Aggregate Accommodation (AA)
A stop-loss provision that advances funds mid-year when claims temporarily exceed the pro-rated aggregate
attachment point. Prevents cash crunches, ensures timely provider payments, and reconciles at year-end. SFH
requires AA on all plans.
Aggregating Specific
A cap on total specific deductible exposure across all members in a year. Without it, if 5 members each
hit a $75K deductible, you pay $375K. With a $200K aggregating spec, your total deductible costs are capped.
ASO (Administrative Services Only)
A self-funded arrangement where the employer pays the claims and hires a carrier or TPA to process them.
The carrier doesn't take risk. Many carriers offer ASO, but they still use their own expensive networks.
BUCAH
Blue Cross, United, Cigna, Aetna, Humana. The five largest health insurance carriers in America. Together
they cover ~50% of commercially insured Americans.
Chargemaster
A hospital's internal price list. These are the "billed charges" that carrier discounts are calculated
against. Chargemaster prices are set by the hospital and have no relationship to actual costs. They're
typically 600-1,200% of Medicare.
Claims Fund
The employer's account from which healthcare claims are paid in a self-funded plan. Think of it as a bank
account dedicated to healthcare expenses.
Corridor (Stop-Loss)
A gap between the specific deductible and where stop-loss begins paying. A $75K deductible with a $25K
corridor means stop-loss doesn't pay until claims exceed $100K. Lowers premium but adds self-insured risk.
CPT Code
Current Procedural Terminology. A standardized code for every medical procedure (e.g., 27447 = Total Knee
Replacement). Used by every provider and payer in America.
DPC (Direct Primary Care)
A primary care model where the employer pays a flat monthly fee per member and the physician provides
unlimited visits, same-day access, and comprehensive primary care. No insurance billing, no copays.
DRG (Diagnosis Related Group)
How Medicare pays hospitals for inpatient stays. Each diagnosis/procedure maps to a DRG with a fixed
national payment amount. Example: DRG 470 (Hip/Knee Replacement) = ~$14,124.
ERISA
Employee Retirement Income Security Act. Federal law that governs self-funded health plans. Self-funded
plans are regulated federally under ERISA, not by state insurance departments. This provides more
flexibility in plan design.
Facility Fee
An additional charge hospitals add on top of the cost of the actual service. When a drug is administered
in a hospital outpatient setting, the facility fee alone can double the total cost. Independent infusion
centers and ASCs don't charge facility fees.
Fully Insured
A health plan where the employer pays a fixed premium to a carrier, and the carrier assumes all claims
risk. The carrier keeps any surplus. The employer has no visibility into claims.
BAA (Business Associate Agreement)
A HIPAA-required contract between a covered entity (your health plan) and any vendor that handles PHI on
its behalf. Defines data access, protection requirements, and breach obligations.
Covered Entity
Under HIPAA, an entity subject to privacy rules: health plans, healthcare providers, and clearinghouses.
When you self-fund, your health plan is the covered entity — not the employer.
12/12 vs. 12/18 (Contract Basis)
Defines the incurral and paid periods for stop-loss. 12/12 = incurred and paid in the same 12 months.
12/18 = incurred in 12 months, paid within 18 (6-month run-out). SFH supports both 12/12 and 12/18 contracts.
HMO
Health Maintenance Organization. A type of fully insured plan that restricts members to a specific network
of providers. In the Midwest, many HMOs are owned by the same hospital systems that bill you for care
— creating a conflict of interest.
Laser (Stop-Loss)
A higher specific deductible set for one individual member with known high-cost conditions. Isolates a
known risk instead of pricing it into the entire group's rate. Can be a smart trade-off — forces
active management of that member's care.
J-Code
A HCPCS billing code (J0000-J9999) for drugs administered by a provider. When billed under the medical
benefit at a hospital, J-codes bypass PBM pricing and are marked up dramatically. Site-of-care changes move
J-codes to the pharmacy benefit at transparent pricing. See Lesson 7.
Medical Benefit vs. Pharmacy Benefit
Drugs can be billed two ways. The pharmacy benefit (through a PBM like CapitalRx) has transparent pricing
benchmarks (NADAC, AWP). The medical benefit (billed by hospitals as J-codes) has no such benchmarks. Moving
drugs from medical to pharmacy benefit is one of the biggest savings levers.
Medicare
The federal health insurance program for Americans 65+. Medicare's published payment rates (MPFS, OPPS,
IPPS) serve as the objective baseline for evaluating healthcare prices. Every hospital in America accepts
Medicare.
NADAC
National Average Drug Acquisition Cost. What pharmacies actually pay to acquire drugs. Published weekly by
CMS. The most transparent benchmark for drug pricing. SFH's PBM (CapitalRx) prices drugs at NADAC.
Network Discount
The difference between a hospital's chargemaster price and the carrier's negotiated rate. Often reported
as a large percentage, but misleading because chargemaster prices are artificially inflated. See Lesson 1.
PBM (Pharmacy Benefit Manager)
The company that manages prescription drug benefits. Traditional PBMs (Express Scripts, CVS Caremark,
OptumRx) make money through spread pricing and rebate retention. SFH uses CapitalRx with pass-through
pricing.
PEPM / PMPM
Per Employee Per Month / Per Member Per Month. Standard units for measuring health plan costs. PEPM counts
employees only. PMPM counts all covered members (employees + dependents).
PHI (Protected Health Information)
Any individually identifiable health information. HIPAA governs who can access it and how. In a
self-funded plan, employers receive aggregate/de-identified data only. See Lesson 9.
Plan Sponsor
The employer that establishes and maintains the self-funded health plan. The plan sponsor funds the plan
but is separate from the plan itself under HIPAA.
Privacy Officer
A HIPAA-required role for every covered entity. In a self-funded plan, someone at the employer (typically
HR) who maintains the firewall, ensures BAAs are in place, trains staff on PHI rules, and manages breach
response. See Lesson 9.
PPO
Preferred Provider Organization. A broad network of contracted providers. PPO networks negotiate rates
with providers, but those rates are often 250-450% of Medicare. SFH plans include PPO access but steer to
preferred providers at better rates.
Self-Funded
A health plan where the employer pays claims directly from their own funds, typically with stop-loss
insurance to cap risk. The employer retains control, transparency, and upside. 65% of covered American
workers are on self-funded plans.
SPD (Summary Plan Description)
The legal document that describes your health plan's benefits, exclusions, and rules. In a self-funded
plan, the employer controls the SPD, giving them flexibility to design the plan they want.
Spread Pricing
When a PBM charges the plan more for a drug than they pay the pharmacy and keeps the difference. SFH's PBM
uses pass-through pricing (no spread).
Site-of-Care Change
Moving a medical service from a high-cost setting (hospital outpatient) to a lower-cost setting
(independent infusion center, ASC, or specialty pharmacy) without changing the clinical treatment. For
J-code drugs, this can reduce costs 50-75%. See Lesson 7.
Stop-Loss Insurance
Insurance purchased by self-funded employers to cap catastrophic risk. Specific stop-loss covers large
individual claims. Aggregate stop-loss covers total group claims exceeding a set ceiling. See Lesson 8.
340B
A federal program that requires drug manufacturers to sell drugs at steep discounts (~ASP-22%) to eligible
hospitals. Many 340B hospitals bill commercial plans at full price while acquiring drugs at the discounted
rate, pocketing the spread.
TPA (Third Party Administrator)
A company that processes claims and handles plan administration for self-funded employers. SFH is an
integrated plan that combines TPA services with active cost management.
White Bagging
A drug distribution method where a specialty pharmacy ships a patient-specific drug directly to the
infusion site. The drug is billed through the pharmacy benefit at transparent pricing instead of the
hospital's medical benefit markup. See Lesson 7.
