Characteristics of Group Insurance
Conversion Privilege
A 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. The request to convert and payment of premium must be submitted to the insurer within the 31-day grace period after termination. It is not required to offer a conversion privilege, but most employers will offer this as long as the underlying insurance company has an individual plan. The premiums on the individual plan will be higher and the coverage will not be as comprehensive as the group plan.
Group Accidental Death and Dismemberment premiums are _______ by the company paying the premiums as a business expense.
Deductible
Which of the following is consistent with group health underwriting?
Each member of the group is covered regardless of his or her health history Group health insurance does not usually require individual underwriting, and the group is either accepted or rejected as a whole. If accepted, all of the group members are covered, regardless of their health history.
Dependent Eligibility
Eligible dependents 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. The decision of whether to offer this dependent coverage rests with the employer, must be offered to 100% of participating employees, and this optional coverage may be paid for by the employer, the employee, or both.
Worksite Plans have flexible payment funding options:
Employer only (uncommon) Employee only (most common) Cost shared program designed by the employer (when 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 compliment, 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.
Group health insurance is similar in nature to:
Group life insurance Employers are the most common sponsors of group insurance. The employer may contract with an insurance company, HMO, or PPO to provide for payment of direct health care expenses, or may hire a Third Party Administrator to manage claims and other aspects of a self-funded plan. These plans usually cover only nonoccupational (not work-related) injury or disease.
Medical and Dental Taxation
Group medical and dental expense premiums paid by the employer are tax deductible Self-employed persons may deduct up to 100% of the cost of health insurance for themselves and their dependents An employee's share of premiums paid for group health insurance are deductible only to the extent that all premiums, as well as unreimbursed medical expenses, exceed 7.5% of their AGI Benefits received under any medical expense and dental plan, regardless of the premium payer, are not taxable
When an employee is terminated, COBRA provides for the continuation of:
Health insurance at the employee's expense for up to 18 months In the event an employee is terminated for any reason other than gross misconduct, COBRA provides for continuation of the group health plan for the employee and his/her dependents for up to 18 months (29 months if a person is disabled at the time of a qualifying event). The employee can be required to pay up to 102% of the cost of the insurance. Life insurance is not covered under COBRA.
Natural Group
In order for a group to be eligible, it must be considered a __________ _________, which is a group that is formed for a purpose other than to obtain insurance.
Individual Health Insurance
Insured receives a policy Evidence of insurability required; a detailed underwriting process is based on the individual applicant Probationary period is set by the insurer and immediately applies after the policy is issued to limit coverage due to pre-existing conditions Individual can purchase the policy at any time Premiums payable solely by the individual Policy typically has lower limits and higher deductibles Does not usually offer the same coverages and benefits as group
Group Health Insurance
Insured/employee receives a certificate of insurance Underwriting is based on the characteristics of the group, not the individual Probationary period is set by the employer sponsor and starts when the employee is hired to determine enrollment eligibility Employee must wait for the probationary period to end and enroll during the enrollment period without insurability Premiums paid either entirely by the employer or by both employer and employee Policy typically has higher limits and lower out-of-pocket expenses Benefits are usually more comprehensive, dependent coverage usually offered, and employee has conversion rights
Experience vs. Community Rating
Insurers may use experience or community rating when determining cost. 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 the claims history of a particular geographic region of all insureds in a group.
Employer Group Underwriting Process
Most health insurance today is issued on a group basis. Group underwriting is different than individual underwriting; all eligible members of the group are covered regardless of physical condition, age, or gender. In essence, the group as a whole is viewed as an individual.
Recipients of COBRA continuation 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. Because the continuation coverage is the same group plan the employee or dependent was enrolled in, it: Requires no evidence of insurability and provides the same benefits as the group policy Covers preexisting conditions if covered under the group policy If the insured carried dependent coverage on the group, dependent coverage must be made available on the continuation policy.
Accidental Death and Dismemberment
Premiums paid by the employer are tax deductible Benefits received are not taxable
Long-Term Care Insurance Taxation
Premiums paid by the employer are tax deductible Benefits received from a qualified LTC policy are not taxable
Under COBRA, coverage for dependents of an employee may continue up to 36 months for any of the following events, except:
Termination of the Employee
Which is not a qualifying event for the continuation of dependent coverage under the Consolidated Omnibus Budget Reconciliation Act?
Termination of the employee for theft
A group insurance contract is between:
The group sponsor and the insurance company. The group sponsor receives a Master Policy, while individual employees receive a Certificate of Insurance and a Summary of Benefits. All employees have the same coverage. The group sponsor applies for coverage, provides information for underwriting, maintains the policy, and makes premium payments.
Premium Contributions
The insurer can require a minimum percentage of the group to enroll in the plan to guard against only the unhealthy or high risk employees enrolling, known as adverse selection. Minimum percentage requirements are based on who pays the premium. Contributory plans require both the employee and employer to pay a portion of the premium. Contributory plans require a minimum of 75% participation of the eligible employees. Noncontributory plan premiums are paid entirely by the employer and require 100% participation of the eligible employees.
If a child is covered under more than one group health insurance plan how is it determined which carrier is primary?
The plan covering the parent whose birthday occurs first in the calendar year will be the children's primary coverage In the event children are covered by more than one group plan, the 'birthday rule' which says the plan covering the parent whose birthday occurs first in the calendar year will be the children's primary coverage.
Open Enrollment Period
The underwriter's greatest concern when underwriting a group plan is adverse selection. To help protect against pre-existing conditions and immediate claims, group plans may have a probationary period set by the group sponsor. This is a waiting period between when an individual joins the group before they can enroll in the group plan. Once the waiting period is over, the employee typically has 30 days to enroll. As long as the individual enrolls during the open enrollment, coverage is guaranteed and evidence of insurability is not required. Individuals who do not enroll during the initial enrollment period are considered late enrollees and must provide evidence of insurability unless they wait until the next open enrollment period. An annual enrollment period will be offered each year to allow employees the chance to enroll in the plan at a later date. An employee can make changes to the group plan outside of an enrollment period only if they have a change in status, such as going from part-time to full-time, getting married, or adding/dropping dependents.
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 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 (or dependent) is totally disabled at the time of a qualifying event Coverage may continue for dependents up to 36 months for certain qualifying events: Death of employee Divorce or legal separation Employee's entitlement to Medicare benefits A child ages out of the group plan as a dependent at age 26 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.
Nonduplication and Coordination of Benefits
This is a method of determining primary and secondary coverage when an insured is covered by more than one group policy, and to help prevent Nonduplication (overinsurance)—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 are 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.
Events that will cause termination of continuing health coverage by COBRA are:
Timely premium payments are not 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 Notification of an individual's right to continue coverage under COBRA is required at two times. The first time is when a group plan commences or is amended to include the continuation of coverage provision. The second time that an insured must be notified under COBRA is when a qualifying event occurs.
Eligibility for Coverage
To be eligible, an employee must meet the employer's eligibility requirements to be considered full time (such as 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 when determining eligibility and employee benefits.
Employer-Sponsored Worksite Plans
Voluntary benefit plans offered by insurance companies and premiums are withheld as payroll deductions by the employer. These plans allow employees to pick and choose among various types of insurance coverages to supplement other employer-sponsored benefits. The plans are issued as individual coverage and are portable (employees can keep them following termination of employment by paying premiums directly to the insurer). 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