Chapter 8 Flashcards
Accident & Health Policy (A & H)
Policy covering both injury and sickness.
Accidental Injury
A spontaneous event, unforeseen and unintended resulting in injury.
Adverse Selection
The tendency of more bad risks than good risks to purchase and maintain insurance.
Coinsurance
Is a participation requirement whereby the insured must share, on a percentage basis, the cost of expenses in excess of the deductible.
Copayment
Is an amount paid by the insured person each time a medical service is accessed. For example, if an office visit costs $100, the insured may have a copayment of $20 for each office visit.
Deductible
The amount the insured pays on a claim. This is cost containment method designed to help control rising premium costs. It can be expressed as a specific dollar amount that the insured pays first.
Elimination (Waiting) Period
A type of time deductible. A period of days that must expire after onset of an illness or occurrence of an accident before benefits will be payable. The longer the elimination period, the lower the cost of coverage.
Extension of Benefits
If a group Medical Expense Policy is terminated for any reason, the benefits to a disabled insured are extended 3 months for Basic Medical Expense and 12 months for Major Medical Expense. If the coverage is terminated on an individual basis, the Major Medical Expense is to the end of the following calendar year after termination. The disability must occur while covered by the terminated policy. The disability must occur while covered by the terminated policy.
Gatekeeper Concept
This establishes a primary care physician (Gatekeeper) to monitor the insured’s health care needs. This concept helps to control costs by not recommending unnecessary services, including referrals to other physicians and specialists. Not using the primary care physician or gatekeeper may cause a claim to be denied.
Managed Care
This is a system whereby the insured participates in a specific care system such as a HMO or PPO. Care must be provided within the system’s network of providers and facilities unless an emergency makes such treatment impossible or impractical.
Master Policy Owner
This refers to the employer or group which is issued and controls the actual policy. Each employee or group member receives a Certificate of Insurance rather than a copy of the actual policy. The Certificate lists the coverages and who is covered under the certificate.
Morbidity Table
Table showing the mathematical probability of disability (illness or injury).
Peril
Specific Causes of a loss
Policy Period
Time interval when the policy is in force; A & H policy typically for 1 yar.
Pre-Existing Conditions
Prior medical conditions for which the applicant has received, or should have received medical advice or treatment within a specified period before the effective date of a policy.
Probationary Period
A specified period of time, such as 30 days, that a newly hired employee must satisfy before being enrolled in a group health plan. It is intended for people who join the group after the policy effective date.
Sickness
Illness or Disease which first manifests itself or which is first diagnosed and treated while the policy is in force.
Stop Loss Provision
Monetary Limit which, once reached, the insurer pays the full amount of healthcare costs. For example, an insured may be required to pay 20% of the healthcare costs (coinsurance) up to $1,000.
Waiver of Premium
Premiums are waived by the insurer after a stated time period (usually 3 to 6 months). Premiums are not paid by the insured until such time s/he has recovered from the disability; then premiums are resumed at the same mode and amount.
Principal Types of Losses and Benefits
Loss of Income/Disability (Loss of Time) Medical Expense Dental Expense Long Term Care Expenses Accidental Death and Dismemberment
Loss of Income/Disability (Loss of Time)
Valued contract that pays weekly or monthly benefits due to injury or sickness. The benefit is a percentage of the insured’s past earnings.
Medical Expense
Contract that covers the various expenses which an insured may incur due to a disability or illness. It may provide payment in a variety of ways.
Scheduled - pays benefits in the amount as listed for each specified expense.
Cash - pays a lump sum payment up to the stated maximum number of days.
Reimbursement - pays benefits directly to the insured, unless assigned to the provider(s) then it pays directly to the provider.
Fee for Service - Pays directly to the provider for the medical services received.
Prepaid - provides and coordinates health care in return for predetermined monthly premiums.
Dental Expense
A form of Medical expense health insurance covering the treatment and care of dental disease and injury affecting the insured’s teeth. Optional feature with maximum limitations annually or life of the contract.
Long-Term-Care Expense
Product designed to provide coverage for necessary diagnostic preventative, therapeutic, rehabilitative, maintenance, or personal care services provided in a setting other than an acute care unit of a hospital, such as a nursing home or even one’s own home.
Accidental Death & Dismemberment
Pays (principal amount) upon accidental death, loss of sight or loss of 2 limbs. It also pays a smaller amount (capital amount) as per policy schedule for lesser accidental dismemberment losses. It may be added as a rider to a disability income, medical expense or life insurance policy.
Field Underwriting Nature and Purpose
Field underwriting is very important due to the risk of a moral hazard. It includes the agent’s initial personal contact with the applicant and the determination of insurability while assisting the applicant in recording information on the application. Fundamentally, the purpose is to be certain that a prospective insured individual or group has the same probability of loss for which the premium rate is based.
Underwriting Factors
Demographics Smoking/Non-Smoking Hobbies Physical Condition Moral, Morale, Financial Hazard Medical/Health History Chronic/Ongoing Conditions Foreign Travel/Residence Other Insurance Plan Applied For Carrier History
Underwriting Factors
Underwriting involves analysis of the applicant to determine if he/she is acceptable for the insurance proposed under the conditions indicated. It also attempts to eliminate conditions with more frequent and higher claims than the insurer’s rates anticipates.
Net Insurance rates are obtained by multiplying claim frequency by the average value of claims.
Demographics
Age - increased age increased risk.
Gender - Women generally live longer than men
Occupation - When an applicant has more than one occupation, the most hazardous will be used for rating.
Location - temperature, climate, can affect and increase health risks.
Smoking/Non-Smoking
Smoking is a physical hazard that increases health risks.
Hobbies
Many of these pose physical risks, such as diving, racing, skiing.
Physical Condition
Once health has declined, it’s extremely difficult to restore it. The unhealthy are more risky.
Moral, Morale, Financial Hazard
Hazard is an increase of risk, so any type of hazard will be considered.
Medical/Health History
Some health conditions are genetic, also considered here are disabled employees.
Chronic/Ongoing Conditions
A chronic illness is generally held to be that which lasts 3 months or longer. Extended illness increases the probability of loss.
Foreign Travel/Residence
Many nations do not have the same sanitary/safety standards of the US, and the visitor is more susceptible to illness or injury. The more frequent the foreign travel, the greater the risk.
Other Insurance
Insurers want to know if a prospective client has already been denied coverage. If so, that means the client is likely a higher risk.
Plan Applied for
As with any other product, a health insurance policy’s cost will be affected by what the customer wants it to do. The more bells and whistles the client wants, the more risks are being covered and to a greater degree.
Carrier History
If an existing carrier is being replaced, the new insurer will consider what the previous carrier has already had to pay in claims. This is another indication of the risk being considered.
Note that political and religious preference is not considered in determining rates. When an applicant has 2 occupations, the most hazardous will be used for rating.
Underwriting Actions
Upon receipt of an application for insurance, the insurer's underwriting will take one of the following actions: Issue Standard Issue Rated-Up Issue with Exclusions/Limitations Rejection
Issue Standard
Issue the coverage requested at the rate that was quoted.
Issue Rated-Up
Issue the coverage requested but at a higher rate. Same as substandard in life insurance. Higher premiums are required due to the greater potential for a large number of claims.
Issue with exclusions/limitations
May be temporary or permanent, limits the insurer’s obligation to pay. The rider used to exclude coverage for existing conditions is sometimes referred to as an Impairment Rider.
Rejection
Policy is not issued, applicant is excessive risk
Health Group Underwriting Process
Most health insurance 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. Cost is determined by the type, size, average age, location and the group’s claims experience. 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. Insurer’s corporate office location is not a cost factor. Evidence of insurability is not required since annual re-evaluation makes premium adjustments possible, based upon the group’s claims experience.
Group Health Requirements
The group must be formed for a purpose other than obtaining insurance.
A minimum number of enrollees are required.
Contributory requires that at least 75% of employees participate
Noncontributory requires the employer to insure 100% of employees. Employees have to work a minimum number of hours weekly to be eligible. Independent directors and contractors are not employees.
Group Health Underwriting Cont.
New employees are usually eligible to enroll after a probationary period. If they do not enroll upon becoming eligible, and enroll later, the insurer may require proof of insurability. If the employee doesn’t initially enroll, he/she may do so at the next enrollment period, which is typically the plan’s anniversary date. Proof of insurability is not required during enrollment period.
Health Group Insurance Rating
Can be Community or Experience rating.
Community Rating - essentially geographical rating. The cost of medical care within a particular geographical area or community determines how much the plan’s premium will be.
Experience Rating is the utilization of the claim history of the group seeking to purchase insurance to determine how much the plan’s premium will be.
Advantages/Disadvantages
Advantages of group coverage include cheaper premiums and underwriting standards are generally not as strict. Disadvantages include the percentage of participation requirements, enrollment requirements and the potential for change in insurers. Individual policies can be obtained any time with any company of the insured’s choosing.
Group Plan Design Factors
Employer's Objectives Types of Benefits a Plan should Provide Plan Provisions for controlling costs Benefit plan Communication Benefit Outsourcing
