Life and Health Ch 13 Group Health Insurance

Group premium costs are determined by

-Type -Size -Average age -Geographic location of the principal office -The group's claims experience -Occupational hazard -Length of the employer waiting period (Ex. 30, 60, 90 days) -Maximum indemnity period (Ex. 1, 2, 3, years)

Characteristics of Group Insurance

1. coverage of many persons under one contract 2. usually costs less than comparable insurance purchased individually 3. individual evidence of insurability is usually not required 4. experience rating is used

In noncontributory group health plans, how many eligible employees must be covered by the plan?

100%

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.

30

Payment of the first premium and an application must be submitted to an insurer for individual coverage within how many days to convert group coverage to an individual policy not requiring proof of insurability?

31 days

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?

400 *Noncontributory plans requires 100% participation by eligible employees. In this example, only 400 employees qualify as eligible.

A Small Employer is defined as any person, firm, corporation, partnership, or association that is actively engaged in business and has ______ employees or less.

50

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?

60 days *An election to continue the group health plan under the provisions of COBRA must usually be made within 60 days of the qualifying event. Only in the event that proper notice was not given may the election period be extended.

Renewability of Coverage

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

Extension of Benefits

A provision of some health insurance plans allowing for coverage to be extended beyond a scheduled termination date. The extended coverage is made available only when the member is disabled or hospitalized as of the intended termination date, and continues only until the patient leaves the hospital or returns to work.

501 c 9 TRUST

Also known as a Voluntary Employee Beneficiary Association, is used by self-insured groups to fund their group health and other employee benefits plans. Contributions to the trust are deducted immediately, from federal income tax and appreciations of trust assets are not taxable. The cost of establishing the plan is costly and the least favorable benefit of the plan.

Eligible Employee

An employee who has a regular work week (e.g. 30 hours). It does not include an employee who works on a temporary or substitute basis. Eligible employees are those who have worked for the employer 90 consecutive 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. Small employers offering group health must offer the plan to all eligible employees. If dependent coverage is offered then the coverage must be offered to all employees with dependents.

Federal law requiring employers with 20 or more employees to provide continuation of the group plan to all employees and dependents losing coverage due to a qualifying event

COBRA

What benefit does COBRA provide to employees when an employee is terminated?

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.

The employees of a corporation must each pay a portion of the premium for their group insurance. This means they are members of a _____________.

Contributory group plan *In contributory plans (those in which employees pay a portion of the premium), employers are generally required to maintain a minimum of 75% participation among eligible employees.

Allows an employee to exchange a group policy for an individual policy without insurability within 31 days of termination of eligibility for the group plan

Conversion Privilege

When a group member terminates employment, he or she has 31 days to purchase an individual policy without proof of insurability. This is referred to as the:

Conversion Privilege *It is the Conversion Privilege, which affords a group member the right to purchase individual coverage without proof of insurability. The 31-day period also applies when COBRA continuation is exhausted.

Customer Groups

Customer based groups include depositor groups, creditor and debtor groups.

Examples of Worksite Insurance Plans products

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

The federal law that governs employer-sponsored employee retirement and welfare and benefit plans is:

ERISA *The Employee Retirement Income Security Act (ERISA) of 1974 is the federal law that governs employer-sponsored employee retirement and welfare and benefit plans. Among other things, ERISA provides protections for participants and beneficiaries in employee benefit plans (participant rights), including providing access to plan information.

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

Employees can enroll at any time without restrictions *Employees can only enroll during the open enrollment period and must follow any and all eligibility requirements in order to obtain coverage without having to prove insurability. Otherwise they may have to prove insurability if they attempt to enroll later.

Worksite Plans 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

Essential (Basic) and Standard Benefit Plans

Every small employer carrier shall actively offer at least two health benefit plans. One must be an Essential (Basic) Health plan and the second a Standard Health plan; both must offer maternity benefits as directed by legislation. The coverage provided under either plan is published by the state. Each plan offers an indemnity version, an HMO version and a PPO version.

HIPPA Renewability

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, as long as the provision is permitted by state or federal law 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

If a group policy is terminated or replaced, individuals being treated for a medical condition must continue to have their claims covered by either the former insurer or the new insurer

Extension of Benefits

Under HIPAA, coverage may be nonrenewed for all of the following reasons, except: A Participation requirements not fulfilled B Noncompliance with plan provisions C Nonpayment of premium D Frequency of claims

Frequency of claims

Blanket Insurance

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.

Events that Terminate Coverage

Group coverage may be terminated for an employee if employment is terminated, the employee no longer meets eligibility requirements (becomes 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.

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

Groups formed to reduce premiums *A group cannot be formed for the express purpose of obtaining insurance. Employers, labor unions, and associations are eligible plan sponsors.

Federal law that allows for portability of coverage for persons with preexisting conditions

HIPAA

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?

HIPAA *When covered under a group health plan, the Health Insurance Portability and Accountability Act (HIPAA) provides an employee and his/her dependents with the right to enrollment in a new employer's group health plan at the earliest possible moment when an employee begins new employment within 63 days of leaving the former group plan.

HIPPA 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.

Risk Pools

High-risk pools are 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.

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 your military deployment.

Coinsurance and Deductible Carryover

In the event that a group health plan changes insurers in 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.

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 you lose other coverage or experience certain life events 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. This would eliminate any pre-existing condition period if requirement of credited coverage is met.

Multi-Employer Welfare Associations (MEWAs)

MEWAs are generally formed by larger employers for the purpose of obtaining more favorable rates for life and health insurance. These groups can be created as fully insured, self-funded or partially self-funded benefit programs as an alternative mechanism to traditional health insurance for small employers. In order for the Department of Insurance to grant a MEWA a Certificate of Compliance, the MEWA must adhere to standards set forth in the code that are consistent with the provisions of ERISA.

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.

Master policy *A master policy is issued to the group sponsor while a certificate of insurance or policy summary is issued to the employees.

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. A group plan may not discriminate in favor of executives or other highly compensated persons. In essence, the group as a whole is viewed as an individual. The underwriter will take careful measures to protect against adverse selection by appropriately rating each group as a whole.

Group health plans usually cover: A Both occupational and nonoccupational injury or disease B Nonoccupational injury or disease C Neither occupational nor nonoccupational injury disease D Occupational injury or disease

Nonoccupational injury or disease *Group health plans usually only cover nonoccupational injury and disease. Workers' Compensation Insurance is designed to cover job-related injury or disease.

HPPA Individual Plans and Eligibility

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

Civil Rights Act/ Pregnancy Discrimination Act (PDA)

Pregnancy discrimination involves treating a woman less favorably on the basis of pregnancy, childbirth, or related medical conditions. The PDA: Applies to groups with 15 or more employees An employer cannot discriminate in its employment practices against a woman because of any pregnancy-related conditions

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

Premiums are generally re-evaluated annually and may be based upon prior claims *Typically, large group policies are reevaluated annually on the basis of claims. This is known as 'experience rated,' and the prior year's claims will be a significant factor in establishing the next year's premiums, and could result in non-renewal, if permitted. Smaller groups may be 'community rated,' and evaluated in comparison to similar-sized groups. In all cases, the average age of the group is a premium consideration.

Rating Factor

Rating factors shall produce premiums for identical groups that differ only by the amounts attributable to the plan design and not by the nature of the groups themselves.

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

Require a minimum percentage of the group to enroll *By requiring a minimum percentage of the group to enroll, the risk is spread by possibly getting those of better health to participate along with those of poorer health.

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 employer from imposing a preexisting condition exclusion period if you have been treated for a condition during the past 6 months

Labor Unions

The Taft-Hartley Act was a 1947 amendment to the National Labor Relations Act of 1937. 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.

Associations

The association must have at the outset a minimum number of members (usually 100) and is organized for a purpose other than buying insurance. Examples of such association groups would be teacher associations, trade associations, professional associations, alumni associations, etc. The association would be the Master policyholder and handles all funds for the group. Underwriting an association group is difficult if there is little or no claims history.

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.

Regarding group health insurance, which is true? A The plan sponsor is issued the Master Policy B The premium payment is the responsibility of each individual C Each plan participant receives a policy D Individual underwriting is utilized

The plan sponsor is issued the Master Policy

Persistency Factor

The tendency or likelihood of insurance policy business to renew, lapse, or replace. A high persistency factor (retention of coverage) helps stabilize and maintain premiums

Worksite Plans

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).

All of the following are characteristics of a Worksite Plan in health insurance, except: A Employees can pick and choose among various types of insurance coverages B They require the employer to pay all of the premiums C They are voluntary salary reduction plans D The plans are portable in that employees can take them with them upon terminating employment

They require the employer to pay all of the premiums *Worksite plans have flexible payment options: Employer Only, Employee Only, Cost Shared, or Section 125 Cafeteria.

COBRA (Consolidated Omnibus Budget Reconciliation Act)

This Act states employers with 20 or more employees must provide a health coverage 18months for -Termination of employee -Reduction of hours for employee, so they no longer qualify as a full-time employee -Coverage may continue up to 29 months if an individual qualifies for Social Security disability 36months for -Death of employee -Divorce or legal separation -Employee's entitlement to Medicare benefits -Loss of dependent status 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. protects dependents of employees by mandating for them the same extension and conversion privileges available to employees covered by group plans.

Eligibility for Coverage

To be eligible, an employee must be considered full time and work a minimum of 30 hours as established by the Affordable Care Act.

Age Discrimination in Employment Act (ADEA)

U.S. act that prohibits discrimination in the workplace on the basis of age. Applies to groups with 20 or more employee Forbids age discrimination against people who are age 40 or older Provides that employers cannot deny older workers coverage under a group health plan

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

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?

Utilize the group plan's conversion privilege *The conversion privilege allows eligible employees the option to convert from the group plan into an individual plan without having to prove insurability so long as they act within 31 days.

Which of the following would NOT be a likely consideration in determining premium rates for group health insurance? A Whether the company produced a profit or a loss in the previous year B Length of the waiting period C Degree of occupational hazard associated with the group D Maximum indemnity period

Whether the company produced a profit or a loss in the previous year *Important factors in determining group health policy rates include: average group age, length of eligibility period selected, maximum indemnity period selected and the groups occupational hazards associated with the group. Whether the company produces a profit or loss is not an underwriting consideration.

HIPPA Pre-existing Conditions

a condition 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 a preexisting condition can be excluded from plan coverage, then there is a limit to the preexisting condition exclusion period that can be applied. HIPAA limits the preexisting condition exclusion period for most people to 12 months (18 months if a late enrollee). In order for preexisting conditions to be covered, there can be no more than a 63-day gap in continuous coverage.

Multiple Employer Trusts (METs)

a trust made up of multiple small employers in the same or similar industries that form to provide life insurance or other benefits for their employees while gaining tax benefits

Community Rating

determines premiums by examining a particular geographic region of all insureds in a group.

Dependent Eligibility

eligible dependents include: Spouse All children, natural and adopted, married and unmarried, up to age 26

Persistency of a Group Health Plan

important underwriting factor. 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.

Experience Rating

is determined by examining the history of claims a particular group experiences. The insurer uses past experience to predict future cost.

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

No Loss-No Gain for Existing Claims and Pre-existing Conditions

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. This is also known as a Hold-Harmless Agreement

Open Enrollment Period

specific periods of time when employees choose a particular set of benefits for the coming benefit period

HIPAA (Health Insurance Portability and Accountability Act of 1996)

was 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. HIPAA provides protection for both individuals enrolling in group or individual plans.