Group Insurance and Sources of Health Coverage

HIPAA provides that prior coverage is creditable only if the enrollee obtains the new coverage within ___ days after termination of the prior coverage. - 30 - 31 - 63 - 90

63 The Health Insurance Portability and Accountability Act of 1996 (HIPAA) has made group health insurance more accessible and portable by enabling individuals changing jobs to obtain new group health care coverage without having to satisfy a new pre-existing conditions provision and/or a new probationary period, if the enrollee obtains the new coverage within 63 days after termination of the prior coverage.

Managed Care

HMOs, PPO and POS plans are forms of managed care arrangements. Managed care involves management of the financing and delivery of health care and includes: cost-control techniques. a sharing of financial risk between providers and consumers. management of the use of the health care services.

Single or Married

In addition to the new definition of a dependent in terms of eligibility for coverage, the PPACA also provides that a plan or issuer may not limit dependent coverage based on whether a child is married. While coverage of the spouse of a dependent child is not required, a carrier may choose to extend coverage to that person.

If G wants to install a contributory group health plan for his employees, he must get at least ____ of eligible employees to participate. - 50% - 75% - 80% - 100%

75% At least 75% of all eligible employees must elect to be in a contributory plan.

Workers' Compensation

Although considered casualty insurance and not health insurance, workers' compensation insurance does provide medical and disability income benefits to injured or ill employees. State laws require employers to provide workers' compensation benefits for employees who suffer a loss of income as a result of work-related injury or illness. To fulfill this requirement, an employer may: choose to self-insure; or purchase workers' compensation insurance. Such an insurance policy will pay all benefits required by state law.

Eligible Groups

Associations Associations, such as alumni associations, professional associations and others, can provide group health insurance for their members if they: have had an active existence for at least one year; have a constitution and bylaws; and have been organized and maintained for purposes other than that of obtaining insurance. The association is the policyholder, and the insurance is on the members, employees or employees of members of the association for the benefit of persons other than the association or its officers or trustees. Credit Insurance Group policies may also be offered by banks and creditors to their customers (i.e., depositors and borrowers) in the form of credit health insurance that makes the debt payments due to the lender while the borrower is disabled.

Eligibility

To be eligible for workers' compensation benefits, an employee must work in an occupation covered by the law and suffer a work-related injury or illness while engaged in his occupation.

Group Contracts vs. Individual Insurance

When comparing individual policies to group contracts, generally group contracts have: higher maximums. broader benefits. fewer exclusions. less stringent underwriting.

HIPAA

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) has made group health insurance not only more accessible, but also portable by enabling individuals that change jobs to obtain new group health coverage without having to satisfy a new pre-existing conditions provision and/or a new probationary period.

Commercial Insurers

Commercial insurers (mostly stock or mutual insurers) provide hospital and/or medical coverage on a reimbursement basis. In a reimbursement, or expense-incurred, policy, the insurer will reimburse the insured for all or a percentage of the actual medical expenses he has paid. The insured may assign the insurance proceeds to the doctor or hospital as well so that proceeds may be paid directly to the provider.

When L joined his employer's group health insurance plan he was given a _____ summarizing the coverages, benefits, rights, and policy provisions. - "confirmation of coverage". - "certificate of insurance". - "master policy". - "benefits statement".

"certificate of insurance". The certificate of insurance summarizes the coverage. Sometimes issued as a booklet, it provides information about benefits, continuation and conversion rights, claims procedures, etc..

If G wants to install a noncontributory group health plan for his employees, he must get at least ____ of eligible employees to participate. - 50% - 75% - 80% - 100%

100% At least 100% of all eligible members must be covered by a noncontributory plan.

If COBRA applies, an employee who terminates employment must be allowed to continue coverage for at least _____ months. - 12 - 18 - 24 - 36

18 Under COBRA, an employee is entitled to continue group coverage for up to 18 months if he is terminated for reasons other than gross misconduct or if his hours are reduced so that he is terminated from the plan. If he is disabled, coverage must be continued for up to 29 months.

X insured himself, his wife and his children under his employer's group health plan. If X should die, how long would his wife and children be allowed to continue group coverage under COBRA? - 18 months. - 24 months. - 36 months. - Indefinitely.

36 months. Federal law requires that if the group insured employee dies, the spouse and qualified dependent children would be able to continue coverage under COBRA for 36 months.

Eligible Groups

A group policy may be issued to employment-related groups, associations and customer groups organized for purposes other than to obtain insurance. To achieve cost savings, the insurer has the group sponsor administer the plan. Employment-related groups include individual employer groups, multiple employer trusts (MET) and multiple employer welfare arrangements (MEWA). The most common type of group, though, is the individual employer group where the employer is the policyowner. The policy will insure the employees for the benefit of someone other than the employer; the employer cannot be the beneficiary. Persons qualifying to be members of the insured group are: if an individual proprietorship, a partnership, subsidiary or affiliated corporation or other business entity, the: officers; managers; employees; proprietor(s); and partners. retired employees.

Health Maintenance Organizations

A health maintenance organization (HMO) is an organization that: provides health care services to its participants (i.e., the HMO actually provides the services to the plan participant). is organized on a service-incurred basis, with services purchased on a prepaid basis. Closed Panel vs. Open Panel HMO plans provide services either through salaried personnel under the "staff model" at their own facilities or through contract providers. A closed-panel HMO has its own doctors who treat only HMO members, and participants must use these doctors. An open-panel HMO will contract with doctors to provide services to its participants who may choose their physicians from a list of contracted doctors. Contracted doctors are not only able to treat participants; they may keep their regular practices and treat nonparticipants as well.

Which of the following would be a gatekeeper in a managed care plan? - The insurance agent - The insurance broker - An insurance company representative - A physician

A physician A gatekeeper is the primary care physician through whom the insured would go in order to get authorization to see a specialist.

Point-of-Service Plan

A point-of-service (POS) plan, sometimes called a dual choice plan, allows a participant to seek treatment within an HMO or PPO network or from outside the network on a major medical basis. The participant is reimbursed for expenses incurred for treatment outside the network as if covered under a major medical indemnity plan. Because deductibles and copayments for treatment outside the network are higher than for treatment inside the network, most participants choose to utilize in-network physicians. A POS plan may exist as: an open-ended HMO. The participant may choose a non-network provider at any time and be reimbursed as if covered under an indemnity plan. However, deductibles and copayments are higher than under standard indemnity plans. a gatekeeper PPO. The participant will choose a PCP who acts as a gatekeeper, referring him to specialists within the PPO network when necessary. The participant may elect to seek treatment outside the network at any time, but coverage will be less than if a preferred provider were selected.

Precertification

A precertification (also known as preauthorization, preadmission certification or prospective review) benefit provides for full benefits to be paid if the insured has prior authorization for nonemergency hospitalization. Authorization generally consists of a registered nurse reviewing the case to determine whether hospitalization or alternative care is warranted and to estimate the length of care. The policy may provide: a lower level of benefits for nonemergency hospitalization without authorization; or no benefits for hospitalization if certification had been denied.

Preferred Provider Organization

A preferred provider organization (PPO) is an insurance plan under which an insured may seek diagnosis and medical treatment from a list of preferred providers (i.e., doctors or hospitals that have contracted to provide services for the insurer at a reduced [i.e., negotiated] rate). For example, when an insured uses a preferred provider, he may have to pay a nominal copayment (e.g., $10 per office visit) with no coinsurance, a reduced coinsurance amount (e.g., 10% paid by the insured) or maybe even no coinsurance. The opt-out provision of a PPO plan will allow an insured to get services from a provider not on the preferred provider list. However, the level of benefits is reduced, and there may be an initial deductible. For Example D is insured under a PPO plan. When he visits a doctor who is a preferred provider, the PPO will pay 100% of his costs; when he sees a doctor who is not a preferred provider, the PPO only pays 80% of his costs. Like an HMO, a PPO may be formed on a closed-panel or open-panel basis. An open-panel provider is paid on a fee-for-service basis when services are used. An exclusive provider organization (EPO) is an insurance plan in which the insured can use doctors and hospitals within the EPO network, but cannot go outside the network for care. There are no out-of-network benefits.

Second Surgical Opinion

A second surgical opinion benefit provides coverage for the cost of obtaining a second opinion on a proposed surgery. The policy may: require a second opinion by a surgeon selected by the insurer for either a nonemergency surgery or for certain specified surgical procedures. The coverage would pay the costs of the opinions but provide for a reduced level of benefits if the insured: fails to obtain the required opinion; or elects surgery despite an opinion otherwise. if a second opinion is not required: provide coverage for the cost of a second and/or third opinion, at the insured's option; and provide full surgical benefits even if the second opinion differed from the first.

Benefits

A workers' compensation policy includes: medical benefits. disability income benefits. death or survivor benefits. rehabilitation benefits. Medical benefits will cover expenses for medical, surgical, hospital and nursing, as well as ambulance services, drugs and medical devices, without any time limit, dollar limit, deductible or copayment. Disability income benefits cover lost wages. The amount and period of compensation will be based on: the amount of lost wages. whether the disability is total or partial and permanent or temporary. A total disability is an inability to do any work, while a partial disability involves an ability to work at a reduced capacity at reduced earnings. Either type may be temporary or permanent. Death and survivor benefits cover burial expenses for a deceased employee and provide income to a spouse who has not remarried and dependent children. Rehabilitation benefits cover the cost of medical rehabilitation to help an employee recover physically and vocational rehabilitation to help him learn new job skills. Benefits may cover therapy, training, medical equipment and other things.

Insurer Underwriting Criteria

Benefits There is automatic determination of benefits so that they are not discriminatory. All members of the group must be offered coverage on the basis of a set benefit formula. The employer may distinguish classes (e.g., job classifications) within the group and the benefits offered for each class may be different, but within a class, all employees must be treated the same. The insurer will consider the persistency factors for the group. Persistency refers to the keeping coverage in force. An insurer would prefer to insure a group that shows it does not change insurers frequently since initial underwriting costs are high. An insurer may also prefer to deal with a sponsor that has the administrative capability to effectively enroll new members, keep records, pay premiums and submit claims. Efficient sponsor administration will result in lower overhead for the insurer, allowing lower premiums to be charged. The premium for a group policy is usually experience rated (i.e., based on the claims experience of the group). Experience rating may take into account: the average age of the group members. the coverage limits and deductibles (e.g., weeks of indemnity and the waiting period. occupational hazard(s). Alternatively, some plans will use community rating, which applies the same rates to all insureds in the area, regardless of their claim experience.

In which type of policy is the individual not identified? - Group - Blanket - Franchise - Blue Cross

Blanket Blanket insurance is insurance written on groups with constantly changing membership, so it does not identify the individual insured members. Groups eligible include common carriers; schools; religious, charitable, recreational, educational or civic organizations; sports teams; volunteer fire departments; newspapers for paper carriers; unions, etc.

Blanket Insurance

Blanket insurance coverage is provided in a blanket policy, a group policy issued to a group sponsor to cover all members of the group. The individual members are not identified, nor are they provided certificates of insurance. This type of policy suits the needs of a group that has changing membership and where the issuance of certificates would be impractical. Examples of groups that may be covered under a blanket policy include: riders on a common carrier (i.e., a bus). community volunteers. students and employees of schools, religious, charitable, recreational, educational or civic organizations. members of sports teams. volunteer fire departments. newspaper carriers. unions. For Example While riding on the school bus, Tiny T was injured when the bus crashed into an SUV. The bus company's blanket policy provided coverage for all of those on the bus, including Tiny T.

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Changing Coverage When an employer changes its group carrier, coinsurance and deductibles may be carried over to the new plan, and the new carrier may not deny benefits on existing claims (no loss-no gain statutes). State law may require the carrier to provide an extension of benefits to any person hospitalized as of the date of termination, extending benefits until the end of the hospital confinement or the exhaustion of hospital benefits. Termination of Group Coverage Group coverage generally terminates for an employee on the earliest of the date his employment terminates, he ceases to be eligible for coverage, the overall maximum benefit is paid, the period for which the premium has been paid expires or the master contract is terminated. COBRA Under COBRA, a person insured under a group policy may, within 60 days after his termination, request continuation of his group coverage; he must pay the premium. Coverage may be extended for 18 months if the loss of coverage was due to a reduction of hours, termination or layoff. If the insured is disabled, coverage may be extended 29 months. Dependents whose coverage is lost due to death or divorce may request a continuation of coverage for up to 36 months. COBRA benefits do not apply if the insured is terminated for cause, obtains insurance under another group plan, is eligible for Medicare or the employer terminates all group plans. HIPPA HIPAA allows individuals who change jobs to obtain new group health coverage without having to satisfy a new pre-existing conditions provision and/or new probationary period. Coverage may be subject to a maximum 12-month pre-existing conditions limitation; however this period must be reduced by the length of prior creditable coverage, as documented by a Certificate of Prior Creditable Coverage, as long as the enrollee obtains the new coverage within 63 days after the termination of his prior coverage.

At G's place of employment, all employees must pay a portion of their group insurance premium. They are members of what type of group plan? - Noncontributory - Contributory - Participating - Nonparticipating

Contributory A plan in which employees contribute a portion of the premium is a contributory plan. A plan in which they do not pay a portion of the premium is a noncontributory plan.

Health Maintenance Organizations

Coverage Each HMO participant will choose a primary care physician (PCP). The PCP: attempts to minimize expenses through the use of preventive treatment. acts as a gatekeeper who controls the use of services and refers the participant to a referral, or specialty, physician only when necessary. An HMO will provide: within its area: inpatient hospital and physician services; outpatient medical services; and preventive care (i.e., physical exams and diagnostic tests). This service is emphasized to try and prevent the need for more costly services that may result when conditions are unattended. in or out of its geographic area, inpatient and outpatient emergency services. HMO plans have no deductibles or coinsurance, but they do collect a nominal (i.e., small) use charge, a copayment, for each service rendered. This fee may be a specified dollar amount (e.g., $10 per visit) or a specified percentage of a service cost (e.g., 20%).

Pre-Existing Conditions Limitation

Coverage must be guaranteed issue but may be subject to a maximum 12-month pre-existing conditions limitation after enrollment (18 months for late enrollee). However, this period must be reduced by the length of prior "creditable coverage" as long as the enrollee obtains the new coverage within 63 days after termination of the prior coverage. Most health coverage is creditable coverage and may arise from coverage under a group health plan (including COBRA continuation coverage), an HMO, an individual health insurance policy, Medicaid or Medicare. Creditable coverage does not include coverage under limited policies such as coverage solely for limited-scope dental or vision benefits. For Example Mr. Jones is leaving his employment at XYZ National to work for ABC Industries. Mr. Jones was employed at XYZ National for nine months and was covered under the company's group health plan. When Mr. Jones began working at ABC Industries and enrolled in its group health plan, he was told there was a 12-month pre-existing condition exclusion period. Since Mr. Jones was covered under XYZ National's group health plan for the nine months and he did not have a break in coverage of more than 63 days, the maximum pre-existing condition exclusion that could be imposed on him would be three months. Had Mr. Jones worked at XYZ National for a year or more and been covered under their group health plan for that period, the pre-existing condition exclusion period would be waived by ABC Industries.

Pre-Existing Conditions Limitation

Creditable coverage may be documented by a Certificate of Prior Creditable Coverage, obtained from the previous employer or insurer. Any pre-existing conditions limitation in the new policy may be applied only to a condition that was or should have been treated within the six months prior to enrollment. Pregnancy may not be considered in the same way as a pre-existing condition and may not be excluded coverage for prenatal care and/or delivery. Newborn children and/or legally adopted children must be covered if the parents request coverage within 30 days of birth or adoption. The new insurance policy must be guaranteed renewable, except for: nonpayment of contributions. fraud or other intentional misrepresentation by the employer/sponsor. noncompliance with material plan provisions. failure to meet the terms of a collective bargaining agreement. the discontinuation of the plan in the geographic area.

Master Policy and Certificates

Each insured member of the group gets a certificate of insurance, one per family, as his evidence of coverage. The certificate summarizes the coverage by providing information about benefits, the member's rights of continuation and conversion, claims procedures and other items. It is sometimes issued as a booklet. For Example When T worked for ABC Transactions, Inc., he and his family were covered by a group health policy. ABC Transactions was the policyowner, but T and his family were the insureds. ABC received the master policy, and T received a certificate of coverage showing that he and his family were covered.

COBRA

For Example While Y was working at L&M Batteries, his daughter turned 26 and was no longer eligible for group coverage. However, at that time, she was able to obtain COBRA coverage for the 36 months after her birthday. When Y's wife divorced him, she was also able to get COBRA coverage for 36 months. When Y was laid off, he applied for COBRA coverage within 60 days after termination of his group coverage; he was covered for an additional 18 months. COBRA does not apply when: termination of coverage is due to nonpayment of premiums. an employee obtains coverage under another group policy or is eligible for Medicare. an employer terminates all group plans.

Loss of Coverage

Generally group coverage terminates for an employee on the earliest of the date: employment terminates; the employee ceases to be eligible for coverage; the overall maximum benefit is paid; the period for which the premium has been paid expires; or the master contract is terminated. Group coverage for a dependent terminates on the occurrence of the earliest of those same circumstances or at such time as the dependent no longer qualifies as a dependent (e.g., because of age or divorce).

Benefits

Group contracts provide the same benefits for all persons in any one class of group members. For rating and benefit purposes, employees may be classified based on their length of service, salary, duties or some other category. As a result, persons in a particular classification might be offered different levels of benefits than those in another classification. However, employees may not be classified by age or other factors that could result in discrimination, and individuals may not select their benefit levels.

Insurer Underwriting Criteria

Group health insurance is not individually underwritten for each group member. Instead, the underwriter considers: who is eligible to form the group (to determine whether it is a high-risk, average-risk or low-risk group). the geographic area. the composition of the group in terms of average age and gender. the percentage of eligible members participating. To prevent adverse selection (i.e., persons that are higher risk joining the group to get insurance while persons with less risk leave because the higher-risk persons cause rates for the group policy to be more expensive than rates for an individual policy), the group must exist for a purpose other than to obtain insurance. As premiums are based on the age of the group's members, new members must flow through the group so that new, younger members will help keep the average age down as existing members grow older.

Master Policy and Certificates

Group insurance contracts may offer coverage for accidental death and dismemberment, disability income, hospital expense and major medical expense. The group insurer will issue a master policy to the group sponsor (e.g., an employer), the master policyowner. The policyowner is responsible for: applying for coverage. keeping the policy in force. paying the premiums on behalf of the insured group members. The master policy provisions: explain eligibility requirements. establish when coverage is effective for an individual. state the minimum number of persons and percentage of the group which must be covered. establish coverage limits for members. cite the duties of the master policyowner.

COBRA

Group plans with 20 or more employees are subject to the Consolidated Omnibus Budget Reconciliation Act (COBRA), the federal law giving an insured group member the right to request continuation of his group coverage within 60 days after its termination. The premium paid by the employee during the continuation period would be 100% of the group rate, plus up to 2% for administration costs (i.e., 102% of the group premium rate). The period of time for which coverage may be extended is dependent on the reason for the loss of coverage: If the loss of coverage was due to a reduction of hours to part-time status, the termination of employment or a layoff for reasons other than gross misconduct, coverage may be extended 18 months. If the insured is disabled, coverage may be extended 29 months. In the case of covered dependents, if the insurance was terminated due to the employee's death, divorce, separation or eligibility for Medicare, or because a child was no longer an eligible dependent, coverage may be extended for 36 months.

Application

HIPAA applies to most medical expense plans except: plans with fewer than two participants. government plans. long-term care insurance or Medicare Supplement insurance. limited dental or vision care insurance or specific dread disease insurance. disability income insurance or hospital indemnity insurance. accident insurance. workers' compensation. automobile medical payments insurance. credit-only insurance. Under HIPAA, a group health plan may not discriminate based upon: health status; health history; genetic information; disability; mental illness; or claims experience.

Marketing Considerations

Insurers are subject to the same advertising standards for group insurance as for individual insurance and are responsible for making sure that ads are not misleading or deceptive. Under the doctrine of comity, the state in which a group policy is delivered to the policyowner has regulatory jurisdiction. This means the policy must conform only to the laws of that state, even if the certificates are delivered to insured members in other states.

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Managed Care HMOs, PPO and POS plans are forms of managed care arrangements. Managed care involves management of the financing and delivery of health care. To control costs, health insurance contracts: use deductibles, coinsurance, exclusions, limitations on coverage and benefit maximums. may require the use of a gatekeeper. offer benefits which could result in less costly overall claims (e.g., coverage for second surgical opinions). provide prevention care benefits. A second surgical opinion benefit provides coverage for the cost of obtaining a second opinion on a proposed surgery. Impacting the payment of benefits is whether the opinion is obtained or, if obtained, its results. A precertification or preauthorization benefit provides for full benefits to be paid if the insured has prior authorization for nonemergency hospitalization. Outpatient and alternative care benefits cover surgery and testing on an outpatient basis at a hospital or at a clinic. Coverage may be provided for things such as use of an ambulatory care center; care at a birthing center; hospice care; outpatient radiation, diagnostic x-rays and lab services; and care in a skilled nursing facility. Utilization management, or case management, involves assessing an individual's condition to determine what services/resources are necessary; coordinating the elements of treatment or a care plan; referring the patient to the appropriate medical or social services provider; and monitoring the progress of the patient. Concurrent review involves monitoring a patient's hospital stay in terms of length of stay, what alternatives may be used and what services are necessary.

Plan Comparisons

Note the following in comparing the PPO, HMO and POS plans: Providers: A plan may be open ended, allowing for a choice of providers by the participant, or it may involve the use of a PCP who acts as gatekeeper, referring the participant to specialists when necessary. Payment: An HMO is a prepaid plan, so the HMO assumes the risk that the cost of health care will not exceed the premiums. A PPO is a fee-for-service plan, and a POS plan is fee for service when outside providers are utilized. Services: An HMO provides for comprehensive care, including home health care and lab costs; the PPO and POS may provide comprehensive health benefits or a more limited range of services (e.g., only hospitalization and physician services).

Outpatient and Alternative Care

Outpatient and alternative care benefits cover surgery and testing on an outpatient basis at a hospital or at a clinic. Coverage may be provided for: use of an ambulatory care center (i.e., a clinic providing outpatient surgery). care at a birthing center (i.e., a facility separate from a hospital, designed for delivery of babies). home health care provided by a home health care agency to cover necessary part-time nursing care in a patient's home following hospitalization. hospice care (i.e., a program of care for terminally ill persons and their families). radiation therapy provided on an outpatient basis. outpatient diagnostic x-rays and laboratory services rendered at a doctor's office or hospital. extended care or convalescence in a skilled nursing facility while the patient is recovering after hospitalization.

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PPACA Under the terms of the Patient Protection and Affordable Care Act, any plan or issuer that makes dependent coverage available must make the coverage available until a child reaches age 26. Carriers are no longer allowed to condition dependent coverage on anything other than age. Blanket Insurance A blanket insurance policy covers a group that has a constantly changing membership. Group members are not identified, nor are they provided certificates of insurance.

Insurer Underwriting Criteria

Participation Minimum participation by eligible members may be required. In a contributory plan, where the members pay part of the premium, 75% of the eligible members must participate. In such a plan, coverage becomes effective for a person if he signs a participation form during either an initial or annual open enrollment (i.e., eligibility) period. If the employee enrolls at other times, he may have to provide evidence of insurability. In a noncontributory plan, where members do not pay any of the premium, 100% of the eligible members must participate. For these plans, coverage is effective automatically after the end of the employee's probationary period. Note Not all employees must be eligible for group participation, but of those that are eligible, all must participate.

Blanket Insurance

Pre-Existing Conditions In both group and blanket insurance policies, exclusions for pre-existing conditions are allowed for a certain period of time after the effective date of coverage. As discussed previously, a pre-existing condition is a condition, either physical or mental, regardless of the cause of the condition, for which medical advice, diagnosis, care or treatment was recommended or received during the six months prior to the effective date of coverage. For those enrolling: during an open-enrollment period, an insurer may "look back" no more than six months to determine if a pre-existing condition exists, and if found, can only exclude (for that condition) a maximum of six months after enrollment ("6x6") as a "late enrollee," an insurer may "look back" no more than six months to determine if a pre-existing condition exists, and if found, can only exclude (for that condition) a maximum of 12 months after enrollment ("6x12")

Eligible Groups

Self-Funded Groups Self-funded groups, also known as risk retention or self-insured groups, are organizations large enough that: the law of large numbers enables accurate estimates of losses; and the groups have sufficient assets in reserve to cover their own losses, allowing them to retain their risk. Where insurance is required (e.g., workers' compensation), a self-insurer must meet qualifications established by its state. To respond to unexpected losses, these persons need additional assets or stop-loss insurance (which covers losses in excess of a specified amount). Self-funding eliminates the cost insurers charge for overhead and profit, enables the company to use funds normally held by the insurer and results in a savings if claims are lower than predicted.

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Sources of Health Coverage Commercial Insurer Commercial insurers provide hospital and/or medical coverage on a reimbursement basis under which the insurer will reimburse the insured for all or a percentage of the actual medical expenses he has paid. HMO A health maintenance organization (HMO) provides health care services to its participants, with services purchased on a prepaid basis. Services are provided either by salaried personnel or through contract providers. A closed-panel HMO has its own doctors who treat only HMO members. An open-panel HMO will contract with doctors to provide services, and participants may choose their physicians from a list of those doctors. HMO plans have no deductibles or coinsurance but do collect a copayment. A participant will choose a primary care physician who will act as a gatekeeper to control the use of services and provide referrals when necessary. PPO A preferred provider organization (PPO) is an insurance plan under which an insured may seek diagnosis and medical treatment from a list of preferred providers who have contracted with the plan to provide services at a reduced rate. Services may be obtained from a provider not on the list, but the level of benefits will be reduced. POS A point-of-service (POS) plan, sometimes called a dual choice plan, allows a participant to seek treatment within an HMO or PPO network or from outside the network on a major medical basis. The participant is reimbursed for expenses incurred for treatment outside the network.

R joins the PPO that is provided by his employer. If R decides to go to a physician who is not a PPO provider, which of the following will happen? - R will be required to pay a higher deductible. - The PPO will pay the same benefits as if R had seen a PPO physician. - The PPO will pay benefits, but they will be reduced. - The PPO won't pay any benefits at all.

The PPO will pay benefits, but they will be reduced. R's health insurance will not pay the full amount that likely will be charged by the other doctor.

Who has the responsibility to apply for group health coverage, maintain the policy, and pay premiums? - The agent - The insurer - The group participants - The master policyowner

The master policyowner The group sponsor (e.g., the employer) is the master policyowner. As such, he is the sponsor ot the plan, he has responsibility for applying for the coverage, maintaining the policy and paying premiums on behalf of the insured group members.

B and T are each covered by group health plans at work. Each plan provides coverage for their entire family. If each plan has a coordination of benefits provision, how will they be reimbursed for medical expenses for their sick child? - Each plan will pay an equal share of the covered expenses. - The plan in effect the longest is primary. - B's plan is primary. - The plan of the person with the earliest birthday in the calendar year is primary.

The plan of the person with the earliest birthday in the calendar year is primary. Under coordination of benefits, there is no proration. Liability is split on a primary versus excess basis. If a person is covered by 2 plans, one under which he is covered as an employee and the other under which he is covered as the spouse of the employee, the plan covering him as an employee is primary. If a child is covered by the plans of each of his parents, the plan for the parent with the earliest birthday in the year is primary. If the parents are separated or divorced, the child would be covered on a primary basis by the plan of the parent with custody. The primary plan pays up to its limit. The secondary plan then pays the remainder of covered expenses up to its limit.

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This chapter covers the general concepts, requirements and features of group disability insurance. Conversion and continuation rights upon termination of group coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) and the Health Insurance Portability Accountability Act (HIPAA) are detailed. The Patient Protection and Affordable Care Act (PPACA), relating to the extension of dependent coverage, is summarized. Differences between various sources of group health care coverage are explained and the purpose and features of managed care related. Group Insurance A group insurer will issue a master policy to the group sponsor, the master policyowner, and each insured member of the group will receive a certificate of insurance. The certificate summarizes the coverage, providing information about benefits, continuation and conversion rights and claims procedures. Group contracts provide the same benefits for all persons in any one class of group members. For rating and benefit purposes, employees may be classified based on their length of service, salary, duties or some other category. The coordination of benefits provision is used to limit duplication in the payment of benefits and to reduce those benefits paid when other insurance, in addition to the group plan, is in place. Under the coordination of benefits provision, one insurer will cover a claim on a primary basis up to its limits, after which the other insurer will cover it on an excess basis up to its limits. The provision also establishes how to determine which group plan will be primary and which will be excess. A group policy may be issued to employment-related groups (including multiple employer trusts and multiple employer welfare arrangements), associations (e.g., alumni associations, professional organizations) and customer groups organized for purposes other than to obtain insurance. The most common type of group is the individual employer group. Group policies may also be offered by banks and creditors to their customers in the form of credit health insurance that makes payments on loans if the borrower becomes disabled.

Cost-Control Techniques

To control costs, health insurance contracts: include deductibles, coinsurance, exclusions and limitations on coverage and benefit maximums that shift health care costs to the insured. may require the participant to choose a primary care physician who will act as a gatekeeper that controls the use of services and refers participants to specialists within the managed care network. offer benefits which could result in less costly overall claims (e.g., coverage for second surgical opinions; precertification and alternatives to hospitals such as ambulatory care centers, birthing centers, hospice care, home health care and outpatient surgery; and wellness programs). provide prevention care benefits (e.g., periodic physical exams; well-baby care to age 2 and well-child care to age 15, including immunizations; and patient counseling).

Coordination of Benefits

To limit duplication of payment of benefits, group policies may have a coordination of benefits (COB) provision. This provision is used to reduce group benefits payable when social insurance programs or other group insurance also cover an insured. It does not, however, affect payments when an insured is also to receive benefits from individual disability insurance he himself purchased. Under coordination of benefits, when two or more group insurers cover a loss, they do not prorate the claim payment. Instead, one will cover it on a primary basis, while the other will cover it on an excess basis. After the primary plan pays up to its limits, the excess plan will pay, up to its limits, until all covered expenses are paid. The coordination of benefits provision also establishes how to determine which group plan will be primary and which will be excess: A plan covering a person as an employee is primary over a plan providing coverage for that person as a dependent. When the dependent is a child and is covered under two plans, the primary plan is that of the parent with the earliest birth date in a calendar year. If the parents are separated or divorced, the dependent child is covered on a primary basis by the plan of the parent with custody, unless otherwise ordered by a court. For Example T and his family were covered by a policy issued to ABC. Mrs. T was also covered by a group policy at her place of employment, XYZ Soda Crackers. When Mrs. T suffered a stroke, her policy at XYZ was the primary policy. Only after she had exhausted the limits of that policy did the ABC policy provide coverage. This was reflective of the conditions of the coordination of benefits provisions in the two policies. When, their son, Tiny T, fell off the porch swing and suffered serious injury, Mrs. T's policy provided primary coverage because she was born in April and her husband was born in August.

Eligible Groups

Trusts A MEWA is a legal entity that provides group benefits to employees of two or more employers within a specific industry. Benefits may include: medical, surgical or hospital benefits. death benefits. unemployment benefits. prepaid legal services. scholarship funds. daycare centers. training programs. Each employer must become a member of the MEWA, which is then administered by an insurance company or a professional administrator. Benefits may be: self-funded (i.e., self-insured) or insured and administered by a third party; or fully insured and administered by an insurance company. A MET is the type of MEWA that is fully insured and organized as a trust, administered by an insurance company to provide group insurance to small employers. A MET may not have any element of self-insurance.

Coverage for Dependents

Under the terms of the Patient Protection and Affordable Care Act (the PPACA), legislated in 2010, any plan or issuer that makes dependent coverage available must make the coverage available until a child reaches age 26. In the past, most group health plans that provided dependent coverage limited that coverage based on whether a child qualified as a dependent for tax purposes. As such, dependent coverage was commonly limited to an employee's spouse and their children who qualified as dependents for income tax purposes based on: the age of the child. a child's status as a student. residency. financial support. other factors indicating dependent status.

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Underwriting Group health insurance is not individually underwritten for each group member. Instead, the underwriter considers: whether the group is a high-risk, average-risk or low-risk group); the geographic area; the composition of the group in terms of average age and gender; and the percentage of eligible members participating. Adverse selection occurs when higher risk persons join a group to get insurance, causing rates to increase, while those who have less risk leave because they can obtain an individual policy at a lesser cost. To prevent adverse selection, the group must exist for a purpose other than to obtain insurance and require minimum participation by eligible members. In a contributory plan where the members pay a portion of the premium, 75% of the eligible members must participate. In a noncontributory plan where members do not pay any of the premium, all eligible members must participate. Coverage under a group plan may distinguish between classes of employees, offering different benefits for different classifications. However, within a particular classification, all employees must be treated the same. The underwriter will also consider the persistency factor in underwriting a group plan. Persistency refers to keeping coverage in force, an insurer preferring an employer that does not change group insurance plans on a frequent basis. The premium for a group policy is usually experience rated, which takes into account the average age of the group members, the coverage limits and deductibles and occupational hazards, but may, instead, use the community rating system. Community rating applies the same rates to all insureds in the area, regardless of their claims experience.

Utilization Management

Utilization management, or case management, involves: assessing an individual's condition to determine what services and resources are necessary and by whom they might be most appropriately delivered; coordinating the elements of treatment or a care plan; referring the patient to the appropriate medical or social services personnel or agency; and monitoring the patient to assess his progress and ensure the proper services are delivered. Concurrent review (i.e., hospital stay review) involves monitoring a patient's hospital stay in terms of length of stay, what alternatives may be used and what services are necessary.

Change of Insurance Companies

When an employer changes its group carrier: coinsurance and deductibles may be carried over from one plan to another before the original plan's renewal date. In such cases, the new plan would pay the difference between the amount it would pay based on its coinsurance percentage and the amount payable by the original plan. It would also credit any amounts applied to the deductible under the old plan to the deductible under the new plan to avoid penalizing the insured for the change. no loss-no gain statutes may prohibit the replacing carrier from denying benefits to group members who have existing claims filed with the previous carrier. Benefits must be paid for ongoing claims when group policies are replaced, regardless of pre-existing conditions. state law may require the group carrier to provide an extension of benefits for any person insured under the plan and hospitalized on the date of termination of a plan that is immediately replaced by a group policy issued by another insurer. The extension is subject to all terms, limitations and conditions of the plan, except those relating to termination of benefits, until the earlier of the end of the hospital confinement or the exhaustion of hospital benefits under the plan.

Coverage for Dependents

With the expansion of dependent coverage under the PPACA until age 26, conditioning coverage on whether a child is a tax dependent or a student, or resides with or receives financial support from the parent, is no longer applicable. Carriers are no longer allowed to condition dependent coverage on anything other than age. Because the PPACA does not distinguish between coverage for minor children and coverage for adult children up to age 26, the traditional factors to determine eligibility for coverage may not be used. Accordingly, with respect to children who have not yet reached age 26, a plan or issuer may not define a dependent for purposes of eligibility other than in terms of the relationship between the child and the participant in the plan. Factors that may not be used for defining a dependent child include any one or any combination of the following: Financial dependency on the participant or primary insured/subscriber Student status Employment status Eligibility for other coverage

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Workers' Compensation Workers' compensation coverage is coverage for an employee who suffers a loss of income as a result of a work-related injury/illness. A workers' compensation policy will cover: medical benefits without any time limit, dollar limit, deductible or copayment. disability income benefits. death or survivor benefits in the form of funds for burial expenses and income to a spouse and dependent children. rehabilitation benefits (e.g., therapy, training, medical equipment). This concludes the review for Group Insurance and Sources of Health Coverage.

All of the following groups would be eligible for group insurance EXCEPT - a labor union. - a trustee group formed by 2 or more employers. - an employee group which includes retirees and dependents of employees. - an association formed for the purpose of obtaining insurance.

an association formed for the purpose of obtaining insurance. Groups eligible for insurance generally include employee groups, unions, associations and trusts created for purposes other than to obtain insurance. In addition, a trustee group can be created by 2 or more employees (a multiple employer trust) can be created to qualify for group benefits. Employee groups can include retirees and dependents of employees. in order for an association to form a group, it must have been in active existence for at least one year and be formed for purposes OTHER than buying group insurance.

Blanket health insurance - changes benefits as the group changes. - names persons insured in the policy. - covers a specific number of insureds. - covers a changing group of people.

covers a changing group of people. Blanket insurance is insurance written on groups with constantly changing membership, so it does not identify the individual insured members. Groups eligible include common carriers; schools; religious, charitable, recreational, educational or civic organizations; sports teams; volunteer fire departments; newspapers for paper carriers; unions, etc..

HIPAA requires that group coverage - must be guaranteed issue but may be subject to a maximum 6-month limitation after enrollment for pre-existing conditions. - limitations for pre-existing conditions be reduced by the length of prior "creditable coverage." - prior coverage be creditable if the enrollee obtains the new coverage within 93 days after termination of the prior coverage. - not discriminate based upon health status or history, but may discriminate based upon mental illness and claims experience.

limitations for pre-existing conditions be reduced by the length of prior "creditable coverage." HIPAA requires that a group health plan may not discriminate based upon health status, health history, genetic information, disability, mental illness or claims experience. Coverage must be guaranteed issue but may be subject to a maximum 12-month limitation after enrollment (18 months for a late enrollee) for pre-existing conditions. This period must be reduced by the length of prior "creditable coverage." Most health coverage is creditable coverage, such as coverage under a group health plan (including COBRA continuation coverage), HMO, individual health insurance policy, Medicaid or Medicare. Creditable coverage does not include coverage consisting solely of excepted benefits, such as coverage solely for limited-scope dental or vision benefits. Prior coverage is creditable only if the enrollee obtains the new coverage within 63 days after termination of the prior coverage.

J had to be continuously employed for a period of 90 days before he was eligible to join his employer's group health insurance plan. That period is known as the _____ period. - probationary - reinstatement - pre-existing - elimination

probationary To assure that an employee is likely to stay with the company before offering him coverage, the plan generally will call for a probationary period, which is generally 90 days.

All of the following are true regarding Health Maintenance Organizations (HMOs) EXCEPT that they - are service based. - are prepaid plans. - provide coverage on a reimbursement basis. - emphasize preventive care.

provide coverage on a reimbursement basis. HMOs provide coverage on a service-incurred basis and are prepaid plans. The monthly premium prepays for all services regardless of how much (or how little) they are actually used. HMOs have traditionally emphasized prevention. HMOs are not reimbursement plans, which are expense-incurred policies, such as major medical insurance.

COBRA requires that continuation of coverage must be offered to employees and dependents in all of the following situations EXCEPT - the employee dies. - divorce. - reduction in work hours. - the employee obtains coverage under another group plan.

the employee obtains coverage under another group plan. COBRA requires 18 months of coverage continuation if employment is terminated (for other than gross or willful misconduct) or the employee's hours are reduced. It allows 29 months continuation for disability and it also requires continued coverage for up to 36 months for dependents if the employee dies, if a dependent child is no longer qualified as a dependent child, if the spouse of an employee divorces or legally separates from the employee, or if the employee is eligible for Medicare. Coverage is not required to remain in force when the employee gets new coverage.

A coordination of benefits provision in a group health insurance policy will provide that - the primary insurer for a child's claim is one directly insuring the father. - the insurer covering the individual as a group member is primary over the policy covering him as a dependent. - each insurer covering a claim pays a prorated portion of the claim. - the insurer covering the individual as a dependent of a group member is primary over the policy covering him as a group member.

the insurer covering the individual as a group member is primary over the policy covering him as a dependent. Under coordination of benefits, there is no proration. Liability is split on a primary versus excess basis. If a person is covered by 2 plans, one under which he is covered as an employee and the other under which he is covered as the spouse of the employee, the plan covering him as an employee is primary. If a child is covered by the plans of each of his parents, the plan for the parent with the earliest birthday in the year is primary. If the parents are separated or divorced, the child would be covered on a primary basis by the plan of the parent with custody.

The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires that employers allow employees and certain beneficiaries to continue group coverage for a period after coverage would otherwise terminate. As an employer, G became subject to this law when he hired his _____ employee. - tenth - twentieth - thirtieth - fiftieth

twentieth Federal Law (COBRA) applies only to larger employers - those with 20 or more employees.