Chapter 13 Group Health Insurance

Continuation of Coverage under COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985)

*This Act states employers with 20 or more employees must provide a health coverage continuation option to all covered employees and dependents for up to 18 months in the event of: -Termination of employee, unless it is for cause as defined by federal law -Reduction of hours for employee so they no longer qualify as a full-time employee -Coverage may continue up to 29 months if an employee qualifies for Social Security disability *Coverage may continue for dependents for up to 36 months for certain qualifying events: -Death of employee -Divorce or legal separation -Employee's entitlement to Medicare benefits -Loss of dependent status Employees must be notified of their right to continue coverage within 14 days of a qualifying event. The employee or the beneficiary must notify the employer within 60 days if they elect to continue coverage.

Civil Rights Act/ Pregnancy Discrimination Act (PDA)

-Applies to groups with 15 or more employees -Prohibits an employer from discriminating in its employment practices against a woman because of any pregnancy-related conditions

Age Discrimination in Employment Act (ADEA)

-Applies to groups with 20 or more employees -Forbids age discrimination against people who are age 40 or older -Provides that employers cannot deny older workers coverage under a group health plan

The insurer can require a minimum percentage of the group to enroll in the plan to guard against adverse selection. Minimum percentage requirements include:

-Contributory: plans require that both the employees and employer contribute to the premium, and 75% participation is required; -Noncontributory: plans require the employer to pay all premiums, and 100% participation is required.

Existing coverage must be renewed unless one of the following exists:

-Failure of the plan sponsor to pay premiums timely -Failure of the plan sponsor to comply with a material provision, such as maintaining a minimum required percentage of participation -The plan sponsor committed an act of fraud or intentional misrepresentation of a material fact regarding the terms of the plan -The employer is no longer a member of the association that sponsors a plan -There is no covered employee that lives or works in the service area of a network plan -The issuer of coverage ceases to offer coverage in a particular market

Advertising requirements include:

-Insurance companies responsibility for the accuracy of their personal testimonials -Statistical information that insurers may be included, as long as it is accurate, and the source is named -An agent must include the full name of the insurer when advertising a certain type of policy -Holding both the insurer and agent accountable if an agent misleads the public in an advertisement -That the public must be made aware of any control the insurer may have over a group if that group endorses a certain health product -When using comparison of like products, the comparisons must be complete and include rates, policies, benefits, and dividends -Prohibiting the use of the history of a very high or unique claim settlement by the agent or insurance company

HIPAA laws applying to groups of 2 or more:

-Limit the ability of a new employer plan to exclude coverage for preexisting conditions -Provides additional opportunities to enroll in a group health plan if other coverage is lost or certain life events occur -Prohibits discrimination against employees and their dependent family members based on any health factors they may have, including prior medical conditions, previous claims experience, and genetic information -HIPAA guarantees the continuation of health benefits to individuals who have 12-months creditable coverage from a group insurance plan immediately preceding a change of employment and who choose to participate in the new employer's group health plan. A certificate of creditable coverage, or proof of coverage, is required.

A health benefit plan will be renewable with respect to all eligible employees and dependents at the option of the small employer except in the following cases:

-Nonpayment of required premiums -Fraud or misrepresentation of the small employer in the application -Noncompliance with the carrier's plan provisions -An insufficient number of individuals under the plan to meet participation requirements -Insurer cannot cancel for frequency of claims

HIPAA guarantees that individuals who meet the eligibility requirements will have access to, and will be able to renew, an individual health plan. Eligibility requirements:

-Not covered under any other health insurance plan -No prior coverage terminated due to nonpayment -Have 18 months creditable coverage with the most recent coverage under an employer-sponsored plan, government plan, church plan or health benefit plan. -Proof of prior coverage or a certificate of creditable coverage is required. -Have no more than a 63-day gap in coverage

Although HIPAA does make it easier when switching jobs and protecting insurance coverage, it does not:

-Require that employers offer health coverage -Guarantee that any conditions you now have (or have had in the past) are covered by your new employer's health plan -Prohibit an insurer from imposing a preexisting condition exclusion period if you have been treated for a condition during the past 6 months

Multiple Employer Trusts (METs) Characteristics include:

-The sponsor or TPA develops the plan, sets the participation rules, and administers the plan -Due to the smaller size of the individual companies participating in the Trust, group health coverage is almost always fully insured and backed by an insurance company -The Trust gets the Master Policy

Acceptable place of delivery must be at least one of the following:

-The state where the policyowner's principal place of business is located -The state where the policyowner is incorporated -Any state where an employer or labor union that is a party to a trust is located -The state in which the greatest number of individuals are employed the policyowner may have a choice of place of delivery if the above locations differ, most insurers are hesitant to issue a group contract in any state unless a corporate official who can accept the contract is located in that state and the primary duties related to the administration of the contract are carried out in that state.

Events that will cause termination of continuing health coverage by COBRA are:

-Timely premium payments not being made -Employer ceases to maintain any group health plan -Employee becomes eligible for Medicare benefits; dependents may remain under COBRA -Employee becomes eligible for any other group health plan -Employee converts to an individual health plan

Preexisting Conditions

A condition for which the insured received medical advice, diagnosis, care, or treatment within the past 6 months. The plan may impose a preexisting condition exclusion for that condition. If it can be excluded from plan coverage, then there is a limit to the exclusion period that can be applied. HIPAA limits the condition exclusion period for most people to 12 months, or 18 months for a late enrollee. In order for preexisting conditions to be covered, there can be no more than a 63-day gap in continuous coverage.

In noncontributory group health plans, how many eligible employees must be covered by the plan? A. 100% B. At least 90% C. 75% D. At least 50%

A. 100%

The pregnancy discrimination act applies to groups with ______ or more employees. A. 15 B. 20 C. 50 D. 10

A. 15

A Small Employer is defined as any person, firm, corporation, partnership, or association that is actively engaged in business and has ______ employees or less. A. 50 B. 100 C. 20 D. 2

A. 50

The federal law that governs employer-sponsored employee retirement and welfare and benefit plans is: A. ERISA B. ADEA C. HIPAA D. COBRA

A. ERISA

Which of the following might be done to protect against adverse selection when underwriting group medical insurance? A. Require a minimum percentage of the group to enroll B. Include all dependents to make the group larger C. Enroll the business owner first D. Allow coverage to begin immediately

A. Require a minimum percentage of the group to enroll

Which statement is incorrect regarding COBRA? A. The employee or beneficiary must respond to the notification of his/her right to continue coverage within 90 days, if he/she wants to continue the coverage B. The employer may require the former employee or beneficiary to pay an amount equal to 102% of the premium C. Coverage continues for 29 months for individuals receiving Social Security disability D. Evidence of insurability is not required to continue coverage under COBRA

A. The employee or beneficiary must respond to the notification of his/her right to continue coverage within 90 days, if he/she wants to continue the coverage

Conversion Privilege

Allows an employee to convert the group coverage to an individual policy, without proof of insurability, upon termination of eligibility or termination of the group plan, providing the request is submitted to the insurer within 31 days after the qualifying event. The premiums will be higher and the coverage will not be as comprehensive as the group plan.

Eligible Employee

An employee who has a regular work week of at least 30 hours. This does not include an employee who works on a temporary or substitute basis. A waiting period for eligibility cannot exceed 90 days.

Business Group of One

An individual, sole proprietor, or a single full-time employee of an S Corporation, C Corporation, Limited Liability Company, or partnership who has carried on business activities for at least one year prior to the application date. Also, the business must have generated taxable income in one of the previous 2 years.

Small Employer

Any person, firm, corporation, partnership, or association that is actively engaged in business and has 50 employees or less.

HIPAA laws apply to groups of _____ or more. A. 100 B. 2 C. 5 D. 20

B. 2

The employee or the beneficiary must notify the employer within ______ days if they elect to continue coverage under COBRA. A. 90 B. 60 C. 30 D. 45

B. 60

Which of the following types of policies would a sports team purchase to obtain coverage for a season? A. Limited Accident B. Blanket C. AD&D D. Limited Sickness

B. Blanket

What benefit does COBRA provide to employees when an employee is terminated? A. Continuation of health insurance at the employee's expense for up to 36 months B. Continuation of health insurance at the employee's expense for up to 18 months C. Continuation of life and health insurance if an employee quits or is fired or laid-off D. Continuation of health insurance at the employer's expense for up to 29 months

B. Continuation of health insurance at the employee's expense for up to 18 months

The employees of a corporation must each pay a portion of the premium for their group insurance. This means they are members of a _____________. A.Noncontributory group plan B. Contributory group plan C. Nonparticipating plan D. Participating plan

B. Contributory group plan

All of the following are correct regarding employer group health insurance plan's eligibility requirements EXCEPT: A. Employees must be considered full-time and actively at work B. Employees can enroll at any time without restrictions C. Newly hired employees must usually satisfy a probationary period before they can enroll in the plan D. Employees must sign up during the enrollment period to avoid providing proof of insurability

B. Employees can enroll at any time without restrictions

Which action would not render a small employer's health benefit plan nonrenewable? A. Misrepresentation by the employer on the application B. Frequent claims C. Premiums are not paid D. The employer does not comply with the plan provisions

B. Frequent claims

What law provides the right of employees to continue health insurance coverage when changing employers by removing any restrictions against waiting periods and coverage in a new group health plan, as long as the employee has had creditable coverage? A. ERISA B. HIPAA C. COBRA D. PPACA

B. HIPAA

All of the following are true of the Coordination of Benefits Provision under a group plan, except: A. In a spousal situation, the insurer for the claim of an employee is primary, with the spouse's plan being secondary B. In the event children are covered under two group plans, the insurer for the parent who is the oldest is primary, and the other parent's plan is secondary C. Secondary carriers will only pay claims that are in excess of the primary carrier's responsibility D. It is a method of determining primary and secondary coverage when an insured is covered by more than one group policy

B. In the event children are covered under two group plans, the insurer for the parent who is the oldest is primary, and the other parent's plan is secondary

Which is not a qualifying event for the continuation of dependent coverage under the Consolidated Omnibus Budget Reconciliation Act? A. The employee's eligibility for Medicare benefits B. Termination of the employee for theft C. Divorce or legal separation D. Death of the employee

B. Termination of the employee for theft

All of the following are correct regarding regulatory jurisdiction over group insurance, except: A. The state in which the group contract is delivered generally has governing jurisdiction B. The policy only needs to provide benefits as required by the state in which the insurer is incorporated C. Unless the state of delivery has a significant relationship to the insurance transaction, other states may seek to exercise their regulatory authority D. The contract must conform to the laws of the state where the Master Policy is delivered even though certificates of insurance may be delivered in other states

B. The policy only needs to provide benefits as required by the state in which the insurer is incorporated

If a plan offers coverage to dependents, eligible dependents include all children, natural and adopted, married and unmarried, up to age ______. A. 18 B. 21 C. 26 D. 19

C. 26

How much time after a qualifying event has occurred and notice is given of their right to continue insurance does an employee or dependent have to elect continuation of the group health plan under COBRA? A. 18 months B. 90 days C. 60 days D. 36 months

C. 60 days

When an individual is covered by more than one health plan and is injured, what provision determines which plan is that person's primary coverage? A. Conversion Privilege B. Continuation of Coverage C. Coordination of Benefits D. Extension of Benefits

C. Coordination of Benefits

A small employer health benefit plan may be nonrenewed for all of the following reasons, except: A. Fraud or misrepresentation on the application B. Insufficient number of individuals under the plan to meet participation requirements C. High number of claims D. Nonpayment of required premiums

C. High number of claims

When an individual carries more accident and health insurance than he/she would need for a loss, it is called: A. Well covered B. Extra coverage C. Overinsurance D. Excess insurance

C. Overinsurance

Which of the following is correct pertaining to underwriting a group health policy? A. The average age of the group is not taken into consideration B. All participants are always eligible immediately C. Premiums are generally re-evaluated annually and may be based upon prior claims D. Group insurance cannot be based upon community experience

C. Premiums are generally re-evaluated annually and may be based upon prior claims

A Taft-Hartley Trust would be formed to provide health and welfare benefits to which of these employees? A. Disabled B. Managerial C. Union-represented D. Part-time

C. Union-represented

What can an employee do in order to obtain coverage when they have a preexisting condition and find that their job was just eliminated? A. Find an experienced agent and apply to insurance companies that specialize in insuring high risk applicants B. Apply for Medicaid benefits C. Utilize the group plan's conversion privilege D. Apply for Medicare benefits

C. Utilize the group plan's conversion privilege

An employee is considered full time and eligible for small employer medical expense insurance if he or she works a minimum of ________ hours per week. A. 25 B. 20 C. 40 D. 30

D. 30

The XYZ Company, which employs 800 workers, provides group disability insurance for the 400 employees who work 30 hours or more. If this group disability coverage is offered on a noncontributory basis, how many employees are participating? A. 600 B. 800 C. 300 D. 400

D. 400

HIPAA defines a pre-existing condition as one for which the insured received medical advice, diagnosis, care, or treatment within the past _____ months. A. 12 B. 18 C. 3 D. 6

D. 6

Which provision of group health plans is used to determine primary and secondary coverage when an insured is covered by more than one insurance plan? A. Primary Care Coverage B. Schedule of Benefits C. Extension of Benefits D. Coordination of Benefits

D. Coordination of Benefits

Which of the following is consistent with group health underwriting? A. Participants must submit to individual physical exams B. Smokers pay a higher rate C. Individual health histories are required D. Each member of the group is covered regardless of his or her health history

D. Each member of the group is covered regardless of his or her health history

All of the following groups are eligible for group rates, except: A. Labor unions B. Associations C. Employers D. Groups formed to reduce premiums

D. Groups formed to reduce premiums

A(n) _________________ is issued to the sponsor of the group, and employees receive an outline of coverage or other summary of benefits, which offers information about the plan's major benefits and principal exclusions. A. Individual policy B. Certificate of insurance C. Certificate of authority D. Master policy

D. Master policy

A replacing insurer must assume liability for paying ongoing existing claims under which law? A. COBRA B. HIPAA C. ERISA D. No-Loss, No-Gain

D. No-Loss, No-Gain

All of the following are a prohibited form of advertising, except: A. When an insurer excludes coverage for preexisting conditions, an advertisement of the policy that implies that the applicant's medical condition or history will not affect eligibility or payment B. An advertisement that uses the words 'only', 'just', 'merely', 'minimum', or similar words to imply a minimal imposition of restrictions and reductions C. Advertisements for Medicare Supplements containing information that create undo anxiety in the minds of the insureds D. Stating that 'We have been in business for over 50 years, for more information contact a local agent.'

D. Stating that 'We have been in business for over 50 years, for more information contact a local agent.'

Some examples of Worksite Insurance Plans products are

Dental Insurance Vision Insurance Accident-Disability Insurance Short-Term Disability Insurance Long-Term Disability Insurance Critical Illness Insurance

HIPAA (Health Insurance Portability and Accountability Act of 1996)

Designed to provide coverage for people with preexisting conditions. The Act allows for portability of coverage. Prior to this legislation, an employee with preexisting conditions might not have been able to obtain coverage when changing employers and provides protection for individuals enrolling in group or individual plans.

Worksite Plans have flexible payment funding options:

Employer only (uncommon) Employee only (most common) Cost shared program designed by the employer, where the employer contributes funds for an FSA plan Section 125 Cafeteria Plan option allows premiums to be paid with pretax income Worksite Insurance Plans can be used to complement, supplement, and/or enhance other benefit plans offered by the employer. Although a worksite plan may be offered under a Master Contract issued to the employer, the employer generally only acts as a conduit for premium payments via payroll deduction. These kinds of plans are rarely governed under ERISA.

Experience vs. Community Rating

Experience rating is determined by examining the history of claims a particular group experiences. The insurer uses past experience to predict future cost. Community rating determines premiums by examining a particular geographic region of all insureds in a group.

Events that terminate coverage

Group coverage may be terminated for an employee if employment is terminated, the employee no longer meets eligibility requirements, such as becoming part-time, or if the group contract is terminated.

Administrative Capability

Group health plans handle many of the administrative issues on behalf of the sponsor, such as updating enrollments and adding new members. Since many of these abilities can be handled online, the cost of administration in a group plan is less than that of an individual plan.

Guaranteed Coverage

HIPAA now allows a new employee to enroll immediately, without a waiting period, if a certificate of creditable coverage is presented. This law also applies to employees leaving the employer to become self-employed. They cannot be denied coverage.

Reinstatement for Military Personnel

If an employer discontinued health coverage during deployment, federal law requires an individual be allowed to resume plan membership without any type of waiting period as long as notice is given to the insurance company directly after military deployment

Coinsurance and Deductible Carryover

In the event that a group health plan changes insurers mid-year, employees must be fully credited with all expenses that have accumulated toward the annual deductible and/or out-of-pocket limit. This includes copayments for prescription medications in companion or stand-alone prescription drug plans.

Open Enrollment Period

Once the waiting period is over, the employee has 30 days to enroll. As long as the individual enrolls during the this time, coverage is guaranteed and evidence of insurability is not required. Individuals who do not enroll during this time period are considered late enrollees and must provide evidence of insurability unless they wait until the next period. An annual period will be offered each year to allow employees the chance to enroll in the plan at a later date.

Recipients of COBRA coverage for the continuation coverage:

Recipients of COBRA coverage will be required to pay premiums to the employer. Employers may require a former employee or their surviving spouse to pay up to 102% of the premium. The continuation coverage: -Requires no evidence of insurability and provides the same benefits as the group policy -Covers preexisting conditions if they are covered under the group policy -If the insured carried dependent coverage on the group, dependent coverage must be made available on the continuation policy

Labor Unions

The Taft-Hartley Act was an amendment to the National Labor Relations Act. Among the provisions of the Act, labor unions were permitted, under certain conditions, to establish primarily employer-funded trusts for the provision of health and welfare benefits to union members.

Persistency

This refers to the renewal quality of a plan and preventing it from lapsing due to nonpayment or being replaced. Insurance companies strive for a high persistency percentage.

probationary period

Used to help protect against preexisting conditions and immediate claims set by the group sponsor. This is a waiting period between when an individual joins the group and before they can enroll in the group plan.

Extension of Benefits

When a group health insurance policy is terminated or replaced, covered individuals who are being treated for a medical condition must continue to have their claims covered. When new group insurance replaces existing coverage within 60 days of the termination of the first policy, either the former insurer will continue paying the claim until it is finally resolved, or the new insurer will take over the claims' payments. Employees and their dependents who are on claim at the time of a policy cancellation/termination, or termination of employment, will continue to be covered by the former group health insurance plan until the claim has ended

Eligibility for coverage

an employee must be considered full time, working a minimum of 30 hours/week, and must be actively at work before they can enroll in the group plan. The employer maintains control over the plan, determines benefits, oversees the enrollment process, and makes premium payments. The employer cannot discriminate

In multi-state groups, cost is determined

by the state in which the majority of the employees are located and the policyholder's principal office location. The insurer's corporate office location is not a cost factor. Evidence of insurability is not required since an annual re-evaluation makes premium adjustments possible, based upon the group's claims experience. The average age, gender, and size of the group will also be a factor in the cost.

Group Blanket Insurance

covers a group of individuals whose membership changes frequently, such as students, passengers traveling on a common carrier, sports teams, volunteer firefighters, or other groups of people, while being exposed to a specific risk.

Multiple Employer Trusts (METs)

entities formed by unrelated businesses in the same or a related industrial classification. The trust is organized under a third-party administrator (TPA) or sponsor and allows for small to medium-sized employers to combine their employees into a single, larger group in order to obtain more favorable life and health insurance premiums and increased benefits.

Multi-Employer Welfare Associations (MEWAs)

generally formed by larger employers for the purpose of obtaining more favorable rates for life and health insurance. These groups primarily consist of employers who self-fund their employees' health insurance benefits. The employer assumes responsibility for providing payment of its own employees' claims through a TPA and do not have the safety net of the backing of an insurance company

Customer Groups

include depositor, creditor, and debtor groups

Dependent Eligibility

include the employee's spouse and all children from birth until age 26. Disabled children who are not capable of self-support may continue to be covered beyond age 26 as long as their disability is due to mental or physical handicap and they are chiefly dependent upon the employee for support and continuous maintenance. Proof of the child's incapacity and dependency must be furnished to the insurer within 31 days of the child's attainment of the limiting age.

Medicare carve-out

integrates an employer-sponsored plan with Medicare Parts A and B for retired employees. Medicare becomes the primary payor and the employer plan will provide benefits up to the limits of the group plan.

No Loss-No Gain for existing claims and pre-existing conditions

legislation requires that when group health insurance is being replaced, ongoing claims under the former policy must continue to be paid under the new policy, overriding any preexisting conditions exclusion and establishing mandatory risk transfer.

Nonduplication and Coordination of Benefits

method of determining primary and secondary coverage when an insured is covered by more than one group policy, and helps prevent overinsurance, which is having more than 100% of a claim paid. The plan that covers a person as an employee is that person's primary coverage, and coverage as a dependent under their spouse's group plan is secondary. In the event children are covered by more than one group plan, the "birthday rule" applies. Under the birthday rule, the plan covering the parent whose birthday occurs first in the calendar year will be the children's primary coverage. Secondary carriers will only pay claims that are not covered or not paid in full by the primary carrier, and only to the extent that the claim would be paid if the secondary carrier was in the primary position, such as deductibles, copayments, and/or coinsurance.

Associations

must have at the outset a minimum number of members, usually 100, and is organized for a purpose other than buying insurance. Ex: teacher associations, trade associations, professional associations, and alumni associations.

High-Risk pools

private, self-funded health insurance plans organized by a state to serve high-risk individuals who meet enrollment criteria and do not have access to group insurance. In most states, they are independent entities governed by their own boards and administrators, but in some states they function as part of the state's department of insurance.

Replacement of Group Policies

the agent should always provide a comparison of benefits between the present and the proposed plan of coverage. Carriers replacing hospital, medical, or surgical benefits, within 60 days of discontinuance, must cover all employees and dependents covered by or eligible for coverage under the previous policy as of the date of discontinuance.