Pharmacy & Health Benefits Glossary

Administrative Services Only, or ASO, is an arrangement in which a self-funded employer contracts with a third party to administer functions such as claims processing, eligibility, and member support while retaining financial responsibility for healthcare claims. Unlike a fully insured arrangement, the employer retains the financial risk and greater control over plan design. ASO arrangements allow organizations to outsource administration while retaining ownership of the underlying benefit strategy and claims risk.

Average Wholesale Price (AWP) is a benchmark used in the pharmaceutical industry to estimate the cost of prescription drugs. Often referred to as the "sticker price," it serves as a reference point for pricing and reimbursement negotiations between pharmacies, insurers, and other stakeholders. AWP is published by drug pricing databases and can vary based on the drug type and manufacturer. It is not necessarily the actual price paid by pharmacies or consumers, but it is widely used across the industry as a starting point for drug cost calculations.

Benefit administration, sometimes abbreviated BenAdmin, is the day-to-day work of running an employee benefits program.This includes enrolling members, managing eligibility, processing claims, handling compliance reporting, and answering member questions. For self-funded employers, much of this work is handled by a third-party administrator (TPA) that brings together networks, pharmacy benefits, point solutions, and stop-loss into one functioning plan. Strong benefit administration reduces administrative waste, keeps the plan audit-ready, and provides plan sponsors with real-time data to make informed decisions. When medical and pharmacy administration live on a single platform, employers gain a unified view that fragmented, multi-vendor setups can't match.

A benefit year is the 12-month period during which a health plan's coverage terms, deductibles, and out-of-pocket maximums apply before they reset. Many plans align the benefit year with the calendar year, running January 1 through December 31, though some sponsors choose a different start date. Deductibles and accumulators reset at the close of the benefit year, which affects what members pay for care in the period that follows.

Biosimilar biological products, or biosimilars, are medicines highly resemblant to an already-approved biologic, with noclinically meaningful differences in safety, purity, or effectiveness. The FDA approves biosimilars after rigorous testing, and they typically cost less than the reference biologic, lowering prescription spending for plans and members. Biosimilar adoption has become one of the most closely watched cost-containment strategies in specialty drug management, though uptake still depends heavily on formularyplacement and rebate incentives.

Brand name drugs are prescription medications sold under a manufacturer's proprietary trademark, typically while the drug remains under patent protection. Brand name drugs generally cost more than their generic equivalents, reflecting the manufacturer's investment in research, development, and marketing. Where a brand name drug sits on a formulary determines member copayments and shapes whether lower-cost generic or biosimilar alternatives are available.

Care coordination is the deliberate organization of a patient's care across providers, settings, and services to improve outcomes and avoid duplicated or conflicting treatment. Effective care coordination connects primary care physicians, specialists, pharmacists, and care managers so that everyone works from the same information. For members managing chronic or complex conditions, strong care coordination reduces gaps in treatment, eliminates unnecessary costs, and smooths the overall care experience.

The Centers for Medicare & Medicaid Services (CMS) is the operating division within the Department of Health and Human Services that runs Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), and the federal health insurance marketplace. CMS establishes the clinical standards, quality metrics, pricing models, and compliance rules that govern federal healthcare programs like the Medicare Prescription Payment Plan (MPPP). Its policies and reimbursement frameworks frequently referenced across the broader healthcare and health insurance industries.

A claim is a request for payment that a healthcare provider or member submits to a health plan after a covered service, prescription, or supply is delivered. The plan reviews the claim, applies the member's benefits, and determines what it pays and what the member owes. Accurate, timely claims processing sits at the center of a well-run health plan, since it directly affects provider payments and member out-of-pocket costs.

A cloud-native platform is software designed specifically to operate in a cloud environment rather than being adapted from legacy, on-premises technology. Cloud-native architecture can support scalability, frequent updates, and flexible infrastructure as needs change. Judi® is a cloud-native enterprise health platform built to support claims adjudication and benefit administration across medical, pharmacy, dental, and vision, while Judi Cloud™ allows health plans and TPAs to license that platform directly.

Coinsurance is the percentage of a covered healthcare cost a member pays after meeting the plan deductible, with the health plan responsible for the remainder. With 20% coinsurance, a member owes $20 of a $100 covered service while the plan pays the other $80. Coinsurance is one of several cost-sharing mechanisms, alongside copayments and deductibles, that plans use to structure member liability across the benefit year.

A Concurrent Drug Utilization Review (CDUR) is a real-time clinical safety check that happens exactly when a pharmacist processes a prescription. The system automatically screens a patient's new prescription against their current medication history to identify potential issues such as harmful drug interactions, incorrect dosages, and duplicate therapies. CDUR is a standard component of pharmacy benefit management and is required under Medicaid programs.

Configuration and customization describe different approaches to adapting technology to meet benefit plan requirements. Configuration involves using existing platform capabilities, such as settings and rules, to support different benefit designs and workflows. Customization involves tailoring functionality to meet requirements beyond what existing capabilities support. Judi® provides a flexible platform that enables plan sponsors to configure and customize benefits to meet their specific needs.

The Consolidated Appropriations Act (CAA) is federal legislation first enacted in 2021 that introduced healthcare transparency and prescription drug reporting requirements, with the 2026 legislation adding further PBM-specific provisions. For PBMs and health benefits professionals, requirements vary by provision and effective date, with implementation evolving through subsequent legislation, federal agency guidance, and rulemaking.

Continuation of therapy, sometimes abbreviated as CoT, is a plan design feature that prevents an interruption in the supply of an existing medication a plan member is taking when benefit coverage changes, such as during a PBM transition, formulary change, or plan transition. Maintaining access to an ongoing medication can help prevent unnecessary disruption for members. Benefit administration systems can support continuation of therapy policies through configurable transition rules, member-specific exceptions, and clinical oversight.

COB (Coordination of Benefits) is the process health plans use to determine which plan pays first when a person is covered by more than one health plan. COB prevents duplicate payments and establishes clear rules for the primary and secondary payer, so total reimbursement does not exceed the actual cost of care. For members with overlapping coverage, this process clarifies payment responsibility and keeps claims moving without delay.

A copayment, or copay, is a fixed dollar amount a member pays for a covered healthcare service or prescription, such as $25 for a doctor visit or $15 for a generic drug. Unlike coinsurance, a copay stays the same regardless of the total cost of the service. Copayments are a predictable form of cost-sharing that plan sponsors often use to steer members toward lower-cost care settings and generic drugs.

CAPS (Core Administrative Processing System) is the central software platform that health plans, payers, and third party administrators (TPAs) use to manage core functions like enrollment, eligibility, benefit configuration, claims processing, and member billing. A modern CAPS connects these workflows in one place, reducing manual errors, speeding up claims adjudication, and giving plan sponsors clearer visibility into how plan dollars are spent. For self-funded employers, CAPS works alongside a TPA or Health Benefits Administrator to turn plan design into accurate, timely payments.

DORA, or Data Output & Reporting Application, is our reporting tool within the Judi® platform that provides plan sponsors and TPAs with self-service access to claims data. Users can build reports, adjust parameters, and retrieve results without waiting for a vendor to produce the information. Because DORA exposes claim-level fields and payment details, it gives users a more direct way to analyze claims, understand what they are paying, and monitor plan performance.

A Deductible (DED) is the amount a health plan member pays out-of-pocket for covered medical services before the plan begins paying its share. Deductibles reset annually and vary across plan designs, including high-deductible health plans, which pair lower monthly premiums with high upfront cost-sharing. A deductible differs from a copay, which is a fixed fee paid per transaction regardless of whether the deductible has been met, and from the out-of-pocket maximum, which caps a member's total annual cost-sharing liability.

Dental coverage is insurance that helps pay for the cost of dental care, including preventive services like cleanings and exams, as well as fillings, extractions, and other treatments. Dental coverage may be offered as a standalone plan or bundled with a medical plan, with benefits typically organized into tiers based on the type of service. Bundling dental with medical and pharmacy benefits under one administrator can simplify plan management and improve the member experience.

The Department of Health and Human Services (HHS) is the U.S. federal agency responsible for protecting public health and administering major healthcare programs, including Medicare, Medicaid, and theHealth Insurance Marketplace. HHS sets and enforces many of the rules that shape health insurance, privacy protections, and care standards nationwide. For plan sponsors and members, HHS guidance frequently defines what coverage must include and how plans are permitted to operate.

Dispense as Written (DAW) is an instruction on a prescription that directs pharmacists to dispense the exact brand-name drug specified by the prescribing physician rather than a therapeutically equivalent generic. When a DAW code is present, the pharmacy cannot substitute a cheaper generic version without explicit authorization. Pharmacy benefit managers and health plans use a standardized set of DAW codes to process claims accurately, distinguish between physician-directed and patient-requested brand dispensing, and apply the appropriate cost-sharing rules. DAW codes can also vary by state, as some jurisdictions have specific regulations governing generic substitution.

A Drug Management Program (DMP) is a structured, clinical approach that health plans and pharmacy benefit managers use to monitor and manage medication use among plan members. These programs typically target high-risk medications such as opioids, apply utilization management strategies, and support safe and appropriate prescribing patterns. DMPs may include step therapy protocols, prior authorization requirements, and pharmacist outreach to reduce misuse, prevent adverse events, and promote clinically appropriate medication pathways.

Electronic Data Interchange, or EDI, is the standardized electronic exchange of business information such as claims, eligibility files, and payments between healthcare organizations. EDI allows organizations to exchange information in a consistent, machine-readable format, reducing manual processes and supporting more efficient administration. Health plans and TPAs may use EDI alongside other integration methods, including APIs, SFTP, and cloud-based connectivity.

EGWP, pronounced "egg-whip," is a Medicare Part D prescription drug plan that an employer or union offers to retirees through a contract with a Medicare-approved vendor. EGWPs enable employers to provide drug coverage to Medicare-eligible retirees while capturing federal subsidies and manufacturer discounts that lower the plan's overall cost. For plan sponsors with a large retiree population, an EGWP can deliver meaningful savings compared to a traditional retiree drug plan, while still offering coverage that meets or exceeds standard Medicare Part D. Employers often pair an EGWP with supplemental "wrap" coverage to maintain the benefit levels their retirees expect.

Encounter data is information about healthcare services a member receives, including diagnoses, procedures, and treatments, even when the service does not result in a traditional fee-for-service claim. Medicare and Medicaid programs use encounter data for purposes such as risk adjustment, quality measurement, and reporting. Complete, accurate encounter data gives plans a fuller view of the care members receive and supports more reliable reporting and analysis.

An Enterprise Health Platform (EHP) is a unified technology system that consolidates the administration of healthcare benefits, pharmacy programs, clinical data, and member management into a single integrated environment. EHPs are designed to replace fragmented, siloed systems by connecting employers, health plans, members, and clinical providers through a centralized platform. Judi, developed by Judi Health, is an AI-powered enterprise health platform built for pharmacy, medical, dental, & vision benefits administration.

Enterprise Health Tech (EHT) refers to the category of digital tools and platforms organizations use to manage complex medical benefits, clinical data, and pharmacy programs. These systems typically provide real-time visibility into claims data, utilization trends, and member outcomes, and are designed to integrate across benefit administration, pharmacy, and clinical functions.

EOB (Explanation of Benefits) is a statement a health plan sends after a claim is processed, showing what a provider billed, what the plan paid, and what the member may owe. An EOB is not a bill; it summarizes how coverage applied to a specific service, including any discounts, copayments, coinsurance, or deductible amounts. Reviewing an EOB against the original claim helps identify billing errors and clarifies true out-of-pocket costs.

The Family and Medical Leave Act (FMLA) is a federal law that allows eligible employees to take up to 12 weeks of unpaid, job-protected leave each year for specific family and medical reasons, such asa serious health condition or the birth of a child. Group health coverage typically continues during FMLA leave on the same terms as active employment.Employers rely on FMLA compliance to protect both their legal standing and their employees' continued access to benefits.

FHIR, or Fast Healthcare Interoperability Resources, is a standard for exchanging healthcare information electronically. It uses modern web technologies and APIs to help healthcare systems share information in a consistent format. FHIR supports interoperability by making it easier for different applications and organizations to exchange data, an important consideration as health plans and TPAs connect claims, clinical, and administrative systems.

Fee for Service (FFS) is a payment model in which healthcare providers are paid separately for each individual service, test, or procedure delivered. FFS is straightforward to administer, but it can reward higher volumes of care over better outcomes, which is part of why many plans are exploring value-based alternatives. Understanding how FFS shapes provider incentives helps plan sponsors evaluate whether their spending is translating into better care.

A fiduciary is a person or entity with a legal responsibility to act in the best interests of another party. In employer-sponsored health and pharmacy benefits, fiduciary responsibilities can include making prudent decisions, avoiding conflicts of interest, managing plan assets responsibly, and carefully evaluating vendors and benefit arrangements. A reverse fiduciary test can help evaluate whether apparent savings from rebates are offset by higher underlying drug costs.

First-call resolution, or FCR, measures the percentage of inbound calls to a health plan’s contact center that are resolved during the initial contact without requiring follow-up. Resolving a question about coverage, a claim, or prior authorization during the first interaction can reduce unnecessary contacts and improve the service experience. Access to complete member and claims information can make it easier for representatives to resolve issues without moving between disconnected systems.

A flexible benefits plan, often called a cafeteria plan, is an employer-sponsored arrangement that lets employees choose from a menu of pre-tax benefits to fit their individual needs. Options within a flexible benefits plan can include health coverage, flexible spending accounts, dependent care assistance, and more. Letting employees tailor their selections stretches benefit dollars further and tends to improve satisfaction across a diverse workforce.

A Flexible Spending Account (FSA) is an employer-sponsored account that lets an employee set aside pre-tax dollars for eligible healthcare expenses like copayments, prescriptions, and certain medical supplies. Because contributions are deducted before taxes, an FSA lowers taxable income as well as out-of-pocket costs. Most FSAs follow a"use it or lose it" rule within the benefit year, so accurate expense estimates matter at enrollment.

A formulary is the list of prescription drugs a health plan covers, typically organized into tiers that determine member cost sharing for each medication. Formularies generally place generics on lower-cost tiers and brand name or specialty drugs on higher ones, which shapes both prescribing patterns and out-of-pocket costs. Formulary design has become a central lever in managing pharmacy spend, particularly as plans weigh biosimilar-first strategies against rebate-driven brand placement.

Generic drugs are prescription medications that contain the same active ingredients, strength, dosage form, and intended use as their brand name counterparts, at significantly lower cost. The FDA requires generics to meet the same quality, safety, and effectiveness standards as brand name versions. Favoring generics, when clinically appropriate, remains one of the most direct ways plan sponsors reduce prescription drug spending without compromising care.

A group health plan is health coverage offered by an employer, union, or other organization to a defined group of members, such as employees and their dependents. Group health plans can be fully insured or self-funded, and self-funded structures face increasing fiduciary transparency requirements under ERISA and the Consolidated Appropriations Act. For employers, how a group health plan is funded and administered directly shapes both cost predictability and compliance exposure.

Health benefits are the coverage and services an employer or insurer provides to help members pay for medical, prescription, dental, vision, and related care. A well-designed health benefits package protects members from high costs, supports preventive care, and helps employers attract and retain talent. Balancing meaningful coverage with cost control is the central challenge plan sponsors face in structuring health benefits year over year.

A Health Benefits Administrator (HBA) is an entity that manages the day-to-day operations of an organization's employee benefit programs, including claims processing, open enrollment, regulatory compliance, and member communications. HBAs may be internal staff, third-party administrators, or technology-enabled platforms that centralize benefit administration functions.

A Health Benefits Manager (HBM) is a professional or organizational role responsible for designing, overseeing, and administering an employer's medical and benefits offerings. Responsibilities typically include evaluating plan designs, negotiating with vendors, analyzing claims data, and ensuring the benefit program meets both regulatory requirements and workforce needs.

Health Level Seven, or HL7, is a standards development organization and a family of standards used to exchange clinical and administrative healthcare information between systems. HL7 standards help define how information moves between systems such as electronic health records, laboratories, pharmacies, and payer platforms. FHIR is one of the newer standards developed within the broader HL7 framework and uses modern web-based approaches to healthcare data exchange.

An Individual Coverage Health Reimbursement Arrangement (ICHRA) is an employer-funded benefit that reimburses employees tax-free for individual health insurance premiums and qualified medical expenses. Rather than offering a traditional group health plan, an employer sets a fixed allowance and employees select coverage that fits their needs, often through the Health Insurance Marketplace. An ICHRA gives employers more predictable costs while giving employees greater choice and portability in their coverage.

An individual health insurance policy is coverage purchased directly by a person, rather than through an employer or group, either from an insurer or through the Health Insurance Marketplace. An individual policy covers the policyholder and any dependents enrolled on the plan, and enrollees may qualify for income-based premium subsidies. For people who are self-employed, between jobs, or without access to a group health plan or ICHRA, an individual policy remains a primary path to coverage.

In-patient care is medical treatment that requires formal admission to a hospital or facility for an overnight stay or longer.In-patient care typically involves more complex services, such as surgery, intensive monitoring, or extended treatment, and is billed differently from outpatient care. Whether a service is classified as inpatient directly affects how a member's benefits and cost sharing apply.

An insurance co-op is a member-owned, nonprofit health insurer created to offer competitive, consumer-focused coverage, with any surplus reinvested to lower costs or expand benefits. Insurance co-ops were established to increase choice and competition in the health insurance market, operating in members' interests rather than those of outside shareholders. For consumers, a co-op represents an alternative source of coverage built around value and accountability rather than profit.

A job-based health plan is health coverage offered to employees and often to their dependents through an employer or an employee organization. These plans, also called group health plans or employer-sponsored coverage, are the most common source of health insurance in the United States. Employers typically share the cost of premiums with employees and may offer several plan designs to fit different needs and budgets. Job-based coverage that meets affordability and minimum value standards counts as qualifying health coverage, which affects an employee's eligibility for marketplace subsidies.

Judi® is a proprietary, cloud-native enterprise health platform that unifies medical and pharmacy claims processing, eligibility management, payments, and care navigation in a single integrated environment. Built as the infrastructure needed to deliver accessible and affordable healthcare, Judi combines award-winning security with seamless interoperability, enabling comprehensive claims adjudication, prior authorization management, formulary processing, and in-depth analytics. The platform supports over 400 unique benefit configurations, real-time data access through secure APIs, pharmacy network oversight, actuarial insights for underwriting and RFPs, and streamlined claims and ancillary invoicing. These features are all designed to simplify operations, reduce costs, and empower health plans, employers, and TPAs with transparent, data-driven decision-making capabilities.

A large group health plan is employer-sponsored coverage offered by a business that exceeds a state-defined size threshold, generally 51 or more employees, though some states set the line at 101. Large group plans follow different rules than small group plans under federal and state law, including different rating and benefit requirements. Because of their size, large groups often have more leverage to negotiate pricing, customize plan design, and self-fund their benefits. This flexibility makes self-funding especially attractive to larger organizations that want direct ownership of plan design and claims data.

Level-funded benefits are a hybrid funding approach that blends features of fully insured and self-funded plans. The employer pays a fixed monthly amount that covers expected claims, administrative fees, and stop-loss insurance, giving the budget predictability of a fully insured plan. If actual claims come in lower than projected, the employer may receive a refund or credit at year-end; if claims are higher, stop-loss coverage limits exposure. Level-funded solutions like Judi Equilibrium appeal to small and mid-size employers who want the flexibility and potential savings of self-funding without taking on its full financial risk.

A manufacturer discount program is an arrangement in which a drug manufacturer provides discounts, rebates, or other financial assistance to reduce the cost of medications for health plans or members. The structure and impact of these programs vary by coverage type and arrangement. For plan sponsors, understanding how manufacturer funding affects plan or member costs is an important part of evaluating the overall economics of prescription benefits.

The Maximum Allowable Cost (MAC) is the highest reimbursement amount a payer will pay a pharmacy for a specific generic or multi-source brand drug. Pharmacy benefit managers maintain MAC lists that set reimbursement ceilings across their pharmacy networks to control drug spending and reduce price variation. MAC pricing applies broadly across commercial health plans, and government programs including Medicaid and Medicare Part D use similar cost-containment mechanisms for generic drug reimbursement.

A Maximum Allowable Cost, or MAC, list is a pricing schedule that establishes the maximum amount a plan will reimburse for certain generic and multisource drugs. MAC pricing is intended to manage generic drug costs by setting a reimbursement limit regardless of what an individual pharmacy charges. For plan sponsors, visibility into how MAC prices are established and applied can help when evaluating pharmacy reimbursement and overall drug costs.

A Maximum Out-Of-Pocket (MOOP) is the highest amount a health plan member will pay for covered, in-network healthcare services within a single plan year. Once a member reaches the MOOP threshold, the health plan covers the full cost of covered services for the remainder of the year. The MOOP is distinct from the deductible, which is the amount a member pays before cost-sharing begins, though deductible spending typically counts toward the MOOP. Federal regulations establish annual MOOP limits for plans sold on the health insurance marketplace and for Medicare programs.

Medication adherence describes how consistently a patient takes a medication as prescribed, including taking the correct dose at the right time and for the prescribed duration. Poor adherence can contribute to worse health outcomes and avoidable healthcare costs. For health plans, adherence programs can combine member outreach, prescriber communication, pharmacist support, and utilization data to identify and address gaps in medication use and is also an important component of Medicare Star Ratings.

Medication Therapy Management (MTM) is a structured clinical service in which a pharmacist works directly with patients to review their current prescriptions, identify potential drug interactions, and optimize their overall medication regimen. MTM programs are designed to improve therapeutic outcomes, reduce unnecessary therapies, and support patients managing multiple chronic conditions. These programs are a required benefit under Medicare Part D and are commonly offered through pharmacy benefit managers.

The National Average Drug Acquisition Cost (NADAC) is a federal benchmark that reflects the average invoice costs retail pharmacies pay to acquire drugs from manufacturers and wholesalers. Published weekly by the Centers for Medicare and Medicaid Services (CMS), it is based on survey data collected directly from retail pharmacies across the country. State Medicaid programs and some commercial health plans use NADAC as a reference point for pharmacy reimbursement rates and drug pricing evaluation.

A National Drug Code, or NDC, is a unique identifier used to identify medications marketed in the United States. The three-segment code identifies the labeler, product, and package size. NDC information is used throughout pharmacy benefit administration for drug identification, claims processing, pricing, and analysis. Because drug pricing can vary at the NDC level, detailed NDC data gives plan sponsors a more precise way to analyze prescription costs.

The National Provider Identifier (NPI) is a unique, ten-digit identification number issued to covered healthcare providers in the United States. Established under HIPAA, the NPI serves as a standard identifier for physicians, hospitals, pharmacies, and other healthcare entities across all administrative and financial transactions. Provider credentials can be verified through the publicly accessible NPI registry maintained by CMS.

The Open Enrollment Period is the set window each year when individuals can enroll in, renew, or change their health coverage without needing a special qualifying event. For employer-sponsored plans, the employer sets the dates and uses this period to communicate plan changes, collect elections, and update payroll deductions. A well-run open enrollment is a major driver of employee satisfaction; clear communication and easy-to-use tools help members choose the right plan with confidence. Outside this window, employees can generally make changes only if they experience a qualifying life event.

Original Medicare is the federal health insurance program administered by the government, consisting of Part A (hospital insurance) and Part B (medical insurance). Members can see any provider nationwide who accepts Medicare, with no network restrictions, and they pay deductibles and coinsurance for covered services. Original Medicare doesn't include prescription drug coverage, so many beneficiaries add a standalone Part D plan, and some purchase supplemental "Medigap" coverage to help with out-of-pocket costs. For employers managing retiree benefits, understanding how Original Medicare coordinates with employer coverage is essential to designing a cost-effective retiree strategy.

Out-of-network coinsurance is the percentage of covered costs a member pays when they receive care from a provider who isn't contracted with their health plan. Because out-of-network providers haven't agreed to the plan's negotiated rates, this coinsurance percentage is usually higher than the in-network rate, and the member may also be responsible for balance billing: the difference between the provider's charge and what the plan allows. For example, a plan might charge 20% coinsurance in-network but 40% out-of-network. Steering members toward in-network, high-value providers is one of the most effective ways to control both plan and member spending.

An out-of-network copayment is the fixed dollar amount a member pays for a covered service delivered by a provider outside the plan's network. Like out-of-network coinsurance, these copays are typically higher than in-network amounts to reflect the lack of a negotiated contract. Members who go out of network may also face balance billing on top of the copay, leading to unexpectedly high costs. Clear, upfront cost guidance helps members understand these differences before they choose a provider, reducing surprise bills and unnecessary high-cost utilization.

Out-of-pocket costs are the healthcare expenses a member pays directly that the plan doesn't cover, including deductibles, copayments, and coinsurance. These costs don't include monthly premiums, but they do count toward the plan's out-of-pocket maximum. Out-of-pocket spending is one of the biggest factors in how employees experience their benefits; high or unpredictable costs drive complaints and dissatisfaction. Giving members real-time visibility into their accumulators and cost estimates before care helps them budget, plan, and avoid surprises.

An out-of-pocket estimate is a projection of what a member can expect to pay for a specific healthcare service before they receive it, based on their plan design and current benefit usage. A good estimate factors in the member's deductible status, applicable copays or coinsurance, and whether the provider is in-network. These estimates turn confusing line-item billing into a clear, plan-specific dollar figure members can act on. When grounded in real-world claims data rather than theoretical pricing, out-of-pocket estimates help members choose lower-cost, high-quality options with confidence.

Per Employee Member Per Month (PEMPM) is a billing and cost measurement metric that accounts for all individuals enrolled under an employee's benefit plan, including the primary subscriber, spouse, and dependents. Unlike PEPM, which counts only the primary employee, PEMPM provides a more complete view of total benefit costs across a covered population.

Per Employee Per Month (PEPM) is a billing metric used by vendors, insurers, and pharmacy benefit managers to charge organizations a flat rate per eligible employee each month for administrative or benefit services. PEPM is calculated by dividing the total monthly cost of a service by the number of eligible employees. It provides a predictable cost structure that simplifies budgeting for benefit programs.

Per Member Per Month (PMPM)  is a standard cost measurement and billing unit in healthcare that distributes total costs across all enrolled members, including dependents, within a given month. PMPM is calculated by dividing the total monthly cost of a health plan or service by the total number of enrolled members. It provides a consistent basis for comparing costs across plans, populations, and time periods.

Pharmacogenomics (PGX) is the study of how an individual's genetic makeup influences their response to medications. By analyzing genetic variations, pharmacogenomic testing helps identify which drugs are likely to be effective, ineffective, or potentially harmful for a specific patient. The field combines pharmacology and genomics to support more precise prescribing decisions and reduce adverse drug reactions. PGx testing is increasingly integrated into benefit plans as a tool for improving clinical outcomes and reducing spending on ineffective therapies.

Pharmacy Audit and Recovery Benefit Solutions (PARBS) is a structured approach to identifying and recovering funds lost to billing errors, duplicate claims, and contractual violations within pharmacy benefit programs. PARBS processes typically involve systematic review of claims data across retail and specialty pharmacy transactions, as well as cross-referencing pharmacy and medical benefits to identify improper billing.

A Pharmacy Benefit Administrator (PBA) processes pharmacy claims and manages benefit data on behalf of health plans without taking ownership of drug spreads or rebates. Unlike a traditional PBM, a PBA functions as a purely administrative intermediary, handling claims adjudication, formulary administration, and reporting without the financial arrangements that characterize full PBM models.

A Pharmacy Benefit Manager (PBM) is an intermediary organization that administers prescription drug benefits on behalf of health plans, employers, and other payers. PBMs negotiate drug pricing with manufacturers and wholesalers, develop and maintain pharmacy networks, manage formularies, process claims, and administer clinical programs. They play a central role in determining how prescription drugs are accessed and priced for plan members.

A plan sponsor is the organization responsible for establishing and maintaining a health benefits plan. Plan sponsors can include employers, unions, and government organizations, and they typically oversee plan design, select vendors, and make decisions about how benefits are administered.

Prescription Drug Event, or PDE, submission is the process through which Medicare Part D plans report detailed information about covered prescriptions to CMS. Each PDE record includes information about the drug, costs, and payments that CMS uses for reconciliation, compliance, and payment purposes. Accurate and timely PDE submissions are important for Part D sponsors because errors can create financial and compliance issues.

Proportion of days covered (PDC) is a medication adherence metric that measures the percentage of days during a given period that a patient has access to their prescribed medication. PDC is calculated by dividing the number of days a patient has medication on hand by the total number of days in the measurement period. A PDC of 80 percent or higher is generally considered indicative of adequate adherence. The metric is commonly used in chronic disease management to identify patients at risk of gaps in therapy.

A qualified health plan is an insurance plan certified by the Health Insurance Marketplace that meets specific standards for benefits, cost sharing, and consumer protections. To earn this designation, a plan must cover the 10 essential health benefits, comply with established cost-sharing limits, and meet minimum value requirements. Qualified health plans are the only plans eligible for premium tax credits and cost-sharing reductions through the marketplace. While most employer coverage is offered outside the marketplace, understanding this standard helps benefits teams evaluate how their plans compare and how employees' marketplace options work.

Qualifying health coverage is any health plan that meets the minimum essential coverage standard under federal law, including most job-based plans, Medicare, Medicaid, and marketplace coverage. Having qualifying coverage historically satisfied the individual mandate, and it still affects eligibility for certain subsidies and special enrollment opportunities. For employers, offering coverage that qualifies as affordable and provides minimum value is central to meeting Affordable Care Act responsibilities and avoiding potential penalties.Documenting and reporting this coverage accurately keeps the plan audit-ready and compliant.

A qualifying life event is a significant change in a person's life that opens a Special Enrollment Period, allowing them to enroll in or change health coverage outside the normal Open Enrollment Period. Common examples include marriage, divorce, the birth or adoption of a child, a move to a new coverage area, or the loss of other coverage. When an employee experiences a QLE, they typically have a limited window, often 30 or 60 days, to make changes. Clear guidance on which events qualify and how to act on them reduces employee confusion and keeps the plan compliant.

Rebate pass-through is a contractual arrangement in which a PBM passes manufacturer rebates back to the plan sponsor rather than retaining a portion of that revenue. The details depend on the contract, including how rebates are defined and whether other forms of manufacturer compensation are included. Reviewing how manufacturer revenue is defined, reported, and returned can help plan sponsors evaluate the economics of their pharmacy benefit.

Reinsurance is insurance for insurers, a way to spread the financial risk of unusually high claims. In the context of self-funded employer plans, reinsurance often takes the form of stop-loss coverage, which reimburses the employer once claims exceed a set threshold. Reinsurance lets employers capture the cost advantages of self-funding while protecting the plan against catastrophic or unpredictable expenses. Choosing the right attachment point and contract terms is a critical part of managing financial exposure without overpaying for protection.

Retiree Drug Subsidy, or RDS, is a federal program that provides subsidies to employers that offer prescription drug coverage to Medicare-eligible retirees, provided the coverage meets federal requirements. The subsidy helps offset the cost of retiree prescription benefits. Plan sponsors may also evaluate alternatives such as Employer Group Waiver Plans (EGWPs) when determining how to structure retiree drug coverage and access available Medicare funding.

RCM (Revenue Cycle Management) is the financial process healthcare providers use to track patient care from appointment scheduling through final payment This includes eligibility verification, coding, claims submission, and collections. Strong RCM reduces denied claims, shortens payment timelines, and keeps provider cash flow healthy. For payers and plan sponsors, clean RCM on the provider side translates into faster, more accurate claims and fewer disputes downstream.

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Risk adjustment is a method used to account for differences in the health status of enrolled populations so that plans covering sicker members aren't unfairly penalized. The process transfers funds from plans with lower-risk enrollees to those with higher-risk enrollees, stabilizing premiums and discouraging plans from avoiding people with serious health needs. Risk adjustment relies on accurate, complete claims and diagnostic data to work fairly. For plan sponsors, understanding risk adjustment clarifies how population health and data quality influence plan economics and pricing.

A self-funded employer pays its employees’ healthcare claims directly rather than purchasing a fully insured plan from an insurance carrier. The employer assumes the financial risk for claims, typically using stop-loss coverage to protect against unusually high costs. Self-funding also gives plan sponsors greater control over benefit design, vendors, and claims data, making access to complete claims information important for managing spending and evaluating benefit performance across both pharmacy and medical.

A self-insured plan, also called a self-funded plan, is an arrangement in which an employer pays directly for its employees' healthcare claims rather than buying a fully insured policy from a carrier. The employer assumes the financial risk for claims and usually contracts with a third-party administrator to manage the plan, and often buys stop-loss insurance to limit exposure. Self-insuring gives employers greater control over plan design, direct access to claims data, and the flexibility to customize benefits for their workforce. This model gives employers direct ownership of their data and a clearer path to cost control, which is why so many mid-size and large employers choose it.

A service area is the geographic region where a health plan accepts members and provides covered services through its contracted network of providers. Plans define their service areas by state, county, or ZIP code, and members generally need to live or work within that area to enroll. For employers with a geographically dispersed workforce, matching plan service areas to employee locations is essential; a network that works well in one region may offer limited access in another. Choosing networks that align with where employees live helps deliver consistent access and a better member experience.

A Special Enrollment Period is a window outside the annual Open Enrollment Period during which a person can enroll in or change health coverage after experiencing a qualifying life event. Events such as losing other coverage, getting married, having a baby, or moving can trigger an SEP, typically lasting 30 or 60 days from the date of the event. The SEP exists so people aren't locked out of coverage when their circumstances change unexpectedly. Helping employees recognize when they qualify and act within the deadline reduces coverage gaps and member frustration.

A special health care need refers to an ongoing physical, developmental, behavioral, or emotional condition that requires health and related services beyond what most people typically use. Members with special health care needs, including those with chronic illnesses or disabilities, often rely on specialists, durable medical equipment, ongoing therapies, or coordinated care across multiple providers. Thoughtful plan design and strong care navigation help these members get the right care at the right time while managing the total cost of care. Connecting medical and pharmacy data gives a fuller picture that supports proactive, personalized support.

A specialist is a physician or provider who focuses on a specific area of medicine, such as cardiology, oncology, dermatology, or orthopedics, rather than general primary care. Members often see a specialist for complex or condition-specific care, and some plans require a referral from a primary care provider before coverage applies. Specialist visits frequently carry higher cost-sharing than primary care, and the same specialty service can vary widely in price and quality across providers. Guiding members to high-quality, cost-effective specialists is one of the most impactful ways to improve outcomes and control spending.

Spread pricing is a traditional PBM pricing model in which a plan sponsor pays more for a prescription than the pharmacy receives, with the PBM keeping the difference. This spread can make it harder for plan sponsors to see the true cost of prescription drugs and evaluate pharmacy spending.

Star Ratings are a CMS quality measurement system used to evaluate Medicare Advantage and Medicare Part D plans on a scale of one to five stars. The ratings incorporate measures related to areas such as medication adherence, member experience, and clinical outcomes, and whether a health plan has above or below average Star Ratings can affect plan quality performance and financial incentives.

State continuation coverage is a state-level protection that lets employees and their dependents keep their group health coverage for a period of time after they would otherwise lose it, like federal COBRA, but often aimed at smaller employers not subject to COBRA. The specifics, including who qualifies, how long coverage lasts, and how much it costs, vary from state to state. This coverage helps prevent gaps when someone leaves a job or experiences a change in status. For employers, understanding both COBRA and applicable state continuation rules is key to staying compliant and supporting departing employees.

The State Health Insurance Assistance Program, or SHIP, is a federally funded program that provides free, unbiased counseling to Medicare beneficiaries and their families. SHIP counselors help people understand their Medicare options, compare plans, navigate enrollment, and resolve coverage or billing questions, without selling any product. For employers managing a workforce approaching retirement, SHIP is a valuable resource to share with Medicare-eligible employees and retirees. Pointing people to trusted, independent guidance supports better decisions and eases the transition from employer coverage to Medicare.

A state insurance department is the government agency responsible for regulating insurance companies and protecting consumers within a given state. These departments license insurers, review rates and policy forms, enforce state insurance laws, and investigate consumer complaints. For benefits teams, the state insurance department is the authority on fully insured plan rules, though self-funded plans are generally governed by federal ERISA rather than state insurance law. Knowing which regulator oversees which type of plan helps employers manage compliance accurately across their benefit offerings.

A state medical assistance office is the agency that administers a state's Medicaid program and related public health coverage. These offices determine eligibility, enroll qualifying residents, and help people understand the benefits available to them, including coverage for low-income individuals, families, seniors, and people with disabilities. For employers, this office is a useful resource when employees or their dependents may qualify for public coverage in addition to, or instead of, employer benefits. Sharing accurate information about these resources supports employees through changes in income or eligibility.

Step therapy is a coverage approach that requires a member to try one or more lower-cost medications before the plan covers a higher-cost alternative. The approach is designed to encourage clinically appropriate, cost-effective treatment while maintaining access to other options when needed. Most step therapy programs include an exception process through which a member or provider can request coverage for a different medication when there is a clinical reason to bypass the usual steps.

Stop-loss coverage protects self-funded health plans against unusually high claims costs. Specific stop-loss coverage limits a plan’s exposure for an individual member, while aggregate stop-loss coverage limits total claims exposure across the covered population. When claims exceed the applicable threshold, the stop-loss carrier reimburses the plan for the covered excess amount. This protection gives self-funded plans greater predictability when managing catastrophic claims risk.

The Summary of Benefits and Coverage, or SBC, is a standardized document that explains a health plan's benefits and coverage in a clear, consistent format, so members can easily compare options. Required under the Affordable Care Act, the SBC outlines what the plan covers, what members pay, and how cost sharing works, using plain language and common coverage examples. Employers and plan administrators must provide an SBC to members at key points, such as during enrollment and upon request. Generating and validating accurate SBCs each year is an important compliance task that keeps the plan audit-ready.