ch 18 - group health insurance

Termination of group coverage

- Employer terminates the term - Employer didn't pay premium - Employee quits, is laid off, reduction in hours - Dependents divorce, employee dies, employee terminated, dependent reaches age 26

General eligibility rule

a group must have been formed for a purpose other than obtaining insurance for its members. "natural group"

Multiple employer trust (MET)

a group of small employers in the same industry who either form together in order to purchase group insurance as one entity or self fund plan

Experience rating

a method of establishing the premium on the groups previous claims experience. The larger and more homogenous (similar) the group, the closer it comes to reflecting standard mortality and morbidity rates

Composition of the group

age, sex, and income of the members of the group will affect the potential benefits that will be paid

Qualified beneficiary

any individual covered under an employer maintained group health plan on the day before a qualifying event. Usually this includes covered employees, spouse of covered employees, and dependent children of covered employees, including children born or adopted during the first 18 months of a benefit continuation period

Coordination of benefits

applies when a person is covered by two group policies. One plan is primary and pays first, the other plan is secondary and pays only if loss is greater than primary coverage. The primary plan is the employee plan and the secondary plan is the spouse's employer plan.

OBRA

continue coverage to 29 months for qualified beneficiaries disabled at the time of termination. Pay up to 150% of the group premium during the 11 month disability extension

Contributory/non contributory

contributory - employees pay part or all of the cost, minimum of 75% participation. Non-contributory - employer pays entire cost 100% participation

Group contract

cover many people under 1 contract. Reduces the plan cost and lowers premiums. Premiums cost less than individual coverage. The two parties in a group contract are the insurer and the sponsoring group The policyholder/owner is the sponsoring group and it controls the master policy

Dependent eligibility

coverage for employees spouse or child up to age 26. Includes step children and adopted children and it applies to whether or not the child is married or a student. Many states require that children older than age 26 be covered by a plan if they are mentally or physically disabled and unable to support themselves

Qualifying events

death of qualified employee, termination, reduction of work hours, medicare, divorce, bankruptcy of the employer, termination of a child's dependent status

Employer group plans

employer may sponsor a group insurance plan for its employees

Employee eligibility

employers cannot discriminate with group benefits. All employees can enroll regardless of their age, handicaps, or sex. Pregnancy and maternity must be treated like any other covered condition. Basic employment criteria like full time and actively at work (not on disability or other inactive status) Employers may also exclude union workers as a class, since their compensation and benefits are covered by a collective bargaining agreement

ERISA

enacted to protect the interests of participants in employee benefit plans as well as the interests of the participants beneficiaries. Plan deals with qualified pensions and also group insurance. Requires that certain information be able to plan participants, beneficiaries, and the dept of labor

Group life plan characteristics

enrollment eligibility, low cost coverage, no proof of insurability to enroll, and convertibility options when exiting the plan

COBRA

federal law that requires employers with 20 or more employees to allow former employees and their dependents to continue the benefits provided by the employer's group health insurance plan. Coverage may be continued for 18 to 36 months Employees or dependents must pay the entire premium for the coverage COBRA specifies rates, coverage, qualifying events, qualifying beneficiaries, notification procedures, and time of payment requirements for the continued insurance

Marketing considerations

group policies are regulated in state where employer has their home office.

Flow of members through the group

individuals joining and leaving the group on a regular basis reduces the risk of adverse selection

Late enrollees

individuals who want to enroll for coverage at any other time other than the initial eligibility period or an annual open period may be required to provide evidence of insurability

Administrative capability

large employers can lower group premium costs by helping administer the plan and use the insurer for stop loss coverage and/or claims

Size of the group

larger groups can more likely avoid adverse selection. Small group = 2 to 50 lives, large group = 51 or more lives

Group credit disability insurance

lender is paid, amount of insurance no greater than the debt

HIPAA

mandated benefits for small employers, self-employed, pregnant women, mentally ill. Includes most health coverage. Small employers cannot be denied Guaranteed 48 hour hospital stay for new mothers after regular delivery and 96 hours for C-section

Duration of coverage

maximum period of coverage continuation for termination of employment is 18 months. For all other qualifying events, max period of coverage continuation is 36 months Coverage must be the same, premium must be the same, terminated individual may also have to pay an additional amount each month not exceeding 2% of the premium to cover the employers admin expenses Continuation applies only to health benefits under COBRA

Notification statements

must be provided when a plan becomes subject to COBRA, an employee is covered by a plan subject to COBRA, and a qualifying event occurs. Must provide statement within 14 days. Option to elect continuation expires in 60 days after receiving notification

Advertising

must not be misleading or obscure and clearly outline all policy exclusions or limitations on coverage as well as policy benefits.

Probationary period

new employees must wait before they can enroll in an emplyers group health insurance plan. Period typically range from 1-6 months

Multiple employment welfare arrangements (MEWAs)

provide health and welfare benefits to two or more unrelated employers. The purpose is to provide affordable health coverage to small employers

Certificate of coverage

provides evidence of coverage, who is covered by the plan, and summarizes the benefits. The individual members covered by the group plan are not parties to the group insurance contract and have no authority to make decisions regarding the plan

No loss, no gain

requires benefits for ongoing (disability) claims that started under an old plan to continue without imposing the new plan's eligibility requirements

Extension of benefits

requires that benefits paid by an in force policy continue after the policy is terminated. Some states require an extension of benefits to a totally disabled member at the time of policy discontinuance

Community rating

sets premium costs by using the same rate structure for all subscribers to a medical expense plan, no matter what their past loss experience has been

Group underwriting considerations

size of the group composition of the group flow of members thru group plan design contributory/noncontributory persistency admin capability

Labor unions

sponsored under a Taft Hartley trust, may sponsor a group plan for its members or two or more labor unions may join together to provide group insurance for their collective members

Association group plans

trade, professional, or other type of association may sponsor a group plan for its members

Eligibility/enrollment period

typically 30-31 days. When new employees can enroll in group health insurance plan

"birthday rule"

used for determining the primary plan if a married couple has children. The parent whose birthday comes first in the calendar year (not the oldest) will be primary.

Open enrollment

usually once a year, no medical questions. Individuals who declined coverage during the initial eligibility period can enroll in the health plan during this period without providing evidence of insurability

Plan design

what will be covered, and for how much

Persistency

when employers keep their group coverage with the same insurer year after year, the insurer's expenses are reduced

Coinsurance and deductible carry over

when group health plans are replaced by another plan, the new insurers will allow coinsurance and deductibles paid under the old plan to count toward the new plans requirements. This eases the transition to the new plan for covered employees