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Life & Health Insurance Exam > Chapter 13: Group Health Insurance > Flashcards

Chapter 13: Group Health Insurance Flashcards

1
Q

Characteristics of Group Insurance

A
  • Similar in nature to Group Life Insurance
  • Only nonoccupational (not work-related) injury or disease
  • Must be considered a natural group
  • Group sponsor receives Master Policy, while individual employees receive a Certificate of Insurance and a Summary of Benefits
  • All employees have same coverage
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2
Q

Types of Eligible Groups

A
  • Multiple Employer Trusts (METs)
  • Multi-Employer Welfare Associations (MEWAs)
  • Labor Unions
  • Associations
  • Blanket Insurance
  • Customer Groups
  • Risk Pools
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3
Q

Multiple Employer Trusts (METs)

A

Entities formed by unrelated businesses in the same or related industrial classification. 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 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
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4
Q

Multi-Employer Welfare Associations (MEWAs)

A

Generally formed by larger employers for the purpose of obtaining more favorable rates for life and health insurance. These groups primarily consis 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.

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5
Q

Labor Unions

A

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.

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6
Q

Associations

A

Must have at the outset a minimum number of members, usually 100, and is organized for a purpose other than buying insurance. The association would be the Master policyholder and handles all funds for the group.

Ex. Teacher associations, trade associations, professional associations, and alumni associations.

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7
Q

Blanket Insurance

A

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.

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8
Q

Customer Groups

A

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

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9
Q

Risk Pools

A

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.

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10
Q

Eligibility for Coverage

A
  • Must be considered full time
  • Work minimum of 30 hours/week
  • Must be actively at work before they can enroll
  • Employer cannot discriminate when determining eligibility and employee benefits
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11
Q

Open Enrollment Period

A
  • Underwriter’s greatest concern is adverse selection
  • Group plans have a probationary period set by the group sponsor
  • Once probationary period is over, employee has 30 days to enroll - coverage guaranteed if employee enrolls during this time.
  • Employees who do not enroll during this period are considered late enrollees and must provide evidence of insurability unless they wait until the next open enrollment period.
  • Annual enrollment offered each year
  • Employees can make changes to the plan outside of open enrollment if they have a change in status (going from part-time to full-time, get married, or add/drop dependents).
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12
Q

Dependent Eligibility

A
  • Employee’s spouse (Domestic Partner if recognized by the state)
  • All children from birth until age 26 - disabled children who are not capable of self-support may continue beyond 26 (as long as they are chiefly dependent upon employee for support). Proof of child’s incapacity and dependency must be furnished to insurer within 31 days of the child’s attainment of the limiting age.
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13
Q

Nonduplication and Coordination of Benefits

A

Method of determining primary and secondary coverage when an insured is covered by more than one group policy. Helps to prevent nonduplication (or overinsurance) which is having more than 100% of a claim paid. Plan that covers that person as an employee is their primary coverage, and coverage as a dependent under a spouse’s plan is secondary.

If children are covered by more than one group plan, the “birthday rule” applies - the plan covering the parent whose birthday occurs first in the calendar year will be the children’s primary coverage. Secondary carriers will only pay claims that are not covered or 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.

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14
Q

Employer Group Underwriting Process

A
  • All eligible members of the group are covered regardless of physical condition, age, or gender
  • Group plan may not discriminate in favor of executives or other highly compensated persons
  • In essence, the entire group is viewed as an individual and underwriter will take careful measures to protect against adverse selection by appropriately rating each group as a whole.
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15
Q

Experience vs. Community Rating

A
  • Experience rating is determined by examining the history of claims a particular group experiences - insurer uses past experience to predict future cost
  • Community rating determines premiums by examining a particular geographic region of all insureds in a group.

*In multi-state groups, cost is determined by the state in which a majority of the employees are located and the policyholder’s principal office location. Insurer’s corporate office location is not a cost factor. Annual re-evaluation makes adjustments possible based on group’s claims experience. Average age, gender, and size of the group will also be a factor in cost.

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16
Q

Plan Design Factors

A

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.
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17
Q

Persistency

A

Another important underwriting factor that 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.

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18
Q

Administrative Capability

A

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.

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19
Q

Coinsurance and Deductible Carryover

A

In the event that a group health plan changes insurers 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.

20
Q

Reinstatement for Military Personnel

A

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 deployment.

21
Q

No-Loss-No Gain for existing claims and pre-existing conditions (Hold-Harmless Agreement)

A

The No-Loss-No Gain legislation requires that when a 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.

22
Q

Events that terminate coverage

A

Group coverage may be terminated for an employee if employment is termination, the employee not longer meets eligibility requirements (ex. becomes part-time), or if the group contract is terminated.

23
Q

Extension of Benefits

A

When a group policy is terminated of 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 claim until it is resolved, or the new insurer will take over. Employees and their dependents who are on claim at the time of the cancellation/termination of employment will continue to be covered by the former group plan until the claim has ended.

24
Q

Conversion Privilege

A

Allows and 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 the insurer within 31 days after the qualifying event. Not all insurers offer this privilege, but if they do, individual plan premiums will be higher and the coverage will not be as comprehensive.

25
Q

Continuation of Coverage under COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985)

A

Employers with 20 or more employees must provide health coverage continuation option to all covered employees and dependents for up to 18 months in the event of:

  • Termination of employee (unless it is for a cause as defined by federal law)
  • Reduction of hours for employee so they no longer qualify as full-time
  • May continue up to 29 months if an employee qualifies for Social Security disability
26
Q

COBRA coverage may continue for dependents for up to 36 months for certain qualifying events:

A
  • Death of employee
  • Divorce or legal separation
  • Employee’s entitlement to Medicare benefits
  • Loss of dependent status (Age 26)
27
Q

Events that will cause termination of continuing health coverage by COBRA are:

A
  • Timely premium payments not being made
  • Employer ceases to maintain and group health plan
  • Employee becomes eligible for Medicare benefits; dependents may remain under COBRA
  • Employee becomes eligible for any other group health plan
  • Employee converts to an individual health plan
28
Q

Notification of individual’s right to COBRA coverage

A

Required at two times:

  • First time is when a group plan commences or is amended to include the continuation of coverage provision
  • Second time is when a qualifying event occurs - employees must be notified within 14 days of qualifying event and employee or beneficiary must notify the employer within 60 days if they elect to continue coverage
29
Q

Recipients of COBRA coverage:

A
  • Are required to pay premiums to the employer
  • Employers may require former employee or their surviving spouse to pay up to 102% of the premium
  • The continuation of coverage:
    • Requires no evidence of insurability and provides the same benefits as group policy
    • Covers preexisting conditions if they are covered under group policy
    • Dependent coverage must be made available on the continuation policy, if insured carried dependent coverage on the group.
30
Q

HIPAA (Health Insurance Portability and Accountability Act of 1996)

A

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 individuals enrolling in group or individual plans.

31
Q

HIPAA Individual Plans and Eligibility

A

HIPAA guarantees that individuals who meet the eligibility requirements will have access to, and will be able to renew, and individual health plan. Eligibility requirements:

  • Not covered under any other health insurance plan
  • No prior coverage terminated due to nonpayment
  • Have 18 months creditable coverage with the most recent coverage under and 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
32
Q

HIPAA Group Plans

A

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 no other coverage is lost or certain life events occur
  • 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
  • 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.
33
Q

HIPAA Guaranteed Coverage

A

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.

34
Q

HIPAA Preexisting Conditions

A

The plan may impose a preexisting condition exclusion for a condition that the insured received medical advice, diagnosis, care, or treatment for within the past 6 months. There is a limit to the preexisting condition exclusion period that can be applied, which HIPAA limits for most people to 12 months, or 18 months for a late enrollee.

In order for preexisting conditions to be covered, there can be no more than a 63-day gap in continuous coverage.

35
Q

HIPAA Renewability

A

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 material provision, such as maintaining a minimum required percentage of participation
  • Plan sponsor commits act of fraud or intentional misrepresentation of a material fact regarding the terms of the plan
  • 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
36
Q

HIPAA does not:

A
  • 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
37
Q

Types of Small Employer

A
  • Business Group of One
  • Small Employer
  • Eligible Employee
38
Q

Business Group of One

A

An individual, sole proprietor, or a single full-time employee of a S Corporation, C Corporation, Limited Liability Company, or partnership who has carried on business activities for at least one year prior to application date. Business must have generated taxable income in one of the previous 2 years.

39
Q

Small Employer

A

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

40
Q

Eligible Employee

A

An employee who has a regular work week of at least 30 hours. This does not include an employee who works on a temporary or substitute basis. Waiting period for eligibility cannot exceed 90 days.

41
Q

Small Employer Medical Expense Insurance Renewability of Coverage

A

A health benefit plan will be renewable with respect to all eliigible 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
42
Q

Worksite Plans

A

Voluntary benefit plans offered by insurance companies and premiums are withheld as payroll deductions by the employer. Plans are issued as individual coverage and are portable, meaning they can keep them following termination of employment by paying premiums directly to insurer.

Examples include:

  • Dental insurance
  • Vision insurance
  • Accident-Disability insurance
  • Short-Term Disability insurance
  • Long-Term Disability insurance
  • Critical Illness insurance

*Rarely governed under ERISA

43
Q

Worksite plans have flexible payment funding options:

A
  • Employer only (uncommon)
  • Employee only (most common)
  • Cost shared program designed by the employer, where the employer contributes funds for an FSA plan
  • Section 125 Cafeteria Plan option allows premiums to be paid with pretax income
44
Q

Medicare Carve-Out

A

Integrates an employer-sponsored plan with Medicare Parts A and B for retired employees. Medicare becomes the primary payor and the employer plan will provide benefits up to the limits of the group plan.

45
Q

Additional Federal Regulation of Group Insurance

A
  • Age Discrimination in Employment Act (ADEA)

- Civil Rights Act/Pregnancy Discrimination Act (PDA)

46
Q

Age Discrimination in Employment Act (ADEA)

A

Age discrimination involves treating an applicant or employee less favorably because of their age. The ADEA:

  • Applies to groups with 20 or more employees
  • Forbids age discrimination against people who are age 40 or older
  • Provides that employers cannot deny older workers coverage under a group health plan
47
Q

Civil Rights Act/Pregnancy Discrimination Act (PDA)

A

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

Life & Health Insurance Exam (15 decks)

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