Insurance8

Question 1

Characteristics of Group Insurance

Answer 1

Insures many people in one contract
■ Usually less expensive than individual insurance
■ Sponsor receives master contract
■ Participants receive a certificate of insurance
■ Premium
–– Experience rating—based on claims history of the individual group
–– Community rating—based on pooling groups (also used in rating individual insurance)

Question 2

Eligible Groups

Answer 2

Group can’t exist solely for the purpose of buying insurance
■ Employer sponsored
■ Multiple employers combined
–– Multiple employer trust (MET)
–– Multiple Employer Welfare Arrangement (MEWA)
■ Labor unions
–– Taft Hartley Trust
■ Trade or professional association
■ Lender group
–– Lender is paid
–– Amount insurance no greater than the debt

Question 3

Group Underwriting Considerations

Answer 3

Size of the group-small group, 2-50 lives, large group, 51 or more lives
■ Composition of the group
■ Flow of members through the group
■ Plan design
■ Contributory or noncontributory:
–– Contributory—employees pay part or all of the cost
■ Minimum 75% participation
–– Non-contributory—employer pays entire cost
■ 100% participation
■ Persistency
■ Administrative capability

Question 4

Eligibility

Answer 4

Employee
■ Full time
■ Actively at work
■ Completed probationary period (if required)
■ Dependents
–– Spouse
–– Children younger than age 26
–– Disabled child regardless of age
■ Enrollment
–– Follows probationary period
–– Usually no medical questions
■ Open enrollment
–– Usually once a year
–– No medical questions
■ Late enrollment
–– Medical questions

Question 5

Coordination of Benefits

Answer 5

Applies when a person is covered by two group policies
■ One plan is primary—pays first
■ Other plan is secondary—pays only if loss is greater than primary coverage
■ Employee plan is primary
■ Children—primary plan is parent whose birthday comes first in the year (not the oldest)
–– Custody may determine primary

Question 6

Change of insurers

Answer 6

No loss or gain in benefits for current claim

Question 7

Termination of Group Coverage

Answer 7

Employer terminates the plan
■ Employer didn’t pay the premium
■ Employee
–– Quits
–– Laid off
–– Reduction in hours
■ Dependents
–– Divorce
–– Employee dies
–– Employee employment terminated
–– Too old

Question 8

COBRA—Consolidated Omnibus Budget Reconciliation ACT

Answer 8

Federal law
■ Applies to employers who regularly employ 20 or more people
■ Employers must allow employee or dependents to remain on the group plan
■ Applies to medical and dental—not life insurance
■ Extends coverage for 18 months if
–– Employees employment is terminated
–– Reduction in hours
■ Extends coverage for 36 months if dependents no longer qualify due to
–– Divorce
–– Too old
–– Death of employee
■ Premium is 102% of regular group premium
–– Employer does not contribute
■ COBRA automatically ends
–– Premium not paid
–– Employer stops the group plan
–– Individual becomes covered by another plan
–– Individual becomes eligible for Medicare

Question 9

OBRA

Answer 9

29 months if disabled at time of termination

Question 10

HIPAA (Health Insurance Portability and Accountability Act

Answer 10

Preexisting conditions
■ Includes most health coverage
■ Guaranteed 48 hour hospital stay for new mothers after regular delivery and 96 hours for
C-section
■ Small employers cannot be denied