Do you have a question about your coverage? Do you need the definition to an insurance term? Or do you want to learn more about health care reform?

Our Resource Center is a continuous work in progress so please let us know if you still need assistance or if you feel we should add something to any of our sections. Take a look:

Frequently asked questions (FAQs)

General

Do you have to be a member of the Medical Society of Virginia to purchase insurance through the Medical Society of Virginia Insurance Agency?
No, the Medical Society of Virginia Insurance Agency is here to assist all physicians in the state of Virginia.

Professional Liability

What is the difference between claims-made & occurrence policies?
The majority of medical professional liability policies are written on a claims-made policy form.  For a claims-made policy to respond to a professional liability claim, the claim must be: reported during the policy period in force (and otherwise covered by the policy); and, involve an incident that occurred after the retroactive date shown on the declarations page of the policy (usually this is the date of your first claims-made policy).  When a claims-made policy expires, it must immediately be replaced with another claims-made policy to avoid a lapse in coverage.

When a claims-made policy is no longer needed, a reporting endorsement ("tail coverage") must be requested.  The Reporting Endorsement is attached to the last policy and provides a place to report any future claim resulting from an incident that occurred between the retroactive date and the date the policy expired.

Another type of policy form is the "occurrence form".  A very limited number of companies offer professional liability coverage on this form.  In contrast to the claims-made policy form, an occurrence policy form is designed to cover claims that result from services performed while the policy was in force, regardless of when the claim is reported.  Therefore, with an occurrence policy it is not necessary to obtain "tail" coverage.

The main difference between the two forms is that the coverage under the claims-made form is determined by when the claim is reported (and the incident must have occurred after the retroactive date).  In contrast, coverage under the occurrence form is determined by when the incident occurred.

Why do most companies use a claims-made policy form for professional liability policies?
Malpractice insurance companies prefer to use a claims-made policy form because with an occurrence policy form, many incidents that could result in a claim may not be reported until sometime in the future.  Therefore, when an occurrence policy ends, the insurance company cannot be sure they are aware of all the incidents that actually occurred during the policy period.  When rates are established for occurrence policies, the company must try to forecast for these future anticipated claims.  The speculative nature of this approach can lead to pricing inaccuracies.

 Since a claims-made policy covers only known claims, or those claims actually reported during the policy period, the insurance company knows at the end of the policy period all claims to which that policy will respond.  These factors allow the insurance company to establish rates more accurately.

What is prior acts coverage?
Prior Acts coverage is when a claims made policy looks back in time to cover medical incidents that happened in the past.  Prior Acts coverage is determined by the “retroactive date” identified on the policy.  If the medical incident took place after the retroactive date (or prior acts date) identified on the policy, and the claim is made during an in-force policy (and is not otherwise excluded), the claims-made policy will respond.

What is my retroactive date?
This date is usually found on the declarations page of a claims-made policy.  Each physician and the legal entity will have their own date.  Only incidents that occurred after this date and are reported during the in-force policy period (and otherwise not excluded) are covered. (Not to be confused with the effective and expiration dates of the policy itself).

What is tail coverage?   (also known as an Extended Reporting Period Endorsement)
This coverage protects the physician against all claims that arise from professional services performed while the claims-made policy was in effect, but which were reported after the termination of the policy. Some insurers offer this feature free of charge for retiring doctors who meet certain requirements.

Health & Benefits

What types of health insurance plans are available?
Insurance companies offer many types of medical plans these days. And the differences are blurring. However, many health plans fall into one of the following types, ranked from less to more "managed care" features.

  • Health Maintenance Organization (HMO) plan
  • Health Reimbursement Arrangement (HRA)
  • Health Savings Account (HSA)
  • Indemnity or traditional medical plan 
  • Preferred Provider Organization (PPO) plan 
  • Point-of-Service (POS) plan

HMO Plans
In a typical HMO plan, you:

  • Need to use HMO providers each time you need care
  • Pay a fixed copayment for many plan services
  • Don’t have to file claim forms or pay an annual deductible
  • Are generally eligible for a wide range of preventive care
  • May need to preauthorize certain treatment (such as elective surgery) and/or obtain second opinions
  • May receive benefits for care outside the HMO if it’s a real emergency and you follow plan rules

With a typical HMO plan, you name a primary care physician (PCP) for each person you enroll. The PCP coordinates all your medical care. However, in "open access" HMO plans, you may not need to start with your PCP as gatekeeper in order to receive plan benefits.

Health Reimbursement Arrangements (HRAs)
An HRA is an employer owned account used to reimburse employees' qualified medical-related expenses not covered by insurance on a non-taxable basis. HRAs were issued under Treasury and IRS Notice 2002-45 and Revenue Ruling 41.

The rising cost of health care is a concern for most employers. With the addition of an HRA, employers can enhance their benefit package while still achieving their overall corporate goals of lowering health benefit costs or capping costs at their current levels. HRAs allow an employer-funded account to repay the unreimbursed medical expensed of employees and may or may not carry unused funds forward. An HRA account may reimburse any or all the same expenses as a Section 125 Health FSA.

Unlike a Health FSA, where the IRS requires the annual election to be available on the first day of the plan year, only a portion of the HRA limit may be added to each account once per month or pay period. That means no surprised and no big hits to the employer's checkbook.  The employer will have less expense each month and only be liable for a small portion of each employee's HRA annual limit.

Health Savings Account with High Deductible Plan (HSAs)
A new type of health care option uses an individual health savings account (HSA) together with a high deductible health pan (HDHP). With this arrangement, you open a tax-sheltered account with contributions from you and /or your employer. You also participate in a high deductible health plan. The high deductible plan is generally a PPO, POS or HMO.

  • You use the HSA to pay for medical expenses before other resources are used.
  • Once you have met your deductible, the plan begins to pay its share of costs.
  • Money in your account rolls over from year to year, so you can accumulate money for the future. The government does, however, set certain limits on eligibility and contributions.

With an HSA, you may find that you feel like you are spending your own money when you obtain medical care. You may “shop around” more, and you may find that as a cash customer you can command some good savings from doctors and hospitals who are tired of waiting for payments from insurance companies.

Indemnity Plans

In a typical indemnity plan, you:

  • See any licensed provider for covered services
  • Pay 100% of eligible expenses until you meet your annual deductible each year
  • Pay a percentage of eligible expenses (splitting costs with the plan) after you meet your annual deductible
  • File claim forms and wait to be reimbursed
  • May need to preauthorize certain treatment (such as elective surgery) and/or obtain second opinions
  • May or may not be covered for preventive care such as physicals, well-baby visits and immunizations

POS and PPO Plans
Both POS and PPO plans provide hybrids between an indemnity plan and an HMO. In a typical POS or PPO plan, you:

  • Have a choice of going "in-network" or "out-of-network" each time you need care
  • Receive higher plan benefits, don’t have to file claim forms, don’t need to pay an annual deductible, and may be eligible for more preventive care when you go in-network
  • Receive lower plan benefits, need to file claim forms, may be eligible for fewer preventive care services, and need to pay 100% of eligible expenses until you meet your annual deductible each year, then split expenses with the plan when you go out-of-network
  • May need to preauthorize certain treatment (such as elective surgery) and/or obtain second opinions, especially out-of-network
  • May receive in-network levels of benefits for out-of-network care if it’s a real emergency and you follow plan rules

In-network, you may have a fixed copayment for many plan services, or you may pay a percentage of the costs.

With a typical POS plan, you name a primary care physician (PCP) for each person you enroll. The PCP coordinates all in-network medical care. However, in "open access" POS plans and PPO plans, you may not need to start with a gatekeeper to receive the higher level of in-network plan benefits.

How many employees do I need before I am able to offer a group health insurance plan?
You must have a minimum of 2 employees or owners to qualify for a group health plan (with the exception of the Anthem Association Value Added Program). These 2 people may be:

  • Employer and Employee
  • Two Partners
  • Two Officers of a Corporation.

If you have employees, you will need to provide a copy of your most recent state quarterly wage report. This will be used to verify eligible employees. For partnerships or corporations, you will need a business license, articles of incorporation or other documents that can verify the legitimacy of your business and the participation of all people to be covered under the group health plan.
 

What other guidelines must an employer meet in order to offer group health insurance?

General guidelines are:

  • The employer must contribute at least 50% of the employee only premium. The employer retains the option to contribute towards the premium for dependents.
  • Usually, 75% percent of all eligible employees must enroll under the group plan (Depending on the number of employees).
  • An “Eligible Employee” is generally defined as any employee that works 25 or more hours per week for the employer, earning minimum wage, and paid via W-2. Employers have the option to define eligibility, as long as they are in compliance with federal laws and insurance carrier guidelines. If an employee is already covered under another health plan, they may be exempt from the 75% minimum participation guideline.
  • Employees may not be denied access to a group health plan due to pre-existing conditions.

Do I have to offer COBRA to terminating employees or their dependents?
COBRA requires that group health plans sponsored by employers with 20 or more employees (includes full and part-time) in the prior year, offer employees and their families the opportunity for a temporary extension of health coverage. Group health coverage can be extended for 18, 29 or 36 months depending on the qualifying event.For additional information about COBRA requirements and other Department of Labor (DOL) regulations, refer to http://www.dol.gov/.
 
I have an employee out on disability. How long am I required to keep him/her on the health insurance policy?
An ineligible employee is defined as one out on Long-Term Disability, someone who has not worked for six months due to illness or injury or three months due to leave of absence, or an employee not scheduled to return to work.

What qualifies as creditable coverage?
Creditable coverage, as defined under federal HIPAA guidelines, is considered as: group health plan coverage (including a governmental or church plan), group or individual health insurance coverage, Medicare, Medicaid, military-sponsored health care (CHAMPUS), a program of the Indian Health Service, a state health benefits risk pool, the FEHBP, a public health plan as defined in the federal HIPAA regulations, and any health benefits plan under section 5(e) of the Peace Corps Act. Not included as creditable coverage is any coverage that is exempt from the law; for example, dental-only coverage, or dental coverage that is provided in a separate policy or even in the same policy as medical, if such coverage is separately elected and results in additional premium.

How does an employer or insurance carrier know that an employee had prior group coverage?
The employee must provide proof of prior creditable coverage by presenting a Certification of Prior Group Health Plan Coverage, or other acceptable means of proof. This documentation can be obtained by contacting the former employer and/ or insurance carrier.

What is the difference between a referral and pre-authorization?
A plan participating PCP will issue a referral to a participating specialist when a covered member needs specialist care. Pre-authorization is when the health plan’s medical care management department has given authorization to a provider that a procedure or treatment is listed as a covered benefit and is deemed medically necessary. Pre-authorization does not guarantee payment.

What is a "C" Corporation?
A corporation, also known as a C corporation, is an entity with a legal existence apart from its owners. A special type of corporation, a professional corporation (PC), can be organized to perform certain professional services.

What is a "S" Corporation?
An S corporation is a hybrid of a partnership and corporation that offers tax advantages to the corporation’s shareholders while giving protection against personal liabilit

Glossary of general insurance terms

01K or Pension Plan Coverage (ERISA Bond)
If the Insured's practice offers a retirement plan, then Federal Law requires 10% of plan assets be covered by an ERISA bond. The bond protects the assets in the plan from fraudulent or dishonest acts. 

Accounts Receivables
This is often part of a Business Owners Policy ("BOP").  This limit covers the costs to reproduce lost or damaged records of amounts owed to the Insured but not yet collected.

Annual Aggregate Limit 
For claims-made carriers, the annual aggregate limit is the maximum amount the carrier will pay for all claims arising from incidents that occurred and were reported during a given policy year. For occurrence carriers, the annual aggregate limit refers to the maximum amount the carrier will pay for all claims arising from incidents that occurred during a given policy year. 

Anti-Kickback Statute 
It is a criminal offense to knowingly and willfully receive or solicit any remuneration to induce or reward referrals of services reimbursed by a Federal health care program. Remuneration cannot be paid, received, offered, or solicited purposefully to induce or reward referrals of items or services payable by a Federal health care program.

Assessability 
Some insurance policies may be assessable.  This means an obligation exists for policyholders to pay additional money, in excess of premium amounts, to cover past company losses for which reserves have proven to be inadequate.

Assets 
The property and financial resources owned by an insurance company.  Admitted assets are those that can be liquidated to raise cash to pay claims.  Nonadmitted assets, such as real estate (other than home office), furniture, and other equipment, are assets that are not recognized for solvency purposes by state insurance laws or insurance department regulations. 

AM Best Rating 
A rating given to insurance companies by the A.M. Best Company, an independent analyst of the insurance industry.  The rating is an independent opinion of an insurer’s financial strength and its ability to meet its ongoing insurance policy and contract obligations.

Backup of Sewer or Drains
This is often part of a Business Owners Policy ("BOP").  This limit covers property losses specifically caused by water that backs up from a sewer or drain.

Billing Errors and Omissions 
Claims arising from improper billing for services as defined by Medicare Fraud and Abuse Laws: The False Claims Act, Anti-Kickback Statute, Physician Self-Referral Law (STARK), and Criminal Health Care Fraud Statute.

    Why Important – Fines, penalties, and repayments associated with audits can hurt the practice’s financial stability by draining significant time away from actually running the business and treating patients. There are tight timeframes and layers of bureaucracy a practice must endure if making an appeal. To help the practice, some policies offer a “shadow audit” to follow the government audit, but in support of the practice’s billing decisions. Practices that see lots of Medicare/Medicaid patients or those with a new and not-yet-familiar EMR system may be more vulnerable. A small amount of coverage might be included in the Professional Liability insurance, but not always. MSVIA recommends that all practices look into more comprehensive coverage.

Blanket Limit
A single limit of insurance that applies over more than one type of property coverage or more than one location, or both.

Builders Risk Policy 
A insurance policy designed to cover property while in the course of construction.   Can apply to the construction site as well as to materials kept in storage or  in transit.   The owner/future occupant of the completed structure or the building contractor may insure the property being built.

Building Coverage
This is often part of a Business Owners Policy ("BOP").   This limit covers structures owned by the Insured, including attached fixtures and outdoor equipment within a certain distance from the building.

Business Income
This is often part of a Business Owners Policy ("BOP").   This limit covers income losses due to the necessary suspension of the Insured's business after a covered loss. Usually covered for 12 months after the event.  (See also Business Expense)

Business Income Daily Limit
Optional; this is often part of a Business Owners Policy ("BOP").   The Insured can set a predetermined amount for the first 15 days (avoids having to send records of lost income and rescheduled patients).

Business Income Extenstion for Off Premises Utility Services
This is often part of a Business Owners Policy ("BOP"). This limit covers income losses caused by interruption of service (Water, Power, Communications) to the insured premises, resulting from a covered  loss to a property not on the premises.

Business Liability 
See General Liability.

Business Owners Policy 
This is an Insurance policy for small and medium sized businesses that combines several business-related risks into one policy. The policy covers the business property, the building (if the business owns the building), crime, business interruption (lost income) and general liability. Many optional coverages can be added and may include: non-owned autos used by the business, tenant legal liability, computer and data coverage, equipment breakdown, etc. 

    Why Important – The policy can pay the repair/replacement costs for physical damage, and can provide continued cash flow if the business must close temporarily – which can help a business get back on its feet after a loss, whether catastrophic or smaller. The general liability protects the Insured from claims from clients, vendors, and others who have suffered an injury or damage to property and allege that the business owners were negligent and liable for their loss. The policy will pay legal defense costs, settlements and/or verdicts up to the policy limit. 

Business Personal Property ("BPP")
This is often part of a Business Owners Policy ("BOP").   This covers losses/damage to property owned by the Insured and used in its business, i.e. furniture, inventory, medical supplies, office machines, etc.

Captive 
In its simplest form, a captive is a wholly owned insurance company that is formed by a noninsurance entity or group to insure or reinsure some or all of the risks of its parent.  A captive is usually administered by consultants. 

Civil Monetary Penalties (CMP) 
Penalties may be imposed for a variety of conduct, and different amounts of penalties and assessments may be authorized based on the type of violation at issue. Penalties range from up to $10,000 to $50,000 per violation. CMPs can also include an assessment of up to 3 times the amount claimed for each item or service, or up to 3 times the amount of remuneration offered, paid, solicited, or received.

Center for Medicare & Medicaid Services 
CMS is a Federal agency within the Department of Health and Human Services that administers and oversees the M
edicare and Medicaid Programs. CMS partners with Recovery Auditors Contractors and other entities and law enforcement agencies to prevent and detect fraud abuse.

Coinsurance
The percentage of health care allowable charges you must pay after you have met your deductible.

Commercial Autos
Often a Separate policy which covers property damage and liability involving vehicles that are owned in the Insured's business name.

Computer Fraud 
This is often part of a Business Owners Policy ("BOP").   This limit covers losses from electronic theft or illegal transfer of money or property.

Computers and Electronic Media 
This is often part of a Business Owners Policy ("BOP").   It covers the physical equipment (servers, laptops, printers, etc.) from power surges, theft, viruses, as well as costs to restore data and/or software, up to a certain limit.   See also Cyberliability.

Condo Unit
Business Owners Policies typically cover the portion of the unit that the Insured owns, that which is not covered by the condominium master policy.  (Often, the master policy only covers outside portions of the building, like the roof, and common areas like sidewalks or lobbies.  Individual units are often not covered).   Condo Association Bylaws can vary greatly, so unit owners must clarify with the Condominium Association which spaces should be insured by which party. 

Condo Unit Loss Assessment
This is often part of a Business Owners Policy ("BOP").   This covers fees that are assessed against all unit owners resulting from damage to common areas by a covered cause of loss.

Coordination of Benefits (COB)
Method of integrating benefits payable under more than one health insurance plan so that the insured's benefits from all sources do not exceed 100 percent of allowable medical expenses.

Copayment
A specific charge you pay for a specific medical service. For example, you may pay $10 for an office visit or $5 for a prescription and the health plan covers the rest of the medical charges.

Cost Sharing
Policy provisions that require individuals to pay, through copayments, deductibles and coinsurance, a portion of their health care expenses.

Crime
This can be part of a Business Owners Policy ("BOP"), or a separate policy.   It protects the Insured's corporate assets from theft, forgery, fraud by employees or third parties.

Criminal Health Care Fraud Statute 
Prohibits knowingly and willfully defrauding any health care benefit program and obtaining by false or fraudulent representations any money, property under the custody and control of any health care benefit program.

Cyber Liability
Cyber liability coverage provides protection for losses involving an unauthorized leak of confidential information transmitted via email, the Internet, and computer networks. Some policies include coverage for recovering lost data, fines and penalties associated with HIPAA violations, and the costs to notify those affected and for credit-monitoring services (which can average around $250 per person). 

    Why Important – The rising use of EMR’s brings with it higher risk for security breaches, theft, loss or accidental transmission of confidential information (personal or financial). This type of coverage is typically not provided for at all, or only at small amounts on the Malpractice or Business Owners policies. Security breaches are not just caused by hackers, but by losing a laptop, employees acting maliciously, or problems with offsite data storage, for example. 

Damage to Premises Rented to You
This is often part of a Business Owners Policy ("BOP").   This is a liability coverage; covers the Insured's liability for damage to a  property that it rents or occupies (usually for fire damage).   See also Tenants Legal Liability and Water Damage Legal Liability.

Date of Medical Incident 
On a claims-made policy, the date on which a situation of alleged malpractice took place.

Date of Reporting 
The date on which an incident was reported to the insurance company.

Declaration 
Also called Declarations Page, this portion of an insurance policy states information such as the name and address of the insured, the policy period, the amount of insurance coverage, premiums due for the policy period, and any coverage restrictions. 

Deductible 
Professional Liability: An applicable deductible means that the insured will pay an amount of the “first dollars” of a claim payment and in return pay a lower premium for assuming the risk.  In most instances, professional liability policies do not contain a deductible.  However, when deductibles are used, they may apply to bothindemnity and defense costs.  When the deductible applies in both areas, the insured pays up to the total amount of the deductible for claims in which defense costs (such as legal fees) have been incurred – even if no indemnity is paid.  If the deductible applies to indemnity only, the insured pays only if indemnity is paid. 
or
Health: This is the amount of money you must pay, generally annually, to cover your medical care expenses before your insurance policy or HMO plan starts paying.

Dividend 
A return to the policyholder of surplus earnings based on the company's experience and costs in a given year.  Policyholder dividends are not guaranteed but depend on claim experience, investment earnings, expenses and other factors. Dividends are paid at the discretion of the company. 

Directors & Officers Liability
This policy covers errors and omissions while serving as director/officer of an organization (such as a medical practice, or on a board for a for- or non-profit organization). Allegations may include Breach of Contract, Conflict of Interest, Using Company Assets for Personal Gain, and Lack of Due Diligence – and can come from competitors, suppliers, fellow shareholder and others. 

    Why Important – A director can be held personally responsible for acts of the company, meaning his/her own personal assets are at risk. The event that leads to a claim can often be unintended. While these types of losses are infrequent, the costs can be very high. For medical directorships in particular, note that Professional Liability policies often exclude this work. 

Disciplinary Actions
Often part of a Professional Liability policy or can be a separate policy.   Provides defense coverage for licensing board actions, hospital privileges hearings.

Domiciled 
Refers to the state in which an insurance company receives a license to operate. The company is then regulated by that state’s department of insurance. 

Earthquake
Covers property losses caused specifically by an earthquake (typically not covered by a Business Owners Policy, but can be added).

Electronic Data Processing Equipment / Data / Media
This is often part of a Business Owners Policy ("BOP").   See Computers and Media.

Eligible Expenses
Expenses defined in the health plan as being eligible for coverage. This could involve specified health services, fees or "usual, customary and reasonable charges."

Elimination Period
A specified number of days at the beginning of each period of disability (in disability income policies) or hospital confinement (in hospital confinement indemnity policies), during which no benefits are paid.

Employee Benefits Liability (EBL)
This policy covers errors/omissions made in the administration of employee benefits programs (life, health insurance, pension plans).   This is often part of a Business Owners Policy ("BOP"). 

Employee Dishonesty
This is often part of a Business Owners Policy ("BOP").    This covers losses from theft of property and/or money from the Insured business by an employee.

Employers Liability
This is part of Workers Compensation insurance.   This protects the Insured business against suits from employees' spouse, family members or other third parties for work-related accidents or injuries.

Employment Practices Liability Insurance (EPLI)
A type of coverage that protects businesses from the financial consequences associated with a variety of employment-related lawsuits including employee harassment, discrimination, failure to hire or promote, wrongful termination, etc. The coverage protects the company, directors, officers, and other employees. 

    Why Important – In addition to providing a legal defense and paying any judgments or settlements up to the policy limits, the insurance companies often offer HR-related resources to their policyholders – like sample employee manuals or employment applications, help with terminating or disciplining employees – which can help prevent or reduce these types of claims against the business. 

Endorsement 
An amendment, sometimes referred to as a rider, added in writing to an insurance contract or policy. 

Enrollee
An individual who is enrolled in an MCHIP.

Equipment Breakdown
This is often part of a Business Owners Policy ("BOP").  This limit covers losses to the Insured's property caused by equipment breakdown.

ERISA Bond
An ERISA Bond protects participants and beneficiaries of a retirement plan from dishonest or negligent acts by the fiduciary who maintains the plan. The bond is required by the ERISA Act of 1974 and protects the assets only. See also Fidelity Bond and Fiduciary Liability. 

    Why Important – The ERISA Act of 1974 was enacted to regulate employee benefit plans. One provision of this Act is if a business offers a retirement plan, federal law requires 10% of plan assets be covered by an ERISA bond, up to at a maximum of $500,000. These bonds are usually inexpensive and easy to obtain. 

Evidence of Coverage (EOC)
Document that summarizes the provisions and benefits of a managed care health insurance plan.

Evidence of Insurability
For health insurance, a statement or proof of physical condition and/or other information affecting a person's eligibility for insurance.

Excess Insurance 
A separate insurance policy with limits above the primary (or “first dollar”) policy. 

Exclusions
Specific conditions or circumstances for which the policy or plan will not provide benefits.

Explanation of Benefits (EOB)
The statement sent to a participant in a health policy or managed care plan listing services, amounts paid by the plan, and total amount billed to the patient.

Extended Reporting Endorsement
See “Tail Coverage”.

Extra Expenses
This is often part of a Business Owners Policy ("BOP").  After a covered loss to the Insured's property, this covers the costs necessary to avoid or minimize the time the business is down.   Example: relocating to another premises would involve moving expenses, extra rent, notifying patients, etc.  Usually included at a set amount.

False Claims Act (FCA) 
Protects US Government from being overcharged or sold substandard goods or services. The FCA imposes civil liability on any person who knowingly submits, or causes to be submitted, a false or fraudulent claim to the Federal Government.

Fee-For-Service
A payment system for health care where the provider is paid for each service rendered rather than a pre-negotiated amount for each patient.

Fidelity Bond
Protects the policyholders/investors in a benefit plan for losses incurred as a result of fraudulent or dishonest acts by the specific individuals charged with handling the benefit plan. 

    Why Important – This policy covers the criminal side of benefit plan management. The policies are designed to cover specific intentional acts such as theft, fraud, and embezzlement. The coverage reimburses the insured organization for losses suffered as a result of intentional employee’s actions. 

Fiduciary Liability 
This insurance protects the person who makes decisions and/or handles enrollments for retirement plans and other employee benefits. Covers errors and omissions made in the administration thereof.

    Why Important - People with fiduciary status are determined by their duties, not their title, to act in others’ best interests. Many organizations use an investment firm to handle the retirement plans, but duties such as choosing the investment firm, administering or monitoring the plan, and transferring assets as employees come and go from the organization are all considered fiduciary duties. Under ERISA, the fiduciary’s own personal assets are at risk from potential allegations of mismanaging the plan assets.

Fine Arts 
This is often part of a Business Owners Policy ("BOP"). This limit can cover items with rare, historic or artistic merit, such as art glass windows or rare books.  Sublimits may apply to individual pieces of art. 

Fire Legal Liability
An outdated term; now refer to Damage to premises to you.

Flood 
(Not Covered; Separate policy needed.)  Covers the Insured's property from damage caused by natural waters (not plumbing).

Forgery/Alterations
This is often part of a Business Owners Policy ("BOP").   This limit protects the Insured against false payments made from its business, using unauthorized company checks or credit/debit cards, as well as losses resulting from acceptance of false payments from others.

Formulary
List of prescription medications covered by a health insurance company.

Fully Insured Plan
Employer-purchased health insurance coverage from a licensed insurance company, wherein the insurance company assumes the risk.

Fungi, Bacteria or Virus Coverage - i.e. Damage/loss to property caused by mold.  
This is often excluded by Business Onwers Policies, however some companies offer a limited amount.

Gatekeeper
Role of the primary care physician or PCP in HMOs and other forms of MCHIPs. The Gatekeeper coordinates care and makes referrals to specialists.

General Liability ("GL") - Also "business liability" or "slip & fall"
This is often part of a Business Owners Policy ("BOP").  General Liability is a broad coverage that protects the insured against claims of Bodily Injury / Property Damage from a client, vendor, etc.   Plaintiffs often allege that the Insured was negligent in maintaining a safe premises.

Grace Period
Specified time (usually 31 days) following the premium due date during which insurance remains in force and a policyholder may pay the premium without penalty.

Grievance Procedure
A procedure which allows a member of a health plan or a provider of benefits to express complaints, protest a decision, and seek remedies.

Group Certificate
The document provided to each member of a group health plan. It describes the benefits provided under the group plan.

Guaranteed Renewable Contract
Contract under which an insured has the right, commonly up to a certain age, to continue the policy by the timely payment of premiums. Under guaranteed renewable contracts, the insurer reserves the right to change premium rates by policy class.

Health Insurance Portability and Accountability Act (HIPAA)  
Require the Department of Health and Human Services (HHS) to adopt national standards for electronic health care transactions and national identifiers for providers, health plans, and employers. To date, the implementation of HIPAA standards has increased the use of electronic data interchange. The Act improves portability and continuity of health insurance coverage in the group and individual markets, to combat waste, fraud, and abuse in health insurance and health care delivery, to promote the use of medical savings accounts, to improve access to long-term care services and coverage, to simplify the administration of health insurance, and for other purposes.

Health Maintenance Organization (HMO)
Prepaid managed care health insurance plans in which you pay a premium and the HMO covers your cost of care to see doctors, hospitals and other providers within the HMO’s network, at prenegotiated rates, subject also to your payment of a specified amount as services are delivered. You generally must choose a PCP who coordinates all of your care and makes referrals to any specialists you might need.

Health Plan Identifier (HPID) 
Rule adopted to set standards for electronic health care transactions required under HIPAA. The rule sets standards for e-transactions by eliminating multiple identifiers to health plans and adopting a data element that will serve as an “other entity” identifier (OEID). The rule also specifies when certain non-covered individual health care providers who are prescribers to obtain and disclose a National Provider Identifier (NPI).

High Value Medical Equipment 
This is often part of a Business Owners Policy ("BOP").   Machines valued over $100,000 can be covered separately from the Business Personal Property. 

Hired and Non-Owned Auto Liability 
This is often part of a Business Owners Policy ("BOP").   This limit protects the Insured business from claims arising from autos that it does not own, but are used in the course of business, i.e. employees’ vehicles (making bank deposits), rentals.  

Incident 
An occurrence that the plaintiff claims has led to culpable injury. 

Incurred Losses 
These losses include both paid and unpaid (reserved) losses. 

Indemnity 
An insurance company’s payment to a plaintiff in settlement or adjudication of a claim.

Indemnity Plan
Traditional health insurance that usually covers a percentage of the cost of care (often 80%) after the consumer pays an annual deductible. Patients with an indemnity plan can choose any doctor or hospital for their care.

Indemnity Reserves 
Claims reserves that are set aside to pay the portion of claims costs paid directly to claimants 

Individual Health Insurance
A policy that provides protection to a policyholder and may extend coverage to his or her family; sometimes called personal insurance, as distinct from group insurance.
Inland Marine policy
A property insurance designed to cover items/exposures that cannot be conveniently or reasonably confined to a fixed location or rated under a standard insurance form.   Useful for certain types of medical equipment.  Also called "floater policies" in some circumstances.

Lifetime Maximum
The total amount of benefits that a health care plan will pay over a policyholder’s lifetime.

Limits of Liability
The maximum amount paid under the terms of the policy.  A professional liability “claims-made” policy usually has two limits, a “per medical incident” limit and an “annual aggregate” limit.  The “per medical incident” limit is the most the insurance company will pay for all claims arising out of any one medical incident. The annual aggregate is the most the insurance company will pay for the sum of all damages in any one policy period (usually one year) regardless of the number of incidents or claims.

Loss Ratio 
The result of losses incurred (indemnity and ALAE) divided by net earned premium. 

Loss Reserves 
The company’s best estimate of what it will pay for claims, which is periodically readjusted. They represent a liability on the insurer’s balance sheet.  

Malpractice Coverage
"See Professional Liability Insurance"

Maximum Out-of-Pocket Costs
The most a member will pay considering copayments, coinsurance, deductibles, etc., usually on a calendar year or policy year basis.

Mechanical Breakdown
See Equipment Breakdown

Medicaid
A joint state and federal public assistance program that pays for health care services for low income or disabled persons.

Medical Expenses or Medical Payments 
This is often part of a Business Owners Policy ("BOP").  This limit is a good-faith, no fault coverage for first aid and medical expenses for parties injured on the Insured's premises, if below a certain dollar amount.   

Medical Malpractice (Physician's Professional Liability)
Professional negligence – the failure by a health care provider to exercise the degree of care, used by reasonably careful practitioners of like qualifications in the same or similar circumstances. For a plaintiff to collect damages in a court of law, the plaintiff’s attorney must show that the provider owed the patient a duty and that the provider’s violation of the standards of practice caused the patient’s injury. 

Medicare
A federally administered health insurance program that covers the cost of hospitalization, medical care, and some related services for most people over age 65, people receiving Social Security Disability Insurance payments, and people with End Stage Renal Disease (ESRD).

Medicare/Medicaid Fraud and Abuse, Billing Errors
Protects the Insured business during audits or investigations involving reimbursements and payments.  Also includes coverage for Recovery Audit Contractors and ZIPC audits.  May include coverage for violations of HIPAA, EMTALA or Stark. This exposure may be covered by a Professional Liability policy or a separate policy.

Medicare Supplement Insurance
Insurance coverage sold on an individual or group basis which helps to fill the gaps in the protection provided by the Medicare program. This insurance is also called "Medigap program."

Money (and Securities) on/off premises
This is often part of a Business Owners Policy ("BOP"). This limit covers theft, loss or destruction of money while at (or in transit to) the business, bank or an employee’s home.

Multiple Employer Welfare Arrangement (MEWA)
An arrangement by which two or more employers form a coalition to offer a health plan to their employees.

National Provider Identifier (NPI) 
Is a HIPAA administrative simplification standard that provides a unique identification number for covered health care providers. Covered health care providers and all health plans and health care clearinghouses must use the NPIs in the administrative and financial transactions adopted under HIPAA. The NPI is a 10-position, intelligence-free numeric identifier (10-digit number). The NPI must be used in lieu of legacy provider identifiers in the HIPAA standards transactions.

Newly Acquired or Constructed Property 
This is often part of a Business Owners Policy ("BOP"). New property not yet added to the BOP policy is covered for a limited number of days and at a limited amount.  Changes must be reported to the insurance company for coverage to apply.

Nonassessable 
A condition under which an insurance company is sufficiently sound to free policyholders of any obligation to pay additional money for past losses for which reserves are inadequate. 

Noncancelable
A health insurance policy that the insured has a right to continue in force by payment of premiums, as set forth in the contract, for a period of time as set forth in the contract. During that period of time, the insurer may not make any change in any provision of the contract, including the premium.

Nose Coverage 
See “Prior Acts Coverage” 

Occurrence Coverage
This policy form type covers claims that occur during its policy period, regardless of when the incident is reported or when the claim is made.  Occurrence insurance policies for medical liability coverage are offered rarely today because of the difficulty of projecting long-term claim costs under this type of policy.

Ordinance or Law
This is often part of a Business Owners Policy ("BOP").   This limit covers the extra expenses, if (especially after property damage), the Insured's space must be built or repaired to comply with updated building codes.   Can also apply to rebuilding the undamaged part of the premises.

Other Entity Identifier (OEID) 
Entities that are not health plans but perform certain health plan functions such as health care clearinghouses, third-party administrators (TPA), and re-pricers. They cannot obtain a health plan identifier (HPID) since they are not considered health plans and can be provided an OEID number to standardize the HIPAA transactions. 

Out-of-Network Care
Medical services obtained by managed care health insurance plan members from non-participating or non-preferred providers. In many plans, such care will not be reimbursed unless previous authorization for such care was obtained.

Out-of-Pocket Costs
Health care costs the covered person must pay out of his or her own pocket, including such things as coinsurance, copayments, deductibles, etc.

Paid Losses 
The amount paid in losses during a specified time period. 

Patient Protection and Affordable Care Act of 2010  
Builds on existing HIPAA regulations with new or expanded provisions requiring operating rules for each of the HIPAA transactions, enumeration of a unique, standard Health Plan Identifier, new standards for electronic funds transfer and electronic health care claims attachments, health plans to certify compliance with standards and operating rules, and penalties for health plans that fail to comply or certify compliance with applicable standards and operating rules.

Personal and Advertising Injury 
Part of General Liability in the Business Owners Policy.  Protects the Insured's business from suits from a third party (often a competitor) alleging that  the Insured's advertising or marketing harmed them or their business (i.e. copyright or trademark infringement, libel, slander, etc).

Personal Effects 
This is often part of a Business Owners Policy ("BOP"). This limit covers personal belongings brought into the Insured's premises, that are not used in the business (i.e. picture frames, artwork owned by employees).

Personal Property of Others
This is often part of a Business Owners Policy ("BOP"). Covers property loaned or leased to the Insured for use in its business (copiers, medical equipment, etc.).

Policy 
The contract between an insurance company and its insured. The policy defines what the company agrees to cover for what period of time, and it describes the obligations and responsibilities of the insured. 

Policy Term 
The length of time for which a policy is written. 

Pre-Admission or Pre-Certification Authorization
A requirement that the health care plan must approve, in advance, certain hospital admissions or certain procedures.

Pre-existing Condition Exclusion
Generally, a limitation or exclusion of health benefits based on the fact that a physical or mental condition was present before the first day of coverage. HIPAA and some state laws limit the extent to which a health plan or issuer can apply a preexisting condition exclusion in certain instances.

Preferred Provider Organization (PPO)
A network of health care providers that have agreed to provide medical services to a health plan's members at discounted costs. The cost to use physicians within the PPO network is generally less than using a non-network provider.

Premises Liability 
Part of General Liability in the Business Owners Policy. This limit protects the Insured business from suits alleging injury or damage suffered by guests/patients while on the premises (i.e. slips and falls).  Plaintiffs often allege that the Insured was negligent in maintaining a safe premises.

Premium 
The amount of money a policyholder pays for insurance protection.  The premium is the amount deemed necessary to pay current losses, to set aside reserves for anticipated losses, and to pay expenses and taxes necessary to operate the company during the time period for which the policies are in force. Premiums allow the company to generate a reasonable profit that reinforces future solvency and contributes to the company’s growth. 

Premium Credits 
A credit included in the premium computation that recognizes a reduction in hazard, which makes the account a better risk. 

Prior Acts Coverage or Retroactive Coverage (sometimes referred to as "Nose" coverage)
Prior Acts coverage is when a claims made policy looks back in time to cover medical incidents that happened in the past.  Prior Acts coverage is determined by the “retroactive date” identified on the policy.  If the medical incident took place after the retroactive date (or prior acts date) identified on the policy, and the claim is made during an in-force policy (and is not otherwise excluded), the claims-made policy will respond.

Primary Care Physician (PCP)
Under many MCHIPs, the physician (often a physician, internist, or pediatrician) who manages your healthcare. With some exceptions, you must first consult with your PCP for healthcare needs. A PCP makes referrals to specialists if necessary.

Products/Completed Operations Liability
Part of General Liability in the Business Owners Policy.  This limit protects against claims related to the manufacture or sale of products, goods, medicines, etc. claiming damage or injuries due to a defect, malfunction, defective design, etc.   

Professional Liability Insurance
Protects against liability incurred  from claims of negligence arising from patient care, or as a result of errors or omissions in the performance of professional services.  
    
Why Important - Physicians and other medical workers can be held legally responsible for errors, negligence, and failure to perform - even if the standard of care has been followed. Lawsuits can have years of litigation and excessive attorney fees for defense regardless of negligence.     

Property Off Premises/ in Transit 
This is often part of a Business Owners Policy ("BOP").  This limit covers property not located on the premises when damaged, or that moves between locations.

Provider
Any person or institution that provides medical care.

Punitive Damages 
These damages may be excluded or optionally covered.  A few states require that punitive damages be covered. Other state laws prohibit insurance companies from covering punitive damages because such damages are intended to punish the defendant for willful, fraudulent, oppressive, malicious, or otherwise outrageous behavior that should not be covered by insurance. 

Recovery Audit Contractor (RAC) 
As defined by Centers for Medicare & Medicaid Services: an auditor responsible for identifying and recovering improper Medicare payments through detection and collection of overpayments made on claims of health care services provided to Medicare beneficiaries, and the identification of underpayments to providers so that the CMS can implement actions that will prevent future improper payments. Civil Monetary Penalties may be imposed as a penalty and/or assessment based on the type of violation.

Rate Maturation also known as Step Rate Increases
When a physician enters onto their first claims-made professional liability policy, the rate will rise annually from a “first-year” claims-made rate until it reaches what is considered a “mature” claims-made rate, typically at year five.  Rates are low in the first year because the policy is only covering one year of exposure. The premium increases as the number of exposure years increases because the longer the physician is insured, the greater the potential for a claim.  This is due to the time delay between when an incident occurs and the time a patient files a claim for past incidents.   

Referral
The process under which an HMO member receives authorization (generally from his or her PCP) to receive or obtain care from a specialist or hospital.

Reimbursement of Legal Expenses for Disposal of Medical Waste
This is often part of a Business Owners Policy ("BOP").  This limt reimburses the Insured business for its legal expenses incurred as a result of being a defendant in a suit alleging improper disposal of medical waste.

Reinsurance 
An agreement between insurance companies under which the reinsurance company accepts all or part of the risk or loss of the primary company.  Most primary companies insure only part of the risk on any given policy.  The amount retained by the primary company varies among companies.  The reminder of the policy limit is covered by a reinsurance entity or entities.  The less risk that a primary company retains, the more premium it has to pay to the reinsurer to cover the remaining policy limit.  

Rescind
To nullify or make void a policy or coverage. If and when and if a company rescinds a policy, premiums may be refunded.

Retroactive Coverage 
See “Prior Acts Coverage” 

Retroactive Date
Usually found on the declarations page of a claims-made policy.  Each physician and the legal entity will have their own date.  Only incidents that occurred after this date and are reported during the in-force policy period (and otherwise not excluded) are covered. (Not to be confused with the effective and expiration dates of the policy itself).

Risk Classifications 
A risk classification is based on the number and amount of losses that can be expected from a physician’s specialty and procedures. 

Risk Management 
A systematic approach used to identify, evaluate, and reduce or eliminate the possibility of an unfavorable deviation from the expected outcome of medical treatment and thus prevent the injury of patients as a result of negligence and the loss of financial assets resulting from such injury. 

Self-Insured Retention ("SIR")
The dollar amount specified in a policy (usually a liability policy) that the Insured must pay before the policy will respond to a loss.   It may apply to the actual damages and/or to defense costs.  SIRs differ from deductibles in that after paying an SIR, the full amount of the limit is available to pay a claim (whereas with a deductible, the deductible amount is subtracted from the available limit).

Spoilage/Temperature Change 
This is often part of a Business Owners Policy ("BOP").  This limit covers losses of property due to the specific reason of spoilage, or changes in temperature or humidty (i.e. refrigerated medications).  

Standard Risk 
A person who, by the company’s underwriting standards, is eligible for insurance without restrictions or surcharges. 

STARK (Physician Self-Referral Law)
 Prohibits a physician from making a referral for certain designated health services to an entity in which the physician (or family member) has interest with which he or she has a compensation agreement, unless an exception applies.

Substandard Risk 
A person or entity that must pay higher premiums and is subject to special coverage restrictions based on underwriting standards. 

Surplus 
The amount by which a company’s assets exceed its liabilities. A company’s surplus allows it to take on risk and serves as a cushion in the event that the losses from that risk exceed the premiums intended to cover the risk. Stated another way, surplus can be used to make up for deficiencies in loss reserves that were set aside from earned premiums. Surplus thus serves to provide strength and to maintain fiscal integrity in the face of adverse loss experience that was not actuarially anticipated. 

Tail Coverage also known as Extended Reporting Coverage
Coverage that protects the physician against all claims that arise from professional services performed while the claims-made policy was in effect, but which were reported after the termination of the policy. Some insurers offer this feature free of charge for retiring doctors who meet certain requirements.

Tenant Legal Liability
This is often part of a Business Owners Policy ("BOP").    This coverage protects the Insured's business against suits claiming property damage to the space it rents, allegedly caused by the Insured.   Coverage is not limited to fire or water damage but other causes of damage also.  See also Damage to Premises Rented to You and Water Legal Liability.

Tenants Improvements and Betterments
This is often part of a Business Owners Policy ("BOP").  This limit provides coverage for permanent or semi-permanent additions made at the Insured's expense (office buildouts, carpeting, cabinetry) on/in a building that is leased.

Terrorism Coverage 
Required by TRIA, the Terrorism Risk Insurance Act of 2002, which created a federal government backstop for insurance claims related to terrorism.  Mandatory on some policies, optional on others.

Umbrella 
Provides an additional layer of coverage over 1 or more underlying liability policies.  Thismay be part of a Business Owners Policy ("BOP") or a separate policy.

Underwriting
Process by which an insurer determines whether or not, and on what basis, it will accept and classify the risks associated with an application for coverage.

Underwriting Results 
The profit or loss of the insurance company, calculated by subtracting from earned premium those amounts paid out and reserved for losses and expenses. Any residual amount is called an underwriting profit. If deductions exceed earned premium, it is called an underwriting loss. Underwriting results do not include investment income. 

Unearned Premium 
That portion of a premium that is paid in advance of a coverage period. Insureds usually pay a calendar quarter or more in advance of an actual coverage period; the advance payment is initially unearned and starts to become earned on the first day of the coverage period and incrementally thereafter during the ensuing coverage period. 

Valuable Papers/Records
This is often part of a Business Owners Policy ("BOP"). This limit covers the cost to reconstruct lost or damaged documents such as  medical records, leases, deeds, mortgages, etc.

Vicarious Liability 
Liability for the acts of someone else because of a relationship.  For example:  an employer could be held vicariously liable for the acts of an employee.

Water Damage Legal Liability 
This is often part of a Business Owners Policy ("BOP").  This limit protects the Insured business against suits claiming water damage to the space it rents, alledgedly caused by the Insured.   (See also Damages to Premises Rented to You.)

Workers Compensation
The policy pays medical expenses and a portion of lost wages after an employee's job-related injury or illness, in accordance with Virginia Law. Employers Liability as part of the Workers Compensation insurance protects the Insured’s business against suits from the employee’s spouse, family members, or third parties for work-related accidents or injuries. 

    Why Important – Workers Compensation insurance is required by the state of Virginia if the business employs 2 or more employees (owner included). Without a policy, the business is still responsible for the injured employee’s medical bills and lost wages. If a policy should have been in place but was not, then the employer is also subject to fines and/or misdemeanor charges.

Health care reform and the Affordable Care Act

Health care reform and your medical insurance

On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act of 2010 (PPACCA). This legislation, along with the Health Care and Education Reconciliation Act of 2010 (HCERA) are collectively known as the Affordable Care Act (ACA). Aimed primarily at decreasing the number of uninsured Americans and slowing the growth of health care costs, the ACA represents the most significant government expansion and regulatory overhaul of the U.S. health care system since the passage of Medicare and Medicaid in 1965.

The Medical Society of Virginia Insurance Agency (MSVIA) monitors implementation of the ACA and other reforms, and will keep you informed about new developments affecting employers and employees in the Commonwealth.

Key Issues 

  • Health insurance exchanges
  • Employer responsibilities
  • Mandatory health insurance benefits
  • Changes to Medicare and Medicaid
  • Medicaid and premium tax credit eligibility
  • Tax rules

 

Resources

Health reform didn’t start with ACA, and it certainly won’t end with it. Since the law’s passage, Virginians have witnessed the enactment of dozens of state and federal health care laws, as well as hundreds of state and federal health care regulations. Feeling overwhelmed? MSVIA is here to help guide you in the right direction.

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