Chapter 13 - Group Health Insurance

4 Worksite Plans 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

HIPAA 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.

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.

Types of Eligible Groups: Customer Groups

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

Small Employer Medical Expense Insurance: 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.

Types of Eligible Groups: Blanket Insurance

Group blanket insurance covers a group of individuals such as employees, teachers, students, passengers traveling on a common carrier, sports teams, volunteer firefighters, or other groups of people while being exposed to a specific risk.

Change in Insurance Companies or Loss of Coverage: 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. 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.

Employer Group Underwriting: Plan Design Factors: 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.

HIPAA 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

Employer Group Underwriting: Experience 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.

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.

Small Employer Medical Expense Insurance: Eligibility

Newly hired employees with a HIPAA certificate of creditable coverage must be allowed to enroll in an employer-sponsored health plan at the earliest opportunity.Employers with 20 or more full-time employees are subject to COBRA continuation and must provide the required disclosure notice within 14 days of a qualifying event.

Employer Group Underwriting: Plan Design Factors: Minimum Percentage

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.

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, and Critical Illness Insurance. 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.

Types of Eligible Groups: Multiple Employer Trusts (METs)

(METs) are entities formed by unrelated businesses in the same or related industrial classification and/or third-party administrators who are called sponsors, thus allowing small to medium sized employers with limited numbers of employees to combine their employees into a single, larger group in order to obtain more favorable life and health insurance premiums and increased benefits (METs can also provide access to other employee benefit plans, such as defined contribution or defined benefit retirement plans). The sponsor 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, relieving the Trust and participant employers of most liability for the claims of employees. The Trust gets the master policy.

Although HIPAA does make it easier when switching jobs and protecting insurance coverage, it does not: (3)

-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

Change in Insurance Companies or Loss of Coverage: 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: Employment-Related 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, reimbursement, or otherwise. In addition to Individual Employer Groups for employees of an eligible employer, there are other types of eligible groups.

Small Employer Medical Expense Insurance: Rating Factor

Carriers will apply rating factors consistent with all small employers and 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. A small employer carrier will treat all health benefit plans issued or renewed in the same calendar month as having the same rating period. A health benefit plan that contains a restricted provider network provision will not be considered the same as a plan that does not contain such a provision, if the restriction of benefits results in substantial differences in claim costs. A small employer carrier will not use case characteristics other than age, geographic area, family composition, or any other rating factors other than actual claims experience. Preexisting conditions may not be excluded for any longer than 1 year.

Employer Group Underwriting: Community Rating

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

Employer Group Health Insurance: Open Enrollment Period

New employees are usually eligible to enroll after a probationary or waiting period. Once the waiting period is over, the employee has 30 days to enroll during an enrollment period. If the employee does not enroll during an enrollment period, the insurer may require proof of insurability. To enroll without evidence of insurability, the employee can enroll during the next open enrollment period. An annual open enrollment period will be offered to allow employees who did not enroll initially to enroll in the group plan. Enrollment periods are typically for 30 days. Proof of insurability is not required during an open enrollment period. 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

Employer Group Underwriting: Plan Design Factors: Persistency

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.

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 -Prohibits an employer from discriminating in its employment practices against a woman because of any pregnancy-related conditions

Change in Insurance Companies or Loss of Coverage: 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.

Types of Eligible Groups: 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.

Types of Eligible Groups: 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.

Employer Group Health Insurance: Eligibility for coverage

To be eligible, an employee must be considered full time (work a minimum of 30 hours) as established by the Affordable Care Act. He/she must be actively at work before they can enroll in the group plan.

Small Employer Medical Expense Insurance: 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. Example: An insurer issues 100 policies and 80 of them renew, then the persistency factor is 80%.

Types of Eligible Groups: 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 primarily consist of employers who self-fund their employees' health insurance benefits. The formation and regulation of MEWAs may vary somewhat by state.

Small Employer Medical Expense Insurance: 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

Employer Group Health Insurance: Nonduplication and Coordination of Benefits

A method of determining primary and secondary coverage when an insured is covered by more than one group policy, and to help prevent Nonduplication. 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. 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.

Multi-Employer Welfare Associations (MEWAs): Risk Retention Group

A risk retention group is a form of MEWA in which employers intend to cover their own employees' claims, but mutually agree to indemnify each other for excessive claims.

Multi-Employer Welfare Associations (MEWAs): Self-Funded Plan

A self-funded plan operates without the services or coverage of an insurance company. The employer assumes responsibility for providing payment of its own employees' claims through a trust.

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 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.

HIPAA 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

HIPAA 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.

HIPAA 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 Portability 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.

Types of Eligible Groups: 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.

Employer Group Health Insurance: Dependent Eligibility

If a plan offers coverage to dependents, eligible dependents include: Spouse and all children, natural and adopted, married and unmarried, up to age 26. Spouse or dependent coverage is not mandatory in group health insurance. However, 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.

Change in Insurance Companies or Loss of Coverage: Reinstatement for Military Personnel

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

Group Insurance 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.

Employer Group Underwriting for Multi-State Groups

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. Normally, the higher the group's average age, the higher the average number of claims.

"Birthday Rule"

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.

Change in Insurance Companies or Loss of Coverage: 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.

The Employee Retirement Income Security Act (ERISA)

Most private sector health plans are covered by ERISA. ERISA of 1974 is the federal law regulated by the US Department of Labor 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. Also, those individuals who manage plans (and other fiduciaries) must meet certain standards of conduct under the fiduciary responsibilities specified in the law. Under ERISA, an employer is required to provide a Summary Plan Description explaining benefits to the employee on an annual basis. In general, ERISA does not cover group health plans established or maintained by governmental entities, churches for their employees, or plans which are maintained solely to comply with applicable workers compensation, unemployment, or disability laws.

Nonduplication

Overinsurance or having more than 100% of a claim paid.

Change in Insurance Companies or Loss of Coverage: 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.