Insurance Exam CH 12 Group Health Insurance
In noncontributory group health plans, how many eligible employees must be covered by the plan? A 100% B 75% C At least 90% D At least 50%
A 100% *Noncontributory plans (in which the employer pays the full cost) must cover 100% of eligible employees.
An employer may require a former employee who has COBRA coverage to pay up to _____% of the premium. A 102 B 95 C 90 D 105
A 102
COBRA is a federal law requiring employers with _____ or more employees to provide the option of continuing the employee's existing health coverage for dependents for up to _____ months following certain qualifying events such as death of the employee. A 20, 36 B 25, 45 C 20, 18 D 15, 36
A 20, 36 *The question specifies coverage for dependents (36 months), not the employee (18 months).
Until yesterday, J. J. worked for his father's company and was covered by the company's large group health plan. He stopped working to go to college. He is 26 years of age and wants to keep the same coverage until he earns his degree in approximately 24 months. Which of the following statements is true? A A good option for J.J. is to exercise the COBRA option under his father's group plan B As a student, J.J. is still covered under his father's group plan C J.J. can obtain coverage under COBRA, but it won't be the same coverage he had under his father's group plan D J.J.'s only option is to buy a personal plan of coverage
A A good option for J.J. is to exercise the COBRA option under his father's group plan *Since J.J has lost his dependent status, but still wants the same group coverage, he can continue that coverage under COBRA for up to 36 months.
Concerning COBRA, which of the following is correct? A Applies to employers with 20 or more employees B Provides 18 months of continuation of coverage for dependents of Medicare-eligible employees C Provides 36 months of continuation of coverage for disabled participants D Provides employees and dependents 36 months of continuation of coverage after termination of employment
A Applies to employers with 20 or more employees *Federal law mandates that employers with 20 or more employees provide a COBRA option. Termination of employment provides only 18 months of continuation. Qualifying events for dependents only (not employees) permit continuation up to 36 months.
The employees of a corporation must each pay a portion of the premium for their group insurance. This means they are members of a _____________. A Contributory group plan B Nonparticipating plan C Noncontributory group plan D Participating plan
A Contributory Group Plan *In contributory plans (those in which employees pay a portion of the premium), employers are generally required to maintain a minimum of 75% participation among eligible employees.
All of the following are correct regarding employer group health insurance plan's eligibility requirements EXCEPT: A Employees can enroll at any time without restrictions B Employees must be considered full-time and actively at work C Newly hired employees must usually satisfy a probationary period before they can enroll in the plan D Employees must sign up during the enrollment period to avoid providing proof of insurability
A Employees can enroll at any time without restrictions *Employees can only enroll during the open enrollment period and must follow any and all eligibility requirements in order to obtain coverage without having to prove insurability. Otherwise they may have to prove insurability if they attempt to enroll later.
All of the following are true of the Coordination of Benefits Provision under a group plan, except: A In the event children are covered under two group plans, the insurer for the parent who is the oldest is primary, and the other parent's plan is secondary B In a spousal situation, the insurer for the claim of an employee is primary, with the spouse's plan being secondary C Secondary carriers will only pay claims that are in excess of the primary carrier's responsibility D It is a method of determining primary and secondary coverage when an insured is covered by more than one group policy
A In the event children are covered under two group plans, the insurer for the parent who is the oldest is primary, and the other parent's plan is secondary *Under the Coordination of Benefits Provision, the insurer for the parent whose birthday is first in the calendar year is primary, not the plan for the parent who is oldest.
If a child is covered under more than one group health insurance plan how is it determined which carrier is primary? A The plan covering the parent whose birthday occurs first in the calendar year will be the children's primary coverage B The parent whose date of birth is closest to the end of the year determines which is primary C The younger parent's plan will become primary D The date of birth of the child that is closest to either parent becomes primary
A The plan covering the parent whose birthday occurs first in the calendar year will be the children's primary coverage *In the event children are covered by more than one group plan, the 'birthday rule' which says the plan covering the parent whose birthday occurs first in the calendar year will be the children's primary coverage.
Generally, regulatory jurisdiction over a group insurance plan belongs to the insurance commissioner of: A The state in which the group contract was delivered to the policyowner B The state in which the initial solicitation took place C The state where the application was completed D The resident state of the producer
A The state in which the group contract was delivered to the policyowner *It is generally accepted that the state in which the group contract is delivered to the policyowner has governing jurisdiction.
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.
Business Group of One
An individual, sole proprietor, or a single full-time employee of an S Corporation, C Corporation, Limited Liability Company, or partnership who has carried on business activities for at least one year prior to the application date. Also, the business must have generated taxable income in one of the previous 2 years.
Small Employer
Any person, firm, corporation, partnership, or association that is actively engaged in business and has 50 employees or less.
Payment of the first premium and an application must be submitted to an insurer for individual coverage within how many days to convert group coverage to an individual policy not requiring proof of insurability? A 45 days B 31 days C 10 days D 7 days
B 31 days *State insurance laws require a 30- or 31-day Conversion Period in group insurance policies.
The XYZ Company, which employs 800 workers, provides group disability insurance for the 400 employees who work 30 hours or more. If this group disability coverage is offered on a noncontributory basis, how many employees are participating? A 300 B 400 C 600 D 800
B 400 *Noncontributory plans requires 100% participation by eligible employees. In this example, only 400 employees qualify as eligible.
What percentage of employee participation is required for a contributory employer group plan? A 100% B 75% C 25% D 50%
B 75% *Contributory plans require 75% participation.
A group of individuals comes together with the objective of obtaining a lower collective insurance premium. This would: A Require a 90-day waiting period B Be disallowed. Group formation must be for a reason other than reducing the cost of insurance. C Be rated due to potential adverse selection D Require 100% participation
B Be disallowed. Group formation must be for a reason other than reducing the cost of insurance. *State insurance laws prohibit the issuance of group policies to groups formed primarily for the purpose of obtaining insurance.
When a group member terminates employment, he or she has 31 days to purchase an individual policy without proof of insurability. This is referred to as the: A Extension of Benefits B Conversion Privilege C Coordination of Benefits D Adverse Selection
B Conversion Privilege *It is the Conversion Privilege, which affords a group member the right to purchase individual coverage without proof of insurability. The 31-day period also applies when COBRA continuation is exhausted.
All of the following groups are eligible for group rates, except: A Employers B Groups formed to reduce premiums C Associations D Labor unions
B Groups formed to reduce premiums *A group cannot be formed for the express purpose of obtaining insurance. Employers, labor unions, and associations are eligible plan sponsors.
A(n) _________________ is issued to the sponsor of the group, and employees receive an outline of coverage or other summary of benefits, which offers information about the plan's major benefits and principal exclusions. A Certificate of authority B Master policy C Certificate of insurance D Individual policy
B Master Policy *A master policy is issued to the group sponsor while a certificate of insurance or policy summary is issued to the employees.
When underwriting group life, the underwriter treats the group as if it were: A A number of separate individuals B One individual C Two groups, with all the males in one group and all the females in the other D A substandard risk
B One individual *In group insurance, the group as a whole is considered an individual, and issuance is based upon that whole. Having one uninsurable individual in a group will not cause a declination, but may increase the premium charged.
Regarding group health insurance, which is true? A The premium payment is the responsibility of each individual B The plan sponsor is issued the Master Policy C Individual underwriting is utilized D Each plan participant receives a policy
B The plan sponsor is issued the Master Policy *In group health insurance, only the plan sponsor receives a copy of the Master Policy. Covered individuals receive a Certificate of Insurance. The plan sponsor is responsible for paying the premiums.
What benefit does COBRA provide to employees when an employee is terminated? A Continuation of health insurance at the employer's expense for up to 29 months B Continuation of health insurance at the employee's expense for up to 36 months C Continuation of health insurance at the employee's expense for up to 18 months D Continuation of life and health insurance if an employee quits or is fired or laid-off
C Continuation of health insurance at the employee's expense for up to 18 months *In the event an employee is terminated for any reason other than gross misconduct, COBRA provides for continuation of the group health plan for the employee and his/her dependents for up to 18 months (29 months if a person is disabled at the time of a qualifying event). The employee can be required to pay up to 102% of the cost of the insurance. Life insurance is not covered under COBRA.
Which provision in a health insurance plan is used to avoid overinsurance when a person is covered by more than one plan? A Schedule of Benefits B Primary Care Coverage C Coordination of Benefits D Extension of Benefits
C Coordination of Benefits *The purpose of the Coordination of Benefits provision is to prevent overinsurance. The 'COB' provision appears in both group and individual health policies.
When an insurer relies on the prior claims history of the group to be insured in determining the rate to be charged, it is called: A Claims rating B Community rating C Experience rating D Cost rating
C Experience rating *If an insurer bases premiums on the group's prior claims history, the coverage is said to be Experience Rated.
What law provides the right of employees to continue health insurance coverage when changing employers by removing any restrictions against waiting periods and coverage in a new group health plan, as long as the employee has had creditable coverage? A COBRA B PPACA C HIPAA D ERISA
C HIPAA *When covered under a group health plan, the Health Insurance Portability and Accountability Act (HIPAA) provides an employee and his/her dependents with the right to enrollment in a new employer's group health plan at the earliest possible moment when an employee begins new employment within 63 days of leaving the former group plan.
What can an employee do in order to obtain coverage when they have a preexisting condition and find that their job was just eliminated? A Find an experienced agent and apply to insurance companies that specialize in insuring high risk applicants B Apply for Medicare benefits C Utilize the group plan's conversion privilege D Apply for Medicaid benefits
C Utilize the group plan's conversion privilege *The conversion privilege allows eligible employees the option to convert from the group plan into an individual plan without having to prove insurability so long as they act within 31 days.
Customer Groups
Customer based groups include depositor, creditor, and debtor groups.
How many employees would an employer require in order to be considered a small employer: A 1-25 B 100 C 2-30 D 50 or less
D 50 or less *A Small Employer is any person, firm, corporation, partnership, or association that is actively engaged in business and has 50 employees or less.
How much time after a qualifying event has occurred and notice is given of their right to continue insurance does an employee or dependent have to elect continuation of the group health plan under COBRA? A 18 months B 90 days C 36 months D 60 days
D 60 days *An election to continue the group health plan under the provisions of COBRA must usually be made within 60 days of the qualifying event. Only in the event that proper notice was not given may the election period be extended.
Experience rating utilizes _______ in determining the rate the insurer will charge for group coverage in each year of coverage. A Actual loss experience of everyone in that zip code B Credit rating of all participants C The plan sponsor's credit rating D Actual loss experience of the group
D Actual loss experience of the group *Experience looks at claims experience. Creditworthiness of a business or its employees is not a factor in underwriting group insurance.
An employer group health insurance sponsor does all of the following, except: A Provide underwriting information B Apply for coverage C Pays the premium D Issue the policy
D Issue the policy *The group sponsor applies for coverage, provides information for underwriting, maintains the policy, and makes premium payments. Only insurers issue policies.
When employers who self-fund their employee benefits form a larger group in order to offer health insurance benefits to each employer's workers, it is called a (an): A Premium Discount Plan B Insurance Alliance C Trade Association D Multiple Employer Welfare Association (MEWA)
D Multiple Employer Welfare Association (MEWA) *A MEWA allows larger employers that self-fund employee benefits to form a group to reduce the cost of providing those benefits. A MEWA provides economy of scale, as would a Multiple Employer Trust (MET) for smaller employers.
Group health plans usually cover: A Both occupational and nonoccupational injury or disease B Neither occupational nor nonoccupational injury disease C Occupational injury or disease D Nonoccupational injury or disease
D Nonoccupational injury or disease *Group health plans usually only cover nonoccupational injury and disease. Workers' Compensation Insurance is designed to cover job-related injury or disease.
A firm with 50 employees replaces its existing group health plan. With regard to ongoing existing claims, the replacing insurer will be: A Required to keep paying them under the Dual Choice Provision B Allowed to deny claims over 60 days old under ERISA C Required to stop paying them under COBRA D Required to continue paying them under the No Loss-No Gain law
D Required to continue paying them under the No Loss-No Gain law *The No Loss-No Gain law (a.k.a. the Hold Harmless Agreement) establishes mandatory risk transfer.
Under COBRA, coverage for dependents of an employee may continue up to 36 months for any of the following events, except: A Death of the employee B The employee's eligibility for Medicare benefits C Divorce or legal separation between employee and spouse D Termination of the employee
D Termination of the employee *If the qualifying event under COBRA is termination of employment, the coverage may be continued only for 18 months.
Events that will cause termination of continuing health coverage under COBRA include all of the following, except: A The employer ceases to maintain any group health insurance plan B Timely premium payments are not made C The employee becomes eligible for Medicare benefits D The employee fails to convert to an individual health insurance plan on the day it is offered
D The employee fails to convert to an individual health insurance plan on the day it is offered *Events that will cause termination of continuing health coverage by COBRA include failure to pay premiums on time, cessation of group health coverage by the employer, and employee eligibility for Medicare benefits. Conversion is a separate benefit.
Regarding group health insurance, which is true? A Individual underwriting is utilized B The premium payment is the responsibility of each individual C Each plan participant receives a policy D The plan sponsor is issued the Master Policy
D The plan sponsor is issued the Master Policy *In group health insurance, only the plan sponsor receives a copy of the Master Policy. Covered individuals receive a Certificate of Insurance. The plan sponsor is responsible for paying the premiums.
A Taft-Hartley Trust would be formed to provide health and welfare benefits to which of these employees? A Managerial B Part-time C Disabled D Union-represented
D Union-Represented *The Taft-Hartley Act was enacted to limit the power of labor unions in the workplace.
Which is true regarding the advertising of Accident and Sickness Insurance? A When an agent misleads the public in an advertisement, only the agent is accountable B Advertisements may use words or phrases such as 'all', 'complete', 'comprehensive' C Sales talks and personal testimonials are not considered advertising D When insurers advertise that a group endorses a certain health product, the public must be made aware of any control the insurer may have regarding the group
D When insurers advertise that a group endorses a certain health product, the public must be made aware of any control the insurer may have regarding the group *Both agent and insurer are accountable. Such words as all, complete, or comprehensive are prohibited. Sales talks and testimonials are considered advertising and are regulated activities.
Experience rating
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.
Multiple Employer Trusts (METs)
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)
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.
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.
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.
Experience vs. Community Rating
Insurers may use experience or community rating when determining cost for group health insurance during underwriting.
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.
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 a minimum number of members (usually 100) and be 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 is the Master policyholder and handles all funds for the group.