Lesson 2 Flashcards
2.1.1.a Outline factors affecting the scope of the benefits plan management function and process (6)
Group benefit plan management function and processes (who makes decisions, how they are made, and who is accountable) vary.
Other factors include
- comprehensiveness of coverage,
- size of group,
- uniformity of benefits for different categories of members,
- geographical dispersion of members,
- whether insured benefits are offered and
- the number of service providers involved.
Regardless there are common activities that need to be addressed:
2.1.1.b List three key activities of the basic plan management
- Plan design
- plan administration
- plan funding
Decisions must also be considered in the context of the overall governance of the benefits plan
2.1.2 List 6 plan features generally focused on in plan design
1) Plan objectives
2) Who is eligible for coverage
3) Type and level of benefits provided an under what terms and conditions
4) Whether plan members can choose some of their benefits
5) Who pays premium costs
6) How plan costs will be controlled
2.1.3.a What is the primary issue in determining a plan sponsor’s arrangement options
The primary issue is deciding who will be financially responsible for payment of claims and expenses incurred under the benefits plan.
2.1.3.b Funding arrangements available to the plan sponsor (insured or self-insured depend on a variety of factors. Lis 5
1) Size of the plan
2) Type of benefits
3) volume of premiums for insured benefits
4) Volume of claims
5) regulatory requirements
6) tax considerations
7) degree of financial risk the sponsor can assume
8) insurer’s willingness to assume risk
2.1.3.c Define underwriting and explain what it entails
Underwriting is the assessment of risk for the purposes of insurance pricing.
It entails determining the cost of expected claims, plus admin charges and premium rates. Ultimately the insurer determines whether insured finding is available to a given plan sponsor or individual.
2.1.4.a List three broad categories of activities required in benefits plan administration
1) Determining the appropriate administrative structure
2) Performing plan member enrollment and benefit eligibility activities
3) Evaluating overall program and specific benefits against performance standards
2.1.4.b List 5 factors that the appropriate administrative structure required in benefits plan administration may depend upon and confirm who may perform the assessment
This depends on the:
1) sponsor type
2) sponsor size
3) internal and financial resources
4) the availability and cos of TPA resources
5) legislative requirements
This may be preformed in-house by the plan sponsor, by the insurer, or by the TPA or by one or more service providers
2.1.4.c List 5 activities that are part of performing plan member enrollment and benefit eligibility .
1) ongoing claims processing
2) communications with plan members, dependents, and government agencies
3) submitting premiums
4) negotiating and monitoring service provider agreements
5) implementing, maintaining and enhancing benefit administrative systems
6) preparing claims and financial data reports
7) assisting with plan reviews
2.1.4.d List 5 activities that are part of evaluating overall program and specific benefits against performance standards
1) assessing changes in plan membership characteristics
2) assessing organizational and financial resources
3) considering legislative and tax regulations
4) assessing the competitive environment
5) looking t amendments to compensation structures
6) periodically reviewing plan design, administration and funding
If a single employer plan it may also involve providing feedback to other departments whose business strategies may consider the plan.
2.2.1 Identify the policyholder in association plans and list 6 activities it undertakes
For plan management purposes the association is the group policyholder.
1) signs the master contract
2) decides what types of insurance to purchase
3) negotiates the terms of the contract with the insurer,
4) makes decisions regarding plan amendments
5) administers the plan and;
6) collects and remits all premiums.
2.2.2 List 5 factors that influence the viability of employer association plans from an insurers’ perspective
1) a close relationship between members and the association. Whether association members are interested in the association and participate actively in it.
2) A committed association executive. Whether the executive is willing to assume the responsibility of ensuring the plan’s success (successful initial enrollment and high continuous participation)
3) Association administration capability. Whether association staff are able to perform, or outsource regular functions of a single employer in the administration of the plan, such as collecting premiums
4) Close proximity of members. Whether individual member employers are located near each other for the purpose of soliciting participation
5) A simple benefits plan. Whether the plan is easily understood by potential members and its likelihood of being effectively communicated during the initial enrollment
2.2.3 Identify 3 challenges with plans for an association of individuals from an insurer’s perspective
Challenges typically stem from a plan that is not based on the employer-employee relationship
1) There are no employer contributions made to the plan
2) There is no automotive mechanism to collect premiums
3) Member solicitation must be done individually, increasing marketing costs.
2.2.4 Identify the policyholder in creditor plans and when benefits are payable
Creditor plans are available to individuals who choose to insure their outstanding debt. The insured individual is the borrower who pay their financial institution for insurance coverage.
Benefits are payable when the borrower is unable to pay the debt due to disability, death, and/or unemployment.
The financial institution is the group policyholder.
2.2.5 Outline information that must be included in the certificate of insurance provided to a borrower under a creditor’s plan according to the Canadian life and health Insurance Association (CLAHIA) guidelines (10)
1) Insurers name and head office in Canada and sufficient identification of the creditor’s group contract
2) the borrower’s name
3) a description of the coverage, including the amount, duration, and conditions involving eligibility, exceptions, limitations and restrictions.
4) The specific charge for the coverage or sufficient information for the borrower to calculate the charge
5) The circumstances under which the insurance commences and terminates
6) The procedures for making a claim, including to whom a claim should be made and any time limits
7) A statement that the benefits will be paid to the creditor to reduce or extinguish unpaid debt
8) a statement that the duration of the insurance is less than the term or amortization period of the loan or that the amount of insurance is less than indebtedness where that is the case
9) A contract where the borrower can receive more information about the provisions of the coverage
10) An explanation of how refunds are calculated and instructions for applying for a refund
2.2.6 Explain why premium rates for benefits payable under a creditor’s group insurance plan will likely differ from premium rates under an employer sponsored plan
The benefit for the creditor’s group insurance is the borrower’s outstanding debt which is fixed/limited. Further the time of insurance payment may be limited to the period of time that the interest rate is guaranteed or subject to a maximum duration.
Rates aren’t comparable to the group coverage under employer sponsored plans since the amount of coverage decreases over time as the debt is repaid and the borrower remains insured. Furthermore because the borrower pays the cost of insurance the financial institution is less likely to be concerned about obtaining low rates.
2.2.7 Describe the key characteristics of MEPs
MEPs generally cover employees working under the terms of a collective agreement and are typically within one industry.
A MEP commonly uses a trust structure to deliver benefits to large groups of employees covered under numerous collectives agreements with different employers. Employers contribute to the trust and it administers benefits. this typically helps reduce admin costs. The multi-employer trust also has more purchasing power.
2.2.8 Explain the significance of the trust agreement and the participation agreement in managing a MEP.
A trust agreement establishes the terms and conditions for overall trust management and empowers the trustees to make decisions related to trust operations.
Employer responsibilities should be carefully considered when crafting participation agreements which are needed if the employer isn’t a party to the trust agreement.
2.2.9.a list 7 duties/ rules that trusties have when administering a MEP
1) Duty to obey the trust agreement
2) Duty of care - reasonable person
3) Duty of loyalty - best interest of beneficiaries
4) Duty of discretion - benefit trusts should be written to limit trustee discretion
5) No-delegation rule - unless the trust authorizes the delegation, legislation allows for it, or it is impossible for the trustees to do the acts themselves.
6) Duty of confidentiality. Procedures should be in place to safeguard member information.
7) Duty of disclosure. Trustees must keep proper records and accounts
2.2.10 Explain why single employers are the most attractive type of benefits plan sponsor.
These types of employers, such as corporations, partnerships. or sole proprietorships, satisfy the five fundamental principals of insurance and insurers consider them a desirable risk.
The employer usually pays all of the premium and premiums not paid by the employer are collected through payroll.
2.2.11 identify the policyholder in a single employer plan
The employer is the group policyholder.
It signs the master contract, decides what types of group insurance coverage to purchase, negotiates terms of the contract with the insurer and makes decisions around amendments It also administers the plan and collects. remits all premiums.
2.3.1.a Explain the role of governance in benefits plan management
Good governance can help plan sponsors ensure legal compliance and avoid liability
2.3.1.b List 6 things that good governance does/is
1) Is essential for meeting fiduciary and other obligations
2) minimizes risks and maximizes efficiency
3) Promotes accurate, timely and cost-effective delivery for benefits
4) Requires control mechanisms that encourage good decision making, proper and efficient practices, clear accountability, and regular review and evaluation
5) Promotes consistent administration of the plan in the best interests of plan members and beneficiaries
6) Contributes to positive plan performance and demonstrates due diligence on the part of the plan sponsor
