Topic 3: 13.1-13.9

Question 1

Groups of Fewer than 25 Employees

Answer 1

1. Account for 50 percent of the benefit plans
2. Account for 10-15% of the total dollar volume of EE benefits
3. Organized by CEO

Question 2

Groups Between 25-100 EEs

Answer 2

• Account for 25-30% of all groups
• Represent between 10-15% of total premium volume
• Organized by CEO

Question 3

Groups of 100-500

Answer 3

• Account for 10% of Group Benefit Plans

- Represent 25% of the total dollars spent on EE benefits

Question 4

Advantages of Groups (100-500)

Answer 4

• Greater flexibility in plan design
• Greater flexibility in ways it can be administered
• CEO usually delegates decision making to an EE in the organization

Question 5

Groups of 500+

Answer 5

• Account for only a small percentage of group benefit plans
• Represent approximately 50% of dollars spent by ERs
• Usually have 1 or more persons devoted full time to group insurance matters

Question 6

Sellers of EE Benefit Proucts

Answer 6

1. Insurance Companies
   - HOMs, the Blues, PPOs, third party administrators
2. MEWAs
3. Self Funding

Question 7

MEWAs

Answer 7

• Multiple Employer Welfare Arrangements
• Often structured as PPOs for medical coverage
• Mainly for 10 or less EEs, sometimes for 10-25

Question 8

Insurance Company Agents

Answer 8

• Legal representative of the company
• Play a major role in marketing group insurance, particularly to groups with less than 100 EEs
• Work on commission

Question 9

Commission Rates for Group Insurance

Answer 9

• Considerably lower than commission rates for individual insurance
• Agent often relies on a group representative of the insurance company to perform many of the sales and service activities pertaining to the case

Question 10

Two Types of Commission Schedules

Answer 10

1. Standard (Regular)

2. Level Schedule

Question 11

Standard (Regular) Commission Schedule

Answer 11

• High first year commission rates and lower rates in renewal years
• Generates higher total income if the ER cancels or fails to renew the policy after a short period

Question 12

Level Commission Schedule

Answer 12

• Same commission rates for both the first year and any renewal years
• More beneficial if the agent expects substantial increases in premium volume in a case’s renewal years

Question 13

When Do Insurance Companies require the use of a Level Commission Schedule?

Answer 13

• Transferred Business
• Reinstated Cases
• Fully Contributory Plans
• Groups Below a Certain Size
• May be mandatory for very large groups when competitive bidding requires that expenses be held to a minimum and be recoverable in the early years of a contract

Question 14

Broker/EE Benefit Consultant

Answer 14

• Provide advice on group insurance matters and help with dealing with insurance companies.
• Allegiance to buyers
• ## Compensated by fees charged to their clients

Question 15

Difference Between Consultant and Broker

Answer 15

• Consultant is paid by fees, and broker is paid by commission
• Line is becoming more blurred

Question 16

Group Representatives

Answer 16

• EE of the insurance company, generally located outside the home office
• Specializes in selling and servicing his/her company’s group insurance products
• Usually receive a salary
• Aid brokers and consultants

Question 17

Third Party Administrator

Answer 17

• TPA
• Person or org that is hired to provide certain administrative services to group benefit plans
• Primary role was to administer plans
• May be banks or insurance companies