6.1

Question 1

______ insurance is a class of insurance characterized by a single policy that provides life or health insurance coverage for multiple members of an eligible group. Although both group and individual policies are similar in the benefits they provide to eligible members, the characteristics of group insurance are different from that of individual insurance.

Answer 1

Group

Question 2

A ______ is a policy that is issued to an individual or family and provides coverage for immediate members of the family. Policy premium costs, underwriting requirements and benefits provided by an individual insurance policy are unique to the individual or family for which the coverage is provided.

Answer 2

An Individual Insurance policy

Question 3

A Group Insurance policy is a single policy that is issued to the ______, or ‘plan sponsor,’ of an eligible group, such as an employer, association, union, trust, or other similar group that meets the requirements set forth under state law for group life or health insurance. Group insurance provides coverage for the members of an eligible group, as well as their dependents.

Answer 3

administrator

Question 4

Referred to as a ______, a group policy is a single policy purchased by the group to provide coverage for eligible members of the group, in comparison to a separate policy for each member of the group. Policy premium costs, underwriting requirements and benefits provided under a group insurance policy are based on the group as a whole, not each member of the group.

Answer 4

‘master contract,’

Question 5

The majority of group insurance contracts are ______ and provide insurance coverage to full-time employees, typically beginning after a 90 day ‘probationary period’ after the date of hire, and providing an ‘eligibility period’ that extends for 30 or 31 days after becoming eligible for coverage without having to show proof of insurability.

Answer 5

employer-based

Question 6

In a group policy, a Master Contract is created between the insurer and the ______. Since a group insurance contract is established between the plan sponsor and the insurance company, not between the insurer and the members of the group, it is the plan sponsor who is in control of the contract.

Answer 6

plan sponsor

Question 7

The plan sponsor is responsible for the ______ of the group policy including notifying new members of enrollment eligibility, submitting member applications, paying group policy premiums, and assisting members with filing claims.

Answer 7

administration and recordkeeping

Question 8

In addition, the ______ is responsible for maintaining insurance files for all members of the group including any changes in employment, changes in classes of employment, policy benefit amounts or any beneficiary changes, to name a few responsibilities.

Answer 8

plan sponsor

Question 9

As proof of coverage under a group insurance policy, eligible members of the group receive a ______. The certificate summarizes the type and amount of insurance provided to members of the group, as well their rights under the policy. It also explains the specific benefits under the plan such as the effective date, age limits, notice of claim, proof of loss, and the right to convert to individual coverage if the group coverage is terminated.

Answer 9

Certificate of Insurance or Certificate of Coverage

Question 10

When an individual is hired by an employer and joins the employer’s group insurance plan, he or she is entering into a contract with the employer, not the insurance company, and as such, he or she is provided with the ______ as proof of coverage under the employer-based life insurance policy.

Answer 10

certificate of insurance

Question 11

One of the characteristics of group insurance is the ______ of an insurance contract by someone other than the individual being insured.

Answer 11

right of ownership

Question 12

In comparison to an individual life or health insurance policy, ______ is not required by each member within a group.

Answer 12

proof of insurability

Question 13

The lack of individual underwriting is especially beneficial to individuals who may have a ______ and might otherwise not qualify for an individual insurance policy. However, several high-risk individuals within a small group can affect the overall eligibility of the group, creating a ______, or high risk group which could be denied coverage as a group.

Answer 13

high-risk health history

‘risk adverse,’

Question 14

Although individual underwriting is not required for a group policy, to reduce ‘adverse selection,’ a group cannot be formed solely for the purpose of ______.

Answer 14

getting insurance

Question 15

As defined by the NAIC, a ______ is a group that is formed for some reason other than to obtain insurance, such as an employer group, association, union, trust, labor group, fraternal benefit society or other similar organization. Insurance is provided by an organization as a benefit of employment or membership in the group, but is not central to the formation of the group.

Answer 15

Natural Group

Question 16

______ includes examining the nature of the group as well as the number of members in the group. Factors such as the location of the group or its members, the type of occupation or vocation, number of smokers and the average age of the group’s members are reviewed.

Answer 16

Group underwriting

Question 17

Higher risk groups such as a construction workers unions or firefighters associations pose more of a risk to an insurer than do office workers or teachers, and as a result, groups are underwritten accordingly. Most high-risk professions are insured in ______ by insurers that have the financial strength capable of covering claims made by the group.

Answer 17

large numbers

Question 18

A group’s financial strength is also reviewed by the insurer as it indicates the group’s ability to ______ based on its financial history. Again, an insurer’s goal is to ______, and although the insurer is willing to accept more risk from the group than from an individual, the group as a whole must meet certain underwriting standards established by the insurer.

Answer 18

pay policy premiums

produce a profit for its shareholders

Question 19

Another characteristic of group insurance is its ______, meaning that an insurer requires a certain percentage of new members to join the group policy each year in order to maintain the group’s policy.

Answer 19

Turnover Rate

Question 20

Group ‘turnover’ helps an insurer ______ and premium amount payable by the group by introducing new members to the group to offset any members who leave the group each year.

Answer 20

maintain a certain level of risk

Question 21

The NAIC defines a ______ as a group with at least 10 members; however, in regards to policy premium and adverse selection, the larger the group, the more predictable its losses, and as a result, the lower the premium and the less likely individual underwriting is required. Ultimately, each state determines its own minimum regarding the number of members necessary to form a group insurance contract.

Answer 21

True Group

Question 22

Another characteristic of group insurance is the ______ in issuing and maintaining a group contract, as opposed to a group of individual policies. The lower the ______, the lower the premium, thus allowing the insurer to provide more benefits at a lower cost than it could on an individual policy basis.

Answer 22

reduced costs

administrative costs

Question 23

An individual insurance policy’s ______ is based on the characteristics of the individual including his or her age, geographical location, health history, occupation and hobbies. Each of these factors has the potential of ______ to the insurer, and as a result, an increased premium rate for the individual.

Answer 23

premium rate

increased risk

Question 24

In comparison, the basis for a group’s premium rate is reflected by the ______, not of its individual members.

Answer 24

overall risk of the group

Question 25

Although insurers avoid groups that are risk adverse, one of the major benefits of joining a group policy is the ______ in relation to a similar individual policy that is based on the risk of the individual.

Answer 25

reduced premium rate

Question 26

Depending on the size of the group, most group premium rates are more affordable than individual rates, especially for higher risk individuals who might otherwise pay a higher premium rate on an individual policy or even be ______.

Answer 26

declined due to a high-risk medical condition or medical history

Question 27

Although ______ does not occur in a group policy, in order to provide a group with the correct premium rate, an insurer underwrites the ______ based on the overall risk of the group.

Answer 27

individual underwriting

group as a whole

Question 28

When a new group initially applies for insurance, an insurer cannot assess the group’s ______ since a claims history does not yet exist between the new group and the insurer.

Answer 28

future claims potential

Question 29

In the case of a new group, the insurer underwrites the group based on the ______, or the rating provided by the insurer to all people who are covered by the same type of policy in the same geographic area as the group being underwritten. Also referred to as a ______, the insurer determines the group’s rate based on the general rate provided to others within the community in which the group exists.

Answer 29

Community Rating

‘non-experience’ rating

Question 30

Adopted by the NAIC, most states require small group policies, typically with 50 or fewer members, to remain under ______ in calculating annual premium fluctuations.

Answer 30

an ‘adjusted’ community rating

Question 31

In comparison, once a larger group policy has been established, future premium amounts are calculated based on the ‘experiences,’ or claims of the group that are made against the insurer. Using a method referred to as ______, an insurer considers the specific claims experience made by the group in previous years in order to determine the correct amount of premium necessary to cover predicted claims by the group as well as other expenses associated with the group, while still ______. Annual premium fluctuations for a group policy are based on the experience rating calculated by the insurer resulting from the previous claims experience of the group.

Answer 31

Experience Rating

producing a profit for the insurer’s shareholders

Question 32

As a means of preventing large premium increases from one year to the next, states also set limits, referred to as ______ on the percentage that an insurer can vary annual premiums based on the case characteristics or experience of the group.

Answer 32

‘rating bands,’

Question 33

In addition to the size and type of group being underwritten, the group’s ______ and member participation structure is determined at the inception of the policy. As defined by the NAIC, a group insurance plan is considered to be ______

Answer 33

premium contribution

‘non-contributory’ or ‘contributory.’

Question 34

In a Non-Contributory group plan, premiums are paid entirely by the master contract holder, with no contribution of premium by members of the group. Member participation in the group is provided to ______.

Answer 34

all members of the group.

Question 35

In a Contributory group plan, the master contract holder, as well as the members of the group, contributes towards the group’s premium together. At least ______ of the group’s members must participate in the group policy. Most states mandate that in an employer-based group, the employer is always ______.

Answer 35

75%

required to pay some portion of the group’s policy premium

Question 36

When offering group coverage to members of the group, most states require an ______ that prevents discrimination against individuals within the group and prohibits coverage only to select members. State law requires uniform coverage for insured employees within the same classification based on ______. An underwriter must ensure that adverse selection does not exist between individuals within the same classification.

Answer 36

eligibility structure

tenure, job description or salary

Question 37

Members of the group can be categorized according to various classifications such part-time or full-time employees, hourly employees, salaried employees, union vs. non-union employees, and retired employees. Individuals within the group cannot determine the type or amount of benefits as benefits may be offered or denied based only on the ______.

Answer 37

classification of the individual within the group.

Question 38

Group dependent coverage is defined by a relationship such as a spouse, child, dependent parent, or anyone whom dependency to the insured member can be proven. Based on new legislation, a child can remain on a family policy up to age ______.

Answer 38

26, or longer if they are dependent due to permanent disability (mentally or physically).

Question 39

Most group insurance plans include an initial period of time, called a ‘probationary period,’ that extends 90 days after employment begins and before insurance coverage is offered to the newly hired employee. This period of time serves to ______ by excluding the expected employee turnover that typically occurs within the first 90 days of employment.

Answer 39

eliminate unnecessary administrative costs for the insurer

Question 40

In a Contributory group plan, the eligibility period, also referred to as the ______ is the period of 30 or 31 days following the probationary period in which a new member of the group may apply for coverage without having to submit to a medical exam for eligibility. The eligibility period is especially important for members with ______ so that they can join the group insurance policy without having to complete a medical exam.

Answer 40

enrollment period

pre-existing conditions

Question 41

After a new member’s eligibility period ends, ______is required for future enrollment into the group’s insurance plan, meaning that if a new member to a group fails to enroll into the group’s insurance plan during his or her eligibility period, he or she will be required to complete a paramedical exam to qualify to join the group insurance plan.

Answer 41

individual underwriting

Question 42

A ______ for group insurance coverage is the same as an individual applying for an individual insurance contract. If the medical exam’s results show an individual to be of ‘substandard’ or ‘uninsurable’ risk, it can eliminate an individual’s ability to enroll into the group plan and/or change his or her premium, subject to its results, from the initial group rate premium offered by the insurer during the member’s eligibility period.

Answer 42

paramedical medical exam

Question 43

In comparison to the eligibility period of a contributory group plan, in a Non-Contributory group plan, new members of the group are automatically covered by the group’s insurance plan immediately after the ______.

Answer 43

new member’s probationary period ends.

Question 44

______ is the process of underwriting the group as a whole, not its individual members. If the group meets the underwriting standards of the insurer, it is accepted. If rejected, the insurer must reject the entire group, not specific individuals within the group.

Answer 44

Group Risk Selection

Question 45

Referred to as ______, a policy can be purchased by someone other than the insured, such as a parent, spouse or employer, as long as insurable interest is present at the time of application.

Answer 45

Third-Party Ownership

Question 46

A group policy must be established for the benefit of the insured members and their dependents, not ______.

Answer 46

the group’s master contract holder.

Question 47

To avoid ______ resulting from the lack of a sufficient number of individuals in which to provide an ‘experience rating,’ most states mandate that small group premium rates must be based on the ______, not based on the claims experience of the group itself; however, the group’s rate is ‘adjusted,’ or modified to account for specific factors, referred to as ‘case characteristics,’ relative to the group in addition to geographic area and group size such as age, gender, family composition and occupation industry. Some states, such as New York, mandate small group insurers to maintain a community rating without any adjustments for case characteristics.

Answer 47

adverse risk selection

community