grade you on that assumption. Act like it.
Related:Gag Clause AttestationRxDC ReportingBroker Compensation DisclosureMHPAEA / NQTL AnalysisNo Surprises Act
The insurance company. On fully-insured business it takes claims risk for premium. On ASO business it sells administration and network access with no risk.
Why it mattersThe same logo plays two very different roles. Know which one you're buying, because the incentives don't match.
Related:BUCAASOFully-Insured Plan
Nurse-led coordination for members in complex or catastrophic care: transplants, NICU stays, major cancer. The goal is the right care in the right setting, without dropped handoffs.
Why it mattersDone well, it improves outcomes and tames the largest claims at the same time. Ask who performs it, at what caseload, and whether they engage before or after the spend happens.
Related:Large ClaimantCenters of ExcellenceUtilization Management
Designated facilities for specific high-stakes procedures, transplants, joints, spine, cancer, chosen for outcomes and bundled pricing. Plans often waive member cost and cover travel to steer there.
Why it mattersOne redirected spine surgery can pay for the whole program. Quality and cost run together more often than people expect: complications are expensive.
Related:Tiered NetworkCase ManagementLarge Claimant
The detailed record of what your plan paid: who, what service, which provider, what amount. Self-funded employers own theirs. Fully-insured employers usually see summaries at best, and carriers fight to keep it that way.
Why it mattersYou can't manage what you can't see. Claims data is how you find waste, predict trend, and negotiate from facts. The CAA's gag clause ban exists because access was that bad.
Related:Self-Funded PlanGag Clause AttestationBenchmarkingLarge Claimant
Consolidated Omnibus Budget Reconciliation Act
Continuation coverage for employers with 20+ employees: 18 months after termination or reduced hours, up to 36 for events like divorce or death, 29 with a disability extension. Members pay up to 102% of the full premium (150% during the disability extension). They get 60 days to elect. States run mini-COBRA laws for smaller employers.
Why it mattersCOBRA litigation is a cottage industry built on defective notices. Outsource administration, then audit the notices anyway. The liability stays yours.
Related:Premium Equivalent RateQualifying Life EventHIPAA
The percentage split after the deductible is met. An 80/20 plan pays 80% and the member pays 20%, until the member hits the out-of-pocket max.
Why it mattersCoinsurance keeps members price-aware after the deductible, which copays don't. It also makes bills unpredictable. Pick your trade.
Related:DeductibleCopayOut-of-Pocket Maximum
Commissions are a percentage of premium, paid by the carrier, baked into your rates. Fees are flat amounts you pay directly. Overrides and contingent bonuses sit on top of commissions and reward volume with specific carriers.
Why it mattersA percentage of premium grows when your costs grow. Read the incentive. Fee arrangements align better, and the 408(b)(2) disclosure tells you what you're really paying today.
Related:Broker Compensation DisclosureBroker of RecordFiduciary
The rules deciding who pays first when someone has two coverages, like a working couple each carrying the other. The primary plan pays first; the secondary plan picks up some remainder.
Why it mattersWeak COB enforcement means your plan pays claims another plan owed. TPAs vary widely in how hard they chase it. Ask for COB recovery numbers.
Related:SubrogationEOBDependent Eligibility Audit
A flat fee for a service: $30 for a visit, $15 for a generic. Predictable for members, and usually not counted toward the deductible.
Why it mattersCopays buy simplicity and hide prices. A member who pays $30 either way has no reason to pick the $900 MRI over the $400 one.
Related:CoinsuranceDeductible
Programs that capture manufacturer copay assistance. An accumulator takes the assistance but doesn't count it toward the member's deductible or out-of-pocket max. A maximizer spreads the assistance across the year to extract the full amount.
Why it mattersThese programs cut plan costs but can leave members with surprise bills mid-year, and several states restrict accumulators. Know which programs your PBM runs and what members experience.
Related:PBMSpecialty DrugsOut-of-Pocket Maximum
An underwriting measure of how predictive your own claims history is. Big groups are fully credible: their history drives their rates. Small groups get blended with the carrier's book rates because one bad year says little about the next.
Why it mattersKnow your credibility before you negotiate. If your group is highly credible and your claims ran well, you have real leverage on rates. If not, the argument shifts to plan design.
Related:UnderwritingExperience Rating vs. Community RatingRenewal
D
What a member pays for covered care before the plan starts paying. Copays and premiums don’t count toward it in most designs. Resets every plan year.
Why it mattersDeductibles shift cost and shape behavior. Past a point, they stop saving money and start deferring care that comes back bigger. Watch your own claims data for that point.
Related:CoinsuranceCopayOut-of-Pocket MaximumEmbedded vs. Aggregate Deductible
A pre-tax account for childcare and dependent care costs, not medical care. Funds are available only as contributed, unlike a health FSA. Caps are set by statute and IRS guidance.
Why it mattersCheap to offer, loved by working parents, and it fails nondiscrimination testing more than any other benefit. Test early in the year, not in December.
Related:Health FSASection 125
A verification sweep confirming every covered dependent actually qualifies: current spouses, age-eligible children, documented relationships. Audits routinely find 3% to 8% of dependents ineligible.
Why it mattersEvery ineligible dependent is pure claims exposure you never owed. One audit before a funding change or carrier move pays for itself almost every time.
Related:Claims DataQualifying Life Event
A flat monthly fee to a primary care practice for unlimited access. No insurance billing, no copays, longer visits. Paired with a major medical plan for everything beyond primary care. Since January 2026, memberships up to $150 a month are HSA-compatible and HSA-reimbursable.
Why it mattersStrong primary care heads off ER visits and specialist churn downstream. The 2026 HSA fix removed the biggest legal headache for pairing DPC with HDHPs.
Related:HSAHDHPReference-Based Pricing
E
How family deductibles work. Embedded: each person has an individual deductible inside the family one, so one sick family member can hit it alone. Aggregate (non-embedded): the entire family deductible must be met before the plan pays for anyone.
Why it mattersOn family HDHPs, an aggregate deductible can legally reach $3,400 in 2026 before anything pays. Employees rarely understand the difference until a bad year teaches them. Put it in the enrollment materials.
Related:DeductibleHDHPOut-of-Pocket Maximum
The statement showing how a claim was processed: billed, allowed, plan paid, member owes. Not a bill, though it's routinely mistaken for one.
Why it mattersEOBs are where members first spot errors and where balance bills surface. Teach people to read them. Billing mistakes are common enough to make it worth it.
Related:Allowed AmountBalance BillingCoordination of Benefits
A hybrid: no coverage outside the network (like an HMO), but no PCP or referral requirements either (like a PPO). Members navigate freely inside the fence.
Why it mattersEPOs price between HMOs and PPOs. They work when the network is genuinely adequate for where your people live. Check the network map before the premium.
Related:PPOHMONarrow Network
Employee Retirement Income Security Act of 1974
The federal law governing employer benefit plans. It sets fiduciary duties, document and disclosure rules (SPD, Form 5500), and claims procedures. For self-funded plans it preempts most state insurance mandates.
Why it mattersERISA makes the employer, not the broker or carrier, legally responsible for running the plan in employees' interest. Everything else on this list hangs off that fact.
Related:FiduciaryPlan Sponsor vs. Plan AdministratorSPDForm 5500
Experience rating prices your group on its own claims history. Community rating, required in the ACA small group market, pools you with everyone: only age, location, family size, and tobacco can vary rates.
Why it mattersA healthy 30-person company is usually subsidizing the community pool. That math is why level-funded and ICHRA pitches land so well below 50 lives.
Related:UnderwritingCredibilityLevel-Funded PlanICHRA
F
Vitori Health’s trademarked claim pricing model, built as the next step past RBP. Instead of network discounts or one flat Medicare multiple, FMP prices each claim with algorithms that weigh Medicare rates against the actual cost of the specific service, then pays the provider a margin above that. No network, no out-of-network penalties. Vitori reports 98.8% of payments accepted without pushback and balance billing on fewer than 0.25% of claims.
Why it mattersThe knock on classic RBP is friction: members caught between the plan and an angry hospital. FMP's pitch is the repricing savings without the fight. Whatever model you evaluate, ask for acceptance and balance-bill statistics in writing, then check them against these.
Related:Reference-Based PricingAllowed AmountBalance BillingTPA
Anyone with discretionary control over a plan or its assets. Fiduciaries must act solely in participants' interest, with expert-level prudence, and pay only reasonable plan expenses. You can't outsource the status away.
Why it mattersFee transparency from the CAA armed plaintiffs. Employers now face lawsuits over PBM and vendor costs the way 401(k) sponsors did over fund fees. Document a prudent process: review fees, run RFPs, keep minutes.
Related:ERISAPlan Sponsor vs. Plan AdministratorBroker Compensation DisclosureCAA 2021
The annual report welfare plans with 100 or more participants file with the DOL. Due the last day of the seventh month after plan year end (July 31 for calendar years), extendable 2.5 months via Form 5558.
Why it mattersPenalties accrue per day, per filing, and the DOL finds missing 5500s easily. The delinquent filer program (DFVCP) caps the damage if you self-correct before they call.
Related:SARWrap DocumentPlan Sponsor vs. Plan Administrator
The list of drugs your plan covers, arranged in tiers with different copays. Lower tiers cost members less. PBMs build formularies, and manufacturer rebates influence which drugs land in preferred spots.
Why it mattersA rebate-driven formulary can prefer a $900 brand over a $90 alternative because the rebate flows look better. Ask how your formulary decisions get made and who profits.
Related:PBMRebatesStep TherapyPrior Authorization
You pay the carrier a fixed premium. The carrier pays the claims and keeps whatever's left over. State insurance law governs the plan, and the carrier owns the claims data.
Why it mattersGood years build the carrier's surplus, not yours. You're buying budget certainty at the price of every dollar your plan didn't spend.
Related:Self-Funded PlanLevel-Funded PlanMLR
G
The CAA bans contract terms that block your access to cost and quality data or your own claims. Every year, by December 31, plans must attest to CMS that their contracts contain no such clauses.
Why it mattersYou're certifying your TPA and PBM contracts to the federal government. If a vendor won't give you claims data, your attestation has a problem. Use that.
Related:CAA 2021Claims DataTransparency in Coverage
The drug class that includes semaglutide (Ozempic, Wegovy) and tirzepatide (Mounjaro, Zepbound), used for diabetes and weight loss. List prices run near $1,000 a month, and demand is enormous.
Why it mattersGLP-1 coverage for weight loss is now a board-level budget question. Whatever you decide, decide it on purpose: eligibility criteria, prior auth, duration, and an exit plan.
Related:Specialty DrugsPrior AuthorizationFormulary
A plan existing since March 23, 2010 that has avoided disqualifying changes and so skips some ACA requirements, like the out-of-pocket cap and free preventive care. Few remain, and they must disclose their status in plan materials.
Why it mattersIf you still have one, you're preserving exemptions at the cost of design flexibility. Most that survived this long survive on inertia. Re-run the math.
Related:Out-of-Pocket MaximumSBC
A group of employers who jointly own an insurance company that takes a middle layer of their stop-loss risk. Each member self-funds day-to-day claims. The captive layer absorbs mid-size shocks, and underwriting profit returns to the members instead of a carrier.
Why it mattersCaptives let a 75-life company get self-funding economics with less year-to-year volatility. You also sit in a room with other owners who share claims discipline. Underwriting standards matter, so good captives say no a lot.
Related:Self-Funded PlanStop-Loss InsuranceMEWA
H
A plan meeting IRS thresholds that make members HSA-eligible. For 2026: minimum deductible of $1,700 self-only or $3,400 family, out-of-pocket max no higher than $8,500 / $17,000. Preventive care can be covered before the deductible.
Why it mattersThe HDHP+HSA combo is the only plan design with a triple-tax-advantaged account attached. It works when you fund the HSA enough that employees actually use care. Unfunded, it’s just cost-shifting with a tax form.
Related:HSADeductibleOut-of-Pocket Maximum
A pre-tax account for medical expenses, owned by the plan, not the employee. 2026 election cap: $3,400. Unused funds are forfeited unless you offer the carryover (up to $680 for 2026) or a 2.5-month grace period. One or the other. Never both. The full election is available on day one.
Why it mattersDay-one availability means an employee can spend $3,400 in January and quit in February. Forfeitures partially offset that risk across the group. Mind the nondiscrimination tests too.
Related:HSALimited Purpose FSADependent Care FSASection 125
Health Insurance Portability and Accountability Act
For employers, HIPAA means two things: special enrollment rights when life events happen, and privacy/security rules for plan health data. Sponsors handling PHI need business associate agreements, safeguards, and breach procedures.
Why it mattersThe riskiest PHI in your company often sits in HR inboxes and spreadsheets, not systems. Decide what the plan touches, then build the wall there.
Related:Qualifying Life EventCOBRAClaims Data
A plan with a closed provider network. Members pick a primary care physician, need referrals for specialists, and get no coverage outside the network except emergencies. Premiums run lower than PPOs.
Why it mattersHMOs trade choice for cost control. In markets with strong HMO networks, the savings are real. The gatekeeping is the feature, not the bug.
Related:PPOEPOPOS
An employer-funded account that reimburses medical expenses. The employer owns it, sets the rules, and keeps unused funds unless rollover is allowed. Often paired with a high-deductible plan to soften the deductible.
Why it mattersHRAs let you raise deductibles on paper while insulating employees in practice. You only pay when care actually happens, and utilization usually runs well under 100%.
Related:ICHRAQSEHRAHDHP
An employee-owned, portable account paired with an HDHP. Contributions are pre-tax, growth is tax-free, and qualified medical spending is tax-free. 2026 limits: $4,400 self-only, $8,750 family, plus $1,000 catch-up at 55. New for 2026: a direct primary care membership up to $150 a month no longer blocks eligibility.
Why it mattersThe only triple-tax-advantaged vehicle in the code. Employer seed money into HSAs buys more goodwill per dollar than almost any other benefits spend.
Related:HDHPHealth FSADirect Primary Care
L
A member whose annual claims cross a high threshold, often $50,000 or half the specific stop-loss deductible. A small fraction of members typically drives a third or more of total spend.
Why it mattersYour renewal is mostly a story about a handful of people. Case management, site-of-care moves, and stop-loss strategy around large claimants beat nibbling at copays.
Related:Specific Stop-LossCase ManagementSpecialty DrugsLasering
When a stop-loss carrier assigns a higher specific deductible to one named individual, usually someone with a known expensive condition. Everyone else keeps the standard deductible. That one person gets "lasered" at, say, $250,000 instead of $50,000.
Why it mattersA laser shifts six figures of risk back to you, quietly. Ask for no-new-laser guarantees and rate caps at renewal. They exist. You have to ask.
Related:Specific Stop-LossLarge ClaimantStop-Loss Contract Types
A self-funded plan packaged to feel fully-insured. You pay one level monthly amount that bundles expected claims, admin fees, and stop-loss premium. If claims come in under the funded amount, you may get part of the surplus back at year end. How much depends entirely on the contract.
Why it mattersIt's a real first step out of fully-insured. But read the surplus split, the renewal mechanics, and the data access terms. Level-funded is not the full self-funded experience, and some carriers keep half the savings.
Related:Self-Funded PlanFully-Insured PlanStop-Loss Insurance
An FSA restricted to dental and vision expenses, so it can sit alongside an HSA without breaking HSA eligibility rules.
Why it mattersIf you offer an HDHP, offer this with it. It lets HSA participants keep pre-tax dollars flowing for braces and glasses while their HSA grows.
Related:HSAHealth FSAHDHP
M
The PBM’s internal price ceiling list for generic drugs. The PBM sets it, updates it, and often runs different MAC lists for billing the plan versus paying the pharmacy.
Why it mattersTwo MAC lists is how generic spread happens. Contract for one MAC list, disclosed, with audit rights.
Related:Spread PricingAWPNADAC
The baseline coverage that satisfies the offer requirement of the employer mandate. Most employer group plans qualify. Skinny 'MEC plans' covering little beyond preventive care exist mainly to dodge the (a) penalty.
Why it mattersA MEC-only strategy avoids one penalty while leaving the (b) penalty live for every employee who gets a subsidy. Know exactly which exposure you kept.
Related:ACA Employer MandateMinimum Value
The annual inflation rate of healthcare costs: unit prices times utilization, plus new drugs and technology. Underwriters apply trend to project next year's claims. Recent years have run high single digits.
Why it mattersTrend is the silent compounding tax on your plan. At 8%, costs double in about nine years. Every renewal that 'only' matches trend is still a doubling schedule.
Related:UnderwritingRenewalExperience Rating vs. Community Rating
An arrangement where unrelated employers share one health plan. Some are legitimate association plans. Historically, underfunded MEWAs collapsed and left unpaid claims, so states regulate them hard and some effectively ban self-funded versions.
Why it mattersIf someone pitches you shared coverage with other employers, find out exactly what it is, who regulates it, and how it's funded. The word MEWA should slow you down, not stop you.
Related:Group Medical CaptiveAssociation Health PlanFully-Insured Plan
Mental Health Parity and Addiction Equity Act / Non-Quantitative Treatment Limitation
Federal parity law: mental health and substance use benefits can't be more restricted than medical benefits. The CAA requires a written comparative analysis of non-quantitative limits (prior auth, network adequacy, reimbursement methods), available to the DOL on request.
Why it mattersThe DOL has been requesting these analyses, and "our carrier handles it" is not a defense the law recognizes. Confirm in writing who prepared yours and where it lives.
Related:CAA 2021Prior AuthorizationERISA
A plan covering at least 60% of expected costs and providing substantial inpatient and physician coverage. The second test, after affordability, for avoiding the 4980H(b) penalty.
Why it mattersYour actuary or carrier certifies MV. Verify it on any nonstandard design before betting penalty exposure on it.
Related:ACA Employer MandateAffordability Safe HarborsMEC
The share of premium an insurer spends on claims and quality improvement versus admin and profit. The ACA requires 80% in the small group market and 85% in large group. Miss it and the carrier owes rebates.
Why it mattersMLR is a floor, not a virtue. A carrier can hit 85% while costs balloon, because 15% of a bigger number is more money. Rising spend isn't against their interest.
Related:Fully-Insured PlanCarrier
N
National Average Drug Acquisition Cost
A CMS survey of what pharmacies actually pay to acquire drugs. It's public, updated regularly, and the closest thing to a true cost benchmark in pharmacy.
Why it mattersCompare your generic claims against NADAC and the spread becomes visible. Transparent contracts increasingly price at NADAC plus a dispensing fee.
Related:AWPMAC ListSpread Pricing
A deliberately smaller provider network built around lower-cost, higher-quality systems, traded for lower premiums. The opposite of the everyone-in-the-pool PPO.
Why it mattersNarrow networks save 5% to 15% when the network actually matches where employees live and which doctors they already see. Run the disruption report before you commit.
Related:PPOEPOTiered Network
The percentage off billed charges a network negotiates. Sounds concrete. But providers set billed charges themselves, so a hospital can raise list prices and deepen the 'discount' while the real price climbs.
Why it matters'52% off' a number the hospital invented is not a price. Compare allowed amounts, or multiples of Medicare, across networks. Never compare discounts.
Related:Allowed AmountPPOReference-Based PricingTransparency in Coverage
The CAA title that bans balance billing for emergency care, air ambulance, and out-of-network providers at in-network facilities. Members pay in-network cost-sharing; plans and providers settle disputes through independent dispute resolution (IDR).
Why it mattersNSA killed the classic surprise bill but created an arbitration pipeline that affects plan costs. Watch your TPA’s IDR results. They’re your dollars.
Related:Balance BillingCAA 2021Transparency in Coverage
P
A PBM that charges your plan exactly what it pays the pharmacy, passes back all manufacturer revenue, and earns a flat admin fee instead. SmithRx, FairosRx, and Ventegra are names you’ll hear in this category, and Mark Cuban’s Cost Plus Drugs publishes the cash-price benchmark that keeps everyone honest.
Why it mattersThe model removes the incentive to prefer expensive drugs. Verify it in contract terms, not marketing: full claim-level audit rights, all revenue defined and passed through, flat fee.
Related:PBMSpread PricingRebatesPharmacy Carve-Out
The middleman that runs your drug benefit: builds the formulary, sets pharmacy networks, processes claims, and negotiates manufacturer rebates. Three of them, CVS Caremark, Express Scripts, and Optum Rx, processed nearly 80% of U.S. prescriptions in 2023 per the FTC.
Why it mattersYour PBM contract decides what you pay for drugs more than any other document. The big three are owned by carriers and own their own pharmacies. Follow the incentives.
Related:Spread PricingRebatesPass-ThroughFormulary
An annual ACA fee funding outcomes research: $3.84 per covered life for plan years ending October 2025 through September 2026. Self-funded plans (including level-funded and most HRAs) file IRS Form 720 and pay by July 31. Insurers pay it for fully-insured plans.
Why it mattersSmall dollars, real penalty exposure, and nobody files it for you when you're self-funded. It jumped 10.7% this cycle. Put July 31 on the calendar.
Related:Form 5500Self-Funded PlanHRA
Per Employee Per Month / Per Year
The standard normalization for benefits costs: total cost divided by employee months. It makes plans of different sizes and years comparable.
Why it mattersDemand every quote, fee, and report in PEPM. Vendors love quoting big annual numbers or tiny per-claim fees. PEPM makes everything one currency.
Related:BenchmarkingClaims Data
Contracting your drug benefit directly with a PBM you choose, instead of taking the one bundled inside your medical carrier (a carve-in). Self-funded plans can carve out; fully-insured plans usually can't.
Why it mattersCarving out gets you your own contract terms, your own data, and a vendor you can fire. Bundled pharmacy is convenient and opaque, and opaque is expensive.
Related:PBMPass-ThroughSelf-Funded Plan
An HMO-PPO blend: members pick a PCP and need referrals, but can go out-of-network at higher cost. The name comes from choosing your coverage level at the point of service.
Why it mattersPOS plans rarely win on price or simplicity anymore. If one is on your menu, make sure it earns its slot against an EPO or HDHP.
Related:HMOPPOEPO
A plan built on a broad provider network. Members see any in-network provider without referrals and still get partial coverage out-of-network. The most common employer plan type, and usually the most expensive.
Why it mattersYou're paying a premium for freedom of choice most members never use. The PPO network's 'discounts' come off billed charges nobody actually pays.
Related:HMOEPONetwork DiscountNarrow Network
The fixed amount paid for coverage, usually monthly. In employer plans, the company pays most and employees pay the rest through payroll. KFF’s 2025 survey put average annual premiums at $9,325 single and $26,993 family.
Why it mattersPremium is the only healthcare number most companies manage. It's also the output of every other number on this page. Manage the inputs instead.
Related:Fully-Insured PlanPremium Equivalent RateMedical Trend
The calculated full cost of coverage under a self-funded plan: expected claims plus fixed costs, expressed per tier like a premium. Used to set budgets, employee contributions, and COBRA rates (at 102%).
Why it mattersSet it too low and the plan runs a deficit you eat at year end. Set it honestly and your budget, your contributions, and your COBRA rates all hold together.
Related:Self-Funded PlanCOBRAIBNR
A requirement that the plan approve a drug or service before it’s covered. Done well, it steers members to clinically sound, cost-effective care. Done badly, it delays care and buries doctors in paperwork.
Why it mattersPrior auth is a tool, not a virtue. Ask for approval rates, turnaround times, and appeal outcomes. If it approves 95% of requests after friction, it's just friction.
Related:Step TherapyUtilization ManagementFormulary
R
Purchasing entities, mostly PBM-owned, that negotiate manufacturer payments upstream of your contract. The FTC has documented the big three’s affiliates: Zinc (CVS), Ascent (Express Scripts), and Emisar (Optum). Fees collected there may never appear in your rebate reporting.
Why it mattersThis is the loophole that makes '100% pass-through' compatible with billions in retained revenue. Ask your PBM what its GPO collects on your claims. Watch the answer carefully.
Related:RebatesPBMPass-Through
Payments drug manufacturers make to PBMs for placing their products on the formulary. Contracts promise some share back to the plan. The catch is the definition: money labeled as admin fees, data fees, or GPO fees can sit outside the word 'rebate' entirely.
Why it matters'100% pass-through of rebates' means 100% of whatever the contract defines as a rebate. The definition section is where the money moves. Read it.
Related:PBMRebate Aggregator / GPOFormularyPass-Through
A plan model that drops the network entirely. Claims get paid at a multiple of Medicare, often 120% to 200%, rather than a discount off billed charges. Vendors handle provider negotiations and defend members if a provider balance bills.
Why it mattersRBP reprices the claim itself rather than discounting a fictional number. Savings can be dramatic. Execution is everything: member support and balance-bill defense make or break it.
Related:Fair Market PaymentNetwork DiscountBalance BillingAllowed AmountSelf-Funded Plan
The annual repricing of your plan. The carrier proposes new rates, typically 60 to 90 days before the plan year. What happens next depends on whether anyone negotiates with data.
Why it mattersA renewal accepted without claims data, alternatives, or a deadline is a price increase with paperwork. Start 5 to 6 months out or accept what arrives.
Related:UnderwritingMedical TrendBroker of Record
Run-in claims were incurred before the contract period but paid during it. Run-out claims were incurred during the period but paid after it ends. Medical claims routinely take weeks or months to process, so every plan year has both.
Why it mattersWhen you change carriers, TPAs, or funding models, run-in and run-out decide who pays for the claims sitting in the pipeline. Get it in writing.
Related:Stop-Loss Contract TypesIBNRTerminal Liability
Prescription Drug Data Collection
Annual CAA reporting of prescription drug and healthcare spending to CMS, due June 1 for the prior calendar year. PBMs and TPAs typically submit the files, but the obligation sits with the plan.
Why it mattersVendors file it 'on your behalf' only if your contract says so and they actually do. Get written confirmation each year. The deadline doesn't move.
Related:CAA 2021PBMGag Clause Attestation
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The participant-facing summary of the Form 5500, distributed within 9 months of plan year end, or 2 months after an extended 5500 deadline.
Why it mattersIf you file a 5500, the SAR follows automatically. Missing it is an unforced error that shows up in DOL audits as a pattern signal.
Related:Form 5500SPD
The standardized comparison document the ACA requires at enrollment and renewal, capped at four double-sided pages in a government-mandated format. Mid-year material changes require 60 days advance notice.
Why it mattersWillful failure carries per-participant fines. Carriers and TPAs draft SBCs, but delivering them on time is your job, and it's auditable.
Related:SPDOpen Enrollment
The tax code section that lets employees pay premiums and fund FSAs pre-tax. It requires a written plan document and annual nondiscrimination testing. A premium-only plan (POP) is its simplest form.
Why it mattersNo document, no pre-tax treatment. It's that direct. If you've never seen your Section 125 document, that's an action item, not trivia.
Related:Health FSADependent Care FSAWrap Document
Your company pays employee medical claims from its own assets instead of buying insurance for them. A TPA or carrier processes the claims. Stop-loss insurance caps the catastrophic risk. ERISA governs the plan, which preempts most state benefit mandates.
Why it mattersYou keep the margin a carrier would have kept, you see your own claims data, and you design the plan. In exchange, you carry the claims volatility between your stop-loss limits.
Related:Stop-Loss InsuranceTPALevel-Funded PlanERISA
The readable document ERISA requires describing what the plan covers and how it works. Due to new participants within 90 days. Material changes go out as a Summary of Material Modification (SMM). A carrier certificate alone usually isn't an SPD.
Why it mattersMost employers running on a bare carrier booklet are out of compliance and don't know it. A wrap document fixes it cheaply.
Related:Wrap DocumentSBCERISA
High-cost drugs, often biologics, frequently running $1,000 a month and up, for conditions like cancer, MS, and autoimmune disease. A tiny share of prescriptions, but roughly half of total drug spend and climbing.
Why it mattersSpecialty is where your pharmacy trend lives. Site of care, biosimilar substitution, and who owns the specialty pharmacy are five and six figure questions per patient, per year.
Related:BiosimilarGLP-1sPBMLarge Claimant
Per-person catastrophic protection. You pick a deductible, say $50,000. Once any one member’s claims pass it in the contract period, the stop-loss carrier reimburses the rest. Also called individual stop-loss.
Why it mattersYour specific deductible is the single biggest lever on stop-loss premium. Raise it and premiums drop, but every large claimant costs you more first-dollar.
Related:Aggregate Stop-LossAttachment PointLaseringLarge Claimant
The PBM bills your plan one price for a drug, reimburses the pharmacy a lower price, and keeps the difference. The spread is invisible unless your contract requires pass-through pricing and gives you claim-level audit rights.
Why it mattersSpread shows up most on generics, where the gap can be enormous. If your contract doesn't ban it explicitly, assume it's happening.
Related:PBMPass-ThroughMAC ListNADAC
A 'fail first' rule: the member must try a cheaper drug before the plan covers the expensive one. Common on specialty drugs and GLP-1s.
Why it mattersReasonable steps save real money. Unreasonable ones push costs to the medical side when conditions worsen. Review the actual step rules, not the concept.
Related:Prior AuthorizationFormularyUtilization Management
The two numbers are months: when a claim can be incurred, and when it can be paid, for the contract to cover it. A 12/12 covers claims both incurred and paid inside the plan year. A 12/15 adds three months of run-out for claims paid late. A 15/12 adds three months of run-in for claims incurred before the year started. A paid contract covers anything paid during the year.
Why it mattersA cheap 12/12 quote leaves claims incurred in December but paid in February completely unprotected. Gaps between contract types are where switching stop-loss carriers goes wrong.
Related:Run-In / Run-OutIBNRTerminal Liability
Insurance that protects the employer, not the employee. When a self-funded plan's claims pass a set threshold, the stop-loss carrier reimburses the excess. It comes in two forms: specific (per person) and aggregate (whole plan).
Why it mattersStop-loss is what makes self-funding survivable for a 100-life company. It's also a contract full of traps: lasering, contract periods, and exclusions all live here.
Related:Specific Stop-LossAggregate Stop-LossLaseringStop-Loss Contract Types
The plan's right to recover what it paid when someone else was liable, like a car accident where the other driver's insurance should pay the medical bills.
Why it mattersRecoveries flow back to whoever funds claims. Self-funded, that’s you. Ask your TPA what it recovered last year and what the vendor keeps as contingency.
Related:Coordination of BenefitsTPA
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The run-out claims you still owe after a self-funded plan ends or moves to a new arrangement. Terminal liability coverage extends stop-loss protection over that tail, usually for three months, for an extra premium.
Why it mattersLeaving self-funding isn't free. Budget the tail before you make the move, not after the invoices arrive.
Related:Run-In / Run-OutIBNRStop-Loss Contract Types
A network sorted into levels by cost and quality. Members pay least at Tier 1 providers, more at Tier 2, most out-of-network. Everyone stays covered everywhere, but incentives point to value.
Why it mattersTiering is the gentler cousin of the narrow network: steering without removal. It only works if the tier assignments reflect real cost and quality data.
Related:Narrow NetworkCenters of ExcellencePPO
An independent company that runs the mechanics of a self-funded plan: claims processing, network access, member service, reporting. The TPA takes no insurance risk. You pay claims, the TPA administers them.
Why it mattersIndependent TPAs typically hand over your full claims file without a fight. That data access is half the reason to self-fund in the first place.
Related:ASOSelf-Funded PlanClaims Data
Federal rules requiring plans to publish machine-readable files of negotiated in-network rates and out-of-network allowed amounts, updated monthly, plus a member price comparison tool.
Why it mattersThe negotiated rates everyone swore were trade secrets are now public data. Analysts can tell you what your network really pays versus the one across the street. Use that at renewal.
Related:Network DiscountAllowed AmountGag Clause Attestation
