Chapter 1 - Health & Accident Insurance

Nonparticipating plan

Insurance under which the insured is not entitled to share in the divisible surplus of the company.

What various factors enter into premium calculations for health insurance?

Interest, expense, type of benefits, and morbidity. Others: claims experience, age, sex, and occupation of the insured

Business Overhead Expense

Is a form of disability income coverage designed to pay necessary business overhead expenses such as rent, should the insured business owner become disabled.

Health Insurance

Is a general way of describing insurance against loss through sickness or accidental bodily injury.

Small employers that employ less than 20 employees for each working day across each of 20 or more calendar weeks in the current year or preceding year can use

Medicare as a primary payer for claims

Employers that employ 20 or more employees for each working day across each of 20 or more calendar weeks in the current year or preceding year use

Medicare as a secondary payer for claims

Medicare supplement policies and long-term care policies are the most common type of ______ policies.

Noncancellable Policies

ACA (Affordable Care Act)

Obamacare. Designed to increase number of people with health insurance by creating a marketplace. Covered pre-existing conditions. Does NOT apply to ALL health insurance policies

Negotiated Trusteeship

One or more labor unions or associations forming a trust fund for a MET. Synonymous with Taft-Hartley Trust.

Medical Expense insurance

Pays benefits for nonsurgical doctors' fees commonly rendered in a hospital; sometimes pays for home and office calls.

The employer or the association is the _____ and is responsible for premium payments for Group Health Insurance

Policyowner

Key Person Disability Insurance

Protection of a business against financial loss caused by the death or disablement of a vital number of the company, usually individuals possessing special managerial or technical skill or expertise. Pays a monthly benefit for additional help or outside services when an essential person is disabled. Premium pay is not tax deductible, benefits are received by the business tax-free

Limited Risk Policies

Provides coverage for specific kinds of accidents or illnesses, such as injuries received as a result of travel accidents or medical expenses stemming from a specified disease.

Taxation of cafeteria plans are regulated by ___________

Section 125 of the Internal Revenue Code

Reserve-reduction Arrangements

Similar to premium-delay arrangements, the employer is allowed to keep that portion of the premium that is usually kept in the claim reserve fund. This arrangement is usually allowed only after the policy's first year when a claim history has begun to be established.

Probationary Period

Specified number of days after an insurance policy's issue date during which coverage is not afforded for sickness. Standard practice for group coverages.

Premium-delay Arrangements

These arrangements allow employers to delay paying the premium for up to 60 or 90 days past the due date, effectively lengthening the policy's grace period. This allows the employer to keep funds longer, but when the policy finally does terminate the employer is responsible for all past due premiums.

Accidental Means is the

Unforeseen, unexpected, unintended cause of an accident. Requirement of an accident-based policy that can cause the mishap must be accidental for any claim to be payable.

A Buy-Out plan usually contains....

a provision allowing for a lump-sum payment of the benefit, thereby facilitating the buyout of the disabled's interest. Policy is legally binding and proceeds are normally received tax-free.

interim coverage

a short-term policy purchased on an interim basis typically when in between jobs or waiting for a new policy to start.

Shared funding arrangement

allows the employer to self-fund health care expenses up to a certain limit

Minimum premium arrangement

allows the employer to self-insure the normal and expected claims up to a given amount and the insurer funds only the excess amounts

Late enrollee

an individual who enrolls in a plan at a time other than the earliest possible enrollment date or a special enrollment date

Blanket Health Policies

are issued to cover a group who may be exposed to the same risks, but the composition of the group (the individuals within the group) are constantly changing. A blanket health plan may be issued to an airline or a bus company to cover its passengers or to a school to cover its students. No certificates of coverage are issued in a blanket health plan, as compared to group insurance.

Cafeteria Plans (Section 125 Plan)

benefit arrangements in which employees can pick and choose from a menu of benefits, tailoring the benefits package to their specific needs.

An actress who insures her legs for $1 million or a pilot test-flying an experimental airplane who obtains a policy covering his life while flying that particular plane are

both purchasing special risk policies.

Examples of cost sharing

deductible, copayment, coinsurance

The conversion privilege is available to terminated employees, who qualifies?

employee who is laid-off or who leaves a job voluntarily, but not those who are fired "for cause"

Group health Plans are available to:

employers, trade & professional associations, labor unions, credit unions, and other organizations. Can be extended to individuals in the group through the master contract.

If the insured becomes disabled, the policy provides for monthly benefits ____________

equal to the monthly loan payments due.

State laws specify the minimum number of persons to be covered under a ________ policy.

group

Credit Policies are designed to...

help the insured pay off a loan in the event they are disabled due to an accident or sickness or in the event they die.

Group health plans typically have ______ benefit maximums and ________ deductibles

higher, lower

Participating plan

insurance is a plan under which the policy owner receives shares (commonly called dividends) of the divisible surplus of the company

Contributory

is a group insurance plan issued to an employer under which both the employer and employees contribute to the cost of the plan. Generally, 75% of the eligible employees must be insured in most states.

Waiting period

is a period of time (often 12 months) beginning with your effective date during which your health insurance plan does not provide benefits for pre-existing conditions. This period may be reduced or waived based on any prior health care coverage you had before applying for your new health insurance plan.

Noncontributory

is an employee benefit plan under which the employer bears the full cost of the employees' benefits; in most states, the plan must insure 100% of eligible employees.

Preexisting conditions

is an illness or medical condition that existed before a policy's effective date; usually excluded from coverage, through the policy's standard provisions or by waiver.

Capital Sum

is another form of payment payable under an AD&D policy and is the amount payable for the accidental loss of sight or accidental dismemberment, or the capital sum. It is a specified amount, usually expressed as a percentage of the principal sum, which varies according to the severity of the injury. For example, the benefit for the loss of one foot or one hand is typically 50% of the principal sum. The most extreme losses (such as both feet or sight in both eyes) generally qualify for payment of the full benefit, which is 100% of the principal sum.

Coordination of benefits

is designed to prevent duplication of group insurance benefits.

Accidental Death and Dismemberment (AD&D)

is the purest form of accident insurance. Provides the insured with a lump-sum benefit amount in the event of accidental health or dismemberment under accidental circumstances

Self-Funding Arrangement

large employers may elect to fully self-fund, or may self-fund a plan, but contract for administrative services only

Health policies do not offer any sort of ________ option as one would find with a 10 year pay or paid up at 65 life policy.

limited payment option

What does out of pocket limit not include?

monthly premiums or money spent for services the plan does not cover

Enrollment Card

must be completed and signed by a new employee during the open enrollment period to enroll in group insurance.

Except for the _________ type of policy, health insurance premium rates are subject to periodic increases.

noncancelable

Credit policies typically cannot exceed the amount of the loan as that is the _________

only amount the credit has insurable interest in.

Enrollment Period

period of time during which all members may sign up for a group plan. This is a period typically happens once a year for a set number of days

Administration Services Only (ASO) contract

plan stipulates that the employer purchases specific administrative services from an insurer or from an independent third party. These services include administration claims but also prescription drug cards, COBRA administration and employee communications

Accidental Results

policies that use the accidental bodily injury provision (sometimes called the results provision) required that the result of the injury has to be unexpected and accidental. This is far less restrictive than the accidental means provision.

Creditable Coverage

previous coverage under another insurance plan when there has not been a break in coverage of 63 days. An individual's waiting period for pre-existing conditions is reduced or eliminated altogether when he or she has creditable coverage.

The goal of Probationary Period provision is to ________

prohibit people from buying insurance only when they need it and immediately filing a claim, otherwise known as an adverse selection.

Business Continuation Plan

provide a way to help a business continue in the event an owner or key employee dies, or in the event of a disabling sickness or injury

Group Health Insurance

provides coverage for a group of persons, usually employees of a company, under one master contract. Does not usually need underwriting or evidence of insurability.

The HIPAA Privacy Rule

provides federal protections for individually identifiable health information held by covered entities and their business associates and gives patients rights with respect to that information.

Health Insurance Portability and Accountability Act (HIPAA)

provides the ability to transfer and continue health insurance coverage for millions of US workers and their families when they change or lose job.

Guaranteed Renewable Policy

specify that the policy MUST be renewed (usually until the insured reaches a specified age). The insurer still have the option to increase premiums on the anniversary date.

COBRA benefits extend to

spouses or other dependents in case of divorce or the death of the employee. Children who are born to, adopted, or placed for adoption with the covered employee while he or she is on COBRA coverage are also entitled to coverage.

Nonrenewable policies are for ________ lengths of a year or less and are considered ___________

stablished policy lengths & temporary

The Principal Sum under an AD&D policy

the amount payable as a death benefit. It is the amount of insurance purchased. The principal sum represents the maximum amount the policy will pay.

Probationary or waiting period

the period of time during which an employee is ineligible for group health insurance coverage

Subrogation

the right for an insurer to pursue a third party that caused an insurance loss to the insured

Cost Sharing is a general term for ________

the share of costs for services that a plan or health insurance covers that you must pay out of your pocket.

Availability of coverage

this provision authorizes insurers to issue group health insurance policies to small employers (2-50 employees) to cover their employees

If the insured dies, the policy will pay a lump sum ________

to the creditor to pay off the loan.

Loss of coverage

usually counts as a qualifying event that triggers a special enrollment period. If someone loses their plan, they will have a chance to enroll in a new plan, either on or off the marketplace exchange.

Health insurance policies are paid for on a _________ basis.

year by year

Franchise Health Plans (wholesale plans)

• Provide health insurance coverage to members of an association or professional society • Individual policies are issued to individual members and the association or society simply serves as the sponsor for the plan. Premium rates are usually discounted for franchise plans

501(c)(9) Trust Controlled by:

1. its membership 2. an independent trustee such as a bank 3. some other fiduciary on behalf of the members

Nonoccupational coverage

The coverage provided by a Disability Income policy that does not provide benefits for losses occurring as the result of the insured's employment

Out-of-pocket maximum/limit

The most you have to pay for covered services in a plan year. After they spend this amount on deductibles, copayments, and coinsurance, their health plan pays 100% of the costs of covered benefits.

The Probationary period typically does not apply to ________

accidents.

Cancellable Policies

allows the insurer to cancel or terminate the policy at any time. This type of renewability is prohibited in most states.

Retrospective premium arrangement

the insurer agrees to collect a provisional premium but may collect additional premium or make a premium refund at the end of the year based on actual losses

Five Principal Renewability Classifications

- Cancellable - Optionally Renewable - Conditionally renewable - Guaranteed renewable - Noncancellable

Characteristics of group health insurance

- Eligibility standards for groups and individuals within the groups - method of premium payments - lower cost - predetermined benefits - underwriting practices - conversion privileges - preexisting conditions provisions

General Groups of Underwriting Considerations

- Reason for groups existence - stability of group - persistency of group - method of determining benefits - how eligbility is determined - source of premium payments, whether contributory or noncontributory - prior claims experience of the group - size and composition - industry or business in which the group is associated

Benefits of Group Insurance

- The plan contributes to employee morale and productivity. - The plan enables the employer to provide a needed benefit that employees would otherwise have to pay for with personal after-tax dollars (this helps hold down demands for wage increases). - The plan places the employer in a competitive position for hiring and retaining employees. - The employer can obtain a tax deduction for the cost of contributing to the plan. - The plan enhances the employer's image in both public and employee relations.

Events that may terminate insurance plan:

- Your insurer leaves the marketplace You leave your job (group health) - Divorce or legal separation - Death - A Special Enrollment Period (SEP) begins sixty days before your plan's termination date, so it's possible to get a new ACA compliant plan without gap in coverage.

Premium rating for group health plans factor....

- average age of group, the higher the average age the higher the premiums - waiting period for disability benefits; the shorter the waiting period the higher the premiums - disability benefits indemnity period; the higher the indemnity period the higher the premiums - occupation; the more hazardous the employee's occupation the higher the premiums

Common requirements for group life insurance

- minimum of 1 to 3 months of employment service - full-time employment status - working people over age 65 must be offered the same health benefits offered to younger employees

Overhead expenses include things such as....

- rent or mortgage payments - utilities - telephones - leased equipment - employees' salaries Does NOT include any compensation for the disabled owner.

HIPAA requirements

- requires employers with 20 or more employees to allow former employees to continue benefits under the employer's group health insurance. It states that group health coverage must not use health status, medical condition and history, genetic information, disability and claims experience as criteria for coverage. It also limits the ability of a new employer plan to exclude coverage for preexisting conditions - imposes requirements on health care providers with respect to disclosure of protected health information. Notice of information practices must be given to a policyholder at least every three years - When an insured individual leaves an employer and immediately begins working for a new company that offers group health insurance, the individual is eligible for coverage upon hire - states that a group health policy renewal can be denied when participation or contribution rules have been violated - provides that the 10% excise tax for early withdrawal from IRAs will not apply to the extent a withdrawal is used for medical expenses that exceed 10% of the individual's adjusted gross income as of 2019. - states that multiple-employer plans and multiple-employer welfare arrangements must be guaranteed renewable unless for fraud or intentional misrepresentation - rules apply to all types of group health plans EXCEPT disability income plans

optionally renewable policy

- the insurer has the right to terminate a policy on any anniversary date If insurer decides to renew policy, they also have the option to increase the premiums on the anniversary date.

COBRA coverage may be extended beyond _______ months in certain circumstances.

18 months

All companies that have averaged at least _____ full time employees over the past calendar year must comply with COBRA regulations.

20 full time

An employee must make application for a converted policy within a given period of time, usually _______ days depending on the state.

31 days

Under HIPAA, are defined as health issues that existed, were treated, or diagnosed within _____

6 months prior to employment. An enrollees pre-existing conditions for a health benefit plan may be excluded for up to 12 months (18 for late enrollees).

disability income insurance

A form of health insurance that provides periodic payments to replace income when the insured is unable to work as a result of illness, injury, or disease-not as a result of a work-related accident or condition

conditionally renewable policy

A policy that gives the insurer the option to cancel coverage only if certain stated conditions are met. If the insurer decided to renew (not cancel) policy, they also have the option to increase the premiums on the anniversary date.

Health Savings Account

A tax-advantaged personal savings account, set up to be used exclusively for medical expenses; must be paired with a high-deductible health insurance policy

Assignment of benefits to the health provider makes ______ and ____ insurance claim handling more convenient to the insured.

Accident & Health

Health Insurance can also be called...

Accident and health, accident and sickness, sickness and accident, or disability insurance. Applies to many different types of insurance, not just the medical insurance that pays for doctors or hospital visits.

Disability Buy-Sell plans

Agreements between business co-owners that provides that shares owned by any one of them who becomes disabled shall be sold to and purchased by the other co-owners or by the business using funds from disability income insurance.

Conversion Privilege

Allows the policy owner, before an original insurance policy expires, to elect to have a new policy issued that will continue the insurance coverage. Conversion may be effected at attained age (premiums based on the age attained at time of conversion) or at original age (premiums based on age at time of original issue).

Special Risk policy

Covers unusual hazards normally not covered under ordinary accident and health insurance

Renewability Provisions

Define the rights of the insurer to cancel the policy at different points during the life of the policy.

Patient Protection and Affordable Care Act

Designed in part to increase access to care, contains provisions addressing health promotion and prevention of disease and disability

Consolidated Omnibus Budget Reconciliation Act (COBRA)

Federal legislation which extends group health coverage to terminated employees and their families at the individual expense, for up to 18 months.

501(c)(9) Trust

Funding vehicle for the employee benefits that are offered to members. Contributions made to the trust are tax-deductible as if they were paid to an insurer as a premium. Must provide eligible benefits only and its sole purpose must be to provide benefits to members or their beneficiaries.