Aetna HealthFund: Aetna's innovative family of consumer-directed health products which includes the Aetna HealthFund Health Reimbursement Arrangement (HRA), Aetna HealthFund Health Savings Account (HSA), Aetna HealthFund Retiree Reimbursement Account (RRA), Aetna HealthFund Flexible Spending Account (FSA) and Aetna HealthFund First Dollar Plan. (See below for descriptions of each of these product options.)

Coinsurance: An amount or percentage that health plan members are required to pay for health care products or services in conjunction with their employers' benefits plans.

Consumer-directed health plans: Also referred to as "consumer driven," or "consumer choice," this type of health plan gives members more choice and flexibility in making health benefits decisions and more control over their health benefit dollars. These plans often include a health fund or account for covered medical expenses: depending on the type of fund or account unused dollars may be rolled over on an annual basis to cover medical expenses in subsequent years for the duration of the members' enrollment in the plan.

Consumerism: A marketplace trend to empower and support individuals in their consumption of health services by providing increased benefits flexibility coupled with credible price, quality and health information needed to make wiser purchasing decisions.

Deductible: Amount that a health plan member must spend out of pocket before the benefits plan begins to pay for covered medical services.

Defined Contribution Plan: A broad term used to encompass a type of benefit plan where the employer gives employees a set amount of cash to either purchase health insurance from predetermined vendors or from a company of their choosing. Defined contribution plan is often used interchangeably - and erroneously - with "consumer-directed health plan" or "health reimbursement arrangements." There are distinct differences among the types of plans offered from employer to employer.

First Dollar Plan: A First Dollar Plan is a high-deductible plan with a special benefit feature allowing a limited number of services to be paid prior to the deductible. Covered services are paid out of the "fund" at 100 percent and not subject to the deductible. Once the available fund is exhausted, the member must satisfy the deductible before receiving coverage under the plan. First Dollar funds do not roll-over from year to year.

Flexible Spending Accounts (FSAs): An FSA is an employer-sponsored arrangement under the tax-advantaged cafeteria plan rules, created to cover medical expenses as defined under Section 213(d) of the Internal Revenue Code. While contributions to the FSA can be made by the employer or employee, they are typically made by the employee. Employees pay no federal, Social Security or (in most states) state taxes on FSA contributions. There is no IRS limit on annual FSA contributions, but most employers cap contributions at $5,000. FSA funds are subject to a "use it or lose it" provision, and must be used in the year in which they are accrued. Unused funds revert to the employer. Funds are not portable, and do not accrue interest.

Fully Insured: When employers purchase a fully insured benefits plan, they pay the insurer to administer and manage the benefits they've chosen, pay claims and assume the risk for the group's utilization of services.

Health Reimbursement Arrangements (HRAs): An HRA is an employer-funded health benefits account that may be offered to employees and retirees. An HRA may be offered in conjunction with another benefit plan (such as a high-deductible PPO or POS plan) for which an employee contribution is required, but no portion of the HRA can be derived from the employee contribution. Funds must be used for qualified medical expenses permitted under Section 213(d) of the Internal Revenue Code, although the employer can establish more restrictive limits for the use of HRA funds. Unused balances may be carried over from year to year while the employee remains eligible under the plan. Balances may be used after termination of employment, at the sole discretion of the employer. Most HRAs are self-funded obligations of the employer, although HRAs may be established within a fully insured plan as well. While there is no requirement to do so, employers can also choose to credit interest to HRAs.

Health Savings Accounts (HSAs): An HSA is a tax-advantaged account created for the benefit of an individual covered under a high-deductible health plan. To be eligible, an individual must be covered by a "high-deductible" health plan (as defined by the HSA statute), and not be eligible for other general medical coverage. Contributions to the HSA can be made by the employer, the employee or both. Contributions are deductible if made by the employee, and are excludable from income and wages (for employment tax purposes) if made by an employer. Earnings grow tax-free and distributions for qualified medical expenses (defined under Section 213(d) of the Internal Revenue Code) are tax-free. Unused HSA funds can be carried over from year-to-year, are portable, and can be used into retirement.

Medical Savings Accounts (MSAs or Archer MSAs): An MSA is a tax-advantaged account created for the benefit of an individual in a high-deductible health plan who is either employed by a small employer (fewer than 50 employees), or is self-employed. Contributions are deductible if made by an eligible individual, and are excludable from income and wages (for employment tax purposes) if made by an employer. Contributions may be made either by the employee or the employer, but not both. Earnings grow tax-free and distributions for qualified medical expenses under Section 213(d) are tax-free. Rollover of unused funds is permitted from year to year, and funds are portable. Under the new Medicare legislation MSA balances may be rolled over into HSAs as of 1/1/04.

Network: A specific group of health care providers that have contracted with a health benefits company to provide services at a negotiated rate of reimbursement.

Out-of-Pocket: Copayments, deductibles or other fees that a member is required to pay outside of his or her health benefits plan.

Out-of-Pocket Maximum: A cap on the amount a health plan member is required to pay outside of his or her benefits plan for covered services.

Point-of-Service (POS): A health benefits plan that lets members access both participating and nonparticipating providers. Accessing care through a primary care physician (PCP) gives members in-network coverage levels while self referred care is covered at a lower, out-of-network benefit level.

Preventive Care: Programs or services that can help maintain good health, such as annual physical exams, or are meant to detect early signs of health problems or disease, such as mammograms and colon cancer screenings.

Preferred Provider Organization (PPO): A health benefits plan that lets members choose any provider without designating a primary care physician, but offers benefit incentives to members who choose "preferred" or in-network physicians or hospitals.

Retiree Reimbursement Account (RRA): Retiree Reimbursement Accounts are health reimbursement arrangements that can be used upon retirement to pay insurance premiums or obtain reimbursements for qualified health care expenses or both. RRAs are not comprehensive health insurance plans. Contributions to an RRA are made by the employer. Most plans operate for unlimited time periods and balances carry over from year to year during the life span of the member and/or his/her dependents. Funds in an RRA may be used to pay for unreimbursed medical expenses as well as health premiums, including Medicare Part B and Medigap policies. Reimbursements made with employer deposits from these accounts are not considered taxable income to the retiree.

Rollover Feature: The ability to carry forward, or "roll over," any remaining balance in the health fund to use for covered medical services in subsequent years.

Section 213(d): Section 213(d) of the Internal Revenue Code outlines what a qualified medical expense is for purposes of FSA, HRA, HSA and MSA spending. Expenditures from an FSA or HRA must be a qualified medical expense under this code section. HSA funds may be withdrawn for other purposes, but non-qualified withdrawals are subject to tax as income and may be subject to an additional tax penalty.

Self-Insured: Self-insured or self-funded plans are funded entirely by the employer. Because it is essentially the employer's plan, self-insured customers have greater flexibility to customize their plans. These plans can be self-administered, or the employer can choose to contract with an outside administrator such as Aetna for an administrative services arrangement.