group health insurance

small employer

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

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, providing the request is submitted to insurer within 31 days after the qualifying event. Not all insurers offer a conversion privilege, but if offered the employee can convert the group plan into an individual plan. The premiums will be higher and the coverage will not be as comprehensive as the group plan.

types of eligible groups

A group health plan is an employee welfare benefit plan established or maintained by an employer or by an employee organization (such as a union), or both, that provides medical care for participants or their dependents directly or through insurance. Most private sector health plans are covered by the Employee Retirement Income Security Act (ERISA). ERISA governs employer-sponsored retirement, welfare, and benefit plans. Among other things, ERISA provides protections for participants and beneficiaries in employee benefit plans, including providing access to plan information. Also, those individuals who manage plans (and other fiduciaries) must meet certain standards of conduct under the fiduciary responsibilities specified in the law. An employer is required to provide a Summary Plan Description filed with the Department of Labor explaining benefits to the employee on an annual basis. An annual financial report must be filed with the IRS.

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

pre-existing conditions

A pre-existing condition is 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.

age discrimination in employment act (adea)

Age discrimination involves treating someone (an applicant or employee) less favorably because of his age. The ADEA: 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

eligible employee

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

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.

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 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. If a state recognizes domestic partnerships or other civil unions between persons of the same or opposite gender, a group health insurance plan that offers coverage to spouses and dependents must also permit enrollment of a domestic partner.

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 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 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

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.

characteristics of group insurance

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. In order for a group to be eligible, it must be considered a natural group, which is a group that is formed for a purpose other than to obtain group insurance. 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.

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.

individual plans and eligibility

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 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 prior coverage, or a certificate of creditable coverage is required. Have no more than a 63 day gap in coverage

group health 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.

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.

HIPAA (health insurance portabililty and accountability act of 1996)

HIPAA 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.

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,.

relationship with medicare

If an individual is age 65 or over and continues to work, Medicare is usually the secondary insurer to any employer group health plan the individual participates in. A Group Health plan with 20 or more employees is primary to Medicare and pays first. If the employer's plan does not pay all of one's expenses, Medicare may pay secondary benefits for Medicare covered services to supplement the amount paid by the group plan. Employers who have 20 or more employees are required to offer the same health benefits, under the same conditions to employees age 65 or over and to employees' spouses who are age 65 or over, as offered to the younger employees and spouses. If an employee is disabled and on Medicare, he/she is to receive the same offer as all other employees. A 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.

employment-related groups

In addition to Individual Employer Groups for employees of an eligible employer, there are other types of eligible groups.

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.

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 a particular geographic region of all insureds in a group. In multi-state groups, cost is also 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 attribute to the cost.

marketing considerations: regulatory jurisdiction/place of delivery

It is generally accepted that the state in which the group contract is delivered to the policyowner has governing jurisdiction. The contract must conform to the laws of that state even though certificates of insurance may be delivered in other states. Regardless of which state's law governs the contract, the policy must provide benefits as required by each state in which an employee works or resides. Unless the state of delivery has a significant relationship to the insurance transaction, other states may seek to exercise their regulatory authority. Because of this, it has become common practice that an 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 Although 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.

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.

no loss-no gain for existing claims and pre-existing conditions

The No Loss-No Gain 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.

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.

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, and alumni associations. The association would be the Master policyholder and handles all funds for the group.

plan design factors

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. Persistency of a group health plan is another 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.

marketing considerations: advertising

The purpose of an advertising regulation is to give a complete and accurate description to the public, prevent unfair competition, and set a minimum standard of conduct. In most states, each insurer must provide the Department of Insurance a copy of any advertisement prior to its use. Advertisements are printed or published material, audiovisual material and descriptive literature, to include newspapers, magazines, radio scripts, television scripts, billboards, sales talks, presentations, and personal testimonials. Advertising requirements include: Insurance companies responsibility for the accuracy of their personal testimonials Statistical information that insurers may include 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 to 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

open enrollment period

The underwriter's greatest concern when underwriting a group plan is adverse selection. To help protect against preexisting conditions and immediate claims, group plans 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 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.

worksite plans

These plans are 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 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 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

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 qualifies for Social Security disability 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 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. 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 covered under the group policy If insured carried dependent coverage on the group, dependent coverage must be made available on the continuation policy 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.

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.

eligibility for coverage

To be eligible, an employee must be considered full time (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.

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.

replacement of group policies

When replacing a group policy, 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. Although insurers are supposed to coordinate these credits, HIPAA confidentiality rules may impair the insurers' ability to communicate with one another. For this reason, employees must be made aware of the need to maintain records of their health care expenditures, and to supply the information to the new insurer(s) as necessary.

multiple employer trusts (mets)

are entities formed by unrelated businesses in the same or 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. 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.

multi-employer welfare associations (mewas)

are 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

customer based groups include depositor, creditor, and debtor groups

employer group health insurance

eligibility for coverage, open enrollment period, dependent eligibility, nonduplication and coordination of benefits