Group Health Insurance I

Question 1

Certificate of coverage

Answer 1

Contract for coverage between an insurance company and an employer.

Question 2

Master policy

Answer 2

A master policy is issued to an employer when it purchases group health. The individual insured do not receive separate policies, instead they receive certificates of insurance and a booklet outlining the benefits.

Question 3

Group vs. Individual Health Plans

Answer 3

A group plan:

• more extensive benefits
• higher benefit maximums
• lower deductibles

Question 4

Enrollment Period

Answer 4

The limited period of time during which all members may sign up for a group plan.

A new member may sign an enrollment card during the open enrollment period.

Question 5

Small groups vs. large groups

Answer 5

• small groups: 1-50 employees

- large groups: 51+ employees

Question 6

Probational Period

Answer 6

The period of time when a new employee is in eligible for the group health insurance coverage.

Question 7

A natural group

Answer 7

A group must be formed for reasons other than to obtain insurance to qualify for group health insurance coverage.

Question 8

Qualifying groups

Answer 8

Employers, labor unions, trade associations, creditor-debtor groups, multiple employer trusts (employers in the same industry), lodges, etc.

Question 9

Minimum number of people under a group insurance

Answer 9

• stipulated by state laws
• 10 is usually the lowest minimum
• temporary employees are usually not eligible for group insurance coverage

Question 10

Individual eligibility

Answer 10

• minimum 1-3 months in employment
• full-time employment status
• employees age is 65 and above should be offered the same health benefits as the younger employees

Question 11

Non-contributory

Answer 11

• if an employer pays the entire premium, the plan is non-contributory
• most non-contributory plans require 100% participation by eligible employees.

Question 12

Contributory

Answer 12

• if employees pay a portion of the premium, the plan is called contributory
• most contributor plans require participation by 75% of eligible employees

Question 13

Reasons for minimum participation requirement

Answer 13

• to protect the insurer from adverse selection

- to keep the administrative expenses in line with coverage units.

Question 14

Factors determining a group health insurance premium

Answer 14

• The size of the group
• the claims experience with previous insurers
• the ages of group members
• the characteristics of the group as well as plan design

Question 15

Self-funded

Answer 15

• Like electricity bill, go as you pay
• the employer assumes the financial risk for providing health care benefits to its employees
• Self-Insured employers pay for claims out-of-pocket as they are presented instead of paying a pre-determined premium to an insurance carrier for a Fully Insured plan
• Typically, a self-insured employer will set up a special trust fund to earmark money (corporate and employee contributions) to pay incurred claims
• A self-funded employer may hire administrative services

Question 16

Shared Funding Arrangement

Answer 16

• allows an employer, esp. small biz to self fund health insurance up to a limit
• select a deductible, and pay claims up to the maximum limit, after that, the insurer assumes the risk.
  (more reading: https://svg.agency/explanation-shared-funding-self-funding/)

Question 17

Minimum Premium Arrangement

Answer 17

A health insurance plan that is partly self -insured by the employer, however is fully administered by the insurance carrier. The employer pays all claims up to an agreed amount, and the carrier pays the rest.

Question 18

Retrospective Premium Arrangement

Answer 18

• provides for retrospective determination of the policyholder’s premium obligations according to a formula based on the cost of claims actually paid by the insurance company under the policy
• calculated yearly
• the insurer collects a provisional premium payment at the beginning of the accounting period.

Question 19

Pre-determined benefits

Answer 19

• In a group health insurance plan, the benefits of the individual insured are pre-determined by the employer based on the insurer’s benefit schedules and coverage limits
• e.g. group disability insurance tied to a position or earnings schedule.

Question 20

Underwriting Practices of group health insurance

Answer 20

• less restrictive than individual plans
• no need for an individual to prove insurability
• Medical or physical exam not required
• because the large number of participants in a group plan reduces the probabilty of adverse selection

Question 21

Guaranteed health insurance coverage for small employers

Answer 21

• can’t deny coverage based on the health history of group members or the category or nature of the biz
• Plans offered must include standard and essential types of benefits to all eligible employees and their dependents.
• Guaranteed renewability

Question 22

A small employer with <=25 employees

Answer 22

• eligible for federal premium tax credits

- the employer must purchase the plan through the SHOP program to qualify for credits

Question 23

Pre-existing condition in a small-group health insurance plan

Answer 23

• 6 months of wait period
• Pre-existing: a medical condition that can be treated or a prudent person would seek medical advice within a certain period, not exceeding 6 months
• coverage for pre-existing conditions can’t > 12 months since the insurance coverage takes effect.

Question 24

Large group health insurance

Answer 24

• coverage not guaranteed, but guaranteed renewability

- Premium determined by past claims experience & occupational classes.

Question 25

Change of rates upon renewable

Answer 25

• due to different mix of employees +

- the group’s claim experience in the past year.

Question 26

Group Eligibility & rating factors

Answer 26

Demographics (age, gender, occupation); 2) type of industry or work performed ; 3) location of the group or zip code; 4) carrier history (work related accidents or claim submissions); 5) medical history of plan participants; 6) chronic or ongoing condition of plan participants; 7) catastrophic conditions; 8) pregnancies; 9) 10) # of disabled employees and dependents (no actively at work, as an extension of benefit from a former carrier); 11) plan contribution (contributory or non-contributory); 12) plan participation rate (covered or eligible employee and dependents)

Question 27

Change of coverage & impacts on employees

Answer 27

• Co-insurance and/or deductible carryover must be considered
• In many cases, when a plan is changed, an employee is allowed to apply any expenses in the final quarter of the year to the following year’s deductible under the subsequent plan

Question 28

Coverage change & insurer considerations

Answer 28

The key goal is to reduce adverse selection

• Eligibility determination, .e.g. add sickness-related probationary period
• Non-contributory payment is preferred since it requires 100% participation, thus, reducing the probability of adverse selection
• Prior claims experience of the group
• Size & composition of the group
• Industry or business association, e.g. hazardous industries higher mortality & morbidity rates

Question 29

Conversion Privilege

Answer 29

• universal for group insurances providing medical expense coverage
• when an individual leaves employment
• Must be within a certain period, depending on the state, usually 31 days
• Insurer can’t deny coverage even though the individual is uninsurable
• During the conversion period, the applicant is insured under the group plan
• conversion privileges reserved for those who were active in the group plan in the preceeding 3 months.