Unit 18: Group Health Insurance

Question 1

What is group health insurance?

Answer 1

•insures many people in one contract
•usually less expensive than individual insurance
•sponsor receives the master contract
•participants receive a certificate of insurance
•premium costs are determined by,
-experience rating-based on the claims history of the individual group
OR
-community rating-based on pooling groups (also used in rating individual insurance); uses the same rate structure for all subscribers to a medical expense plan, no matter what their past loss experience has been

Question 2

What are the eligible groups for group health insurance?

Answer 2

•employer (employee) group plans-employer sponsors a group insurance plan for its employees

•multiple employer trust (MET)-group of small employees in the same industry who either form together in order to purchase group insurance as one entity or self-fund a plan

•multiple employment welfare arrangements (MEWAs)-provide health & welfare benefits to 2 or more unrelated employers
-purpose is to provide affordable health coverage to small employers

•labor unions-may sponsor a group insurance plan for its members
-2 or more labor unions may join together to provide group insurance for their collective members
-labor union plans are sponsored under a Taft-Hartley trust

•association group plans-trade, professional, or other type of association may sponsor a group plan for its members

•group credit disability insurance-lender, or creditor, may sponsor a group health (disability) insurance plan for its group of debtors
-2 distinct features:
•insurance can be made payable to the sponsoring group, unlike with other types of group insurance
•amount of coverage under a group credit insurance plan is limited to the amount of the insurer’s debt

Question 3

What criteria is included in a group underwriting?

Answer 3

•size of the group-small=2-50 members, large=51+ members
•composition of the group-age, sex, income of group members
•flow of members through the group-individuals joining/leaving the group on a regular basis
•plan design-what will be covered & for how much
•contributory or noncontributory
•persistency-when employers keep their group coverage with the same insurer year after year, the insurer’s expenses are reduced
•administrative capability-large employers can lower group premium costs by helping administer the plan & use the insurer for stop-loss coverage and/or claims processing

Question 4

What is the employment criteria to be eligible for group health insurance?

Answer 4

•full-time
•actively at work-i.e., not on disability leave or other inactive status

*employers may also exclude union workers as a class, since their compensation & benefits are covered by a collective bargaining agreement

Question 5

What is the group health insurance probationary period?

Answer 5

•new employees must wait before they can enroll in an employer’s group health insurance plan
•typically range from 1-6 months

Question 6

What is the eligibility period or enrollment period for group health insurance?

Answer 6

•when probationary period ends
•new employees can enroll in the group health insurance plan
•typically 30 or 31 days

Question 7

What is open enrollment?

Answer 7

•individuals who declined coverage during the initial eligibility period can enroll in the health plan during this period without providing evidence of insurability

**late enrollees-individuals who wants to enroll for coverage at any time other than the initial eligibility period or an annual open enrollment period may be required to provide evidence of insurability

Question 8

What is coordination of benefits?

Answer 8

•many couples will be covered under their own employer’s plan, but also covered as a dependent under their spouse’s plan, which can result in overinsurance—>coordination of benefits is to avoid this

•if a loss is payable under 2 group health insurance plans, one plan will be considered primary & the other will be considered secondary
—>primary plan pays benefits up to its limit first, then the secondary insurance plan will pay up to its limit for costs not covered by the primary plan

•married couple-primary plan is individual’s employer plan, secondary plan is the spouse’s employer plan
•birthday rule-used for determining primary plan if a married couple has children
—>parent whose birthday comes earliest in the year will use their plan as primary coverage for their children
•if parents are separated or divorced, the plan of the parent with custody is primary (barring any other legal arrangements)

Question 9

Advertising must:

Answer 9

•not be misleading or obscure
•clearly outline all policy exclusions or limitations on coverage as well as policy benefits

Question 10

Who regulates a group health insurance policy?

Answer 10

•the state in which is it’s delivered, assuming that state is also where the employer has its principal business office

Question 11

What happens when a group health insurance policy is replaced by another plan?

Answer 11

•new insurers will allow coinsurance & deductibles paid under the old plan to count toward the new plan’s requirements
—>eases transition to the new plan for covered employees

Question 12

What is the no loss, no gain statute?

Answer 12

•no loss or gain in benefits for current claim

•requires benefits for ongoing (disability) claims that started under an old plan to continue without imposing the new plan’s eligibility requirements

Question 13

What are some events that may terminate coverage for group health insurance ?

Answer 13

•employer terminates the plan
•employer didn’t pay the premium
•employee
—>quits
—>is laid off
—>reduction in hours
•dependents
—>divorce
—>employee dies
—>employee employment terminate
—>too old

Question 14

What is extension of benefits?

Answer 14

•required by state laws that benefits paid by an in-force policy continue after the policy is terminated
•some states require an extension of benefits to a totally disabled member at the time of policy discontinuance

Question 15

What is the continuation of benefits requirement?

Answer 15

•Consolidated Omnibus Budget Reconciliation Act (COBRA)-federal law
-requires employers with 20+ employees to allow former employees & their dependents to finite the benefits provided by the employer’s group health insurance plan
•coverage may be continued for 18-36 months
•employees or dependents must pay the entire premium for the coverage
•COBRA specifies rates, coverage, qualifying events, qualifying beneficiaries, notification procedures, & time of payment requirements for the continued insurance

Question 16

What are qualifying events?

Answer 16

•occur when an employee, spouse, or dependent child lose coverage under the group insurance contract

•include:
-death of a coveted employee
-termination of a coveted employee, EXCEPT for gross misconduct
-reduction of work hours of a covered employee
-Medicare eligibility for a covered employee
-divorce or legal separation of a coveted employee from the covered employee’s spouse
-termination of a child’s dependent status
-bankruptcy of the employer

Question 17

What is a qualified beneficiary?

Answer 17

•any individual covered under an employer-maintained group health plan on the day before a qualifying event

•usually includes:
-covered employees
-spouses of covered employees
-dependent children of covered employees, consulting children born or adopted during the first 18 months of a benefit continuation period

Question 18

What are notification statements?

Answer 18

•employers must provide notification statements to individuals eligible for COBRA continuation within 14 days
•must be provided when:
-a plan becomes subject to COBRA
-an employee is covered by a plan subject to COBRA
-a qualifying event occurs
•company must notify new employees of their rights under COBRA when they’re informed of other employee benefits
•notification of an employee’s spouse or other dependents must be made in writing & sent to the last known address of the spouse or dependent
•option to elect continuation expires 60 days after an individual receives the notification

Question 19

What is the maximum period of coverage continuation for termination of employment or a reduction in hours?

Answer 19

18 months

Question 20

For all other qualifying events (besides termination of employment or a reduction of hours), what do the maximum period of coverage continuation?

Answer 20

36 months

Question 21

What are some certain disqualifying events/dates that can result in termination of coverage before the specified time periods of coverage continuation?

Answer 21

•first day a premium is overdue
•date the employer ceases to maintain any group health plan
•date on which the individual is covered by another group plan (even if coverage is less)
•date the individual becomes eligible for Medicare

-coverage must be the same the insured had while employed
-premium must also be the same, except now the terminated employee must pay the entire premium, including any portion previously paid by the employer
-terminated individual may also have to pay an additional amount each month not exceeding 2% of the premium to cover the employer’s administrative expenses
-continuation applies only to health benefits under COBRA

Question 22

What is COBRA/OBRA?

Answer 22

•federal law
•applies to employers who regularly employ 20+ people
•employers must allow employee or dependents to remain on the group plan
•applies to medical & dental-NOT life insurance
•extends coverage for 18 months if,
-employee’s 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 if,
-premium not paid
-employer stops the group plan
-individual becomes covered by another plan
-individual becomes eligible for Medicare

OBRA:
•extended minimum continuation of coverage period to 29 months for qualified beneficiaries disabled at the time of termination
•disability must meet the social security definition of disability
•plan can charge qualified beneficiaries an increased premium, up to 150% of the group premium, during the 11-month disability extension (months 19-29)

Question 23

What is the Health Insurance Portability & Accountability Act (HIPAA)?

Answer 23

•mandated benefits for,
-small employers
-self-employed
-pregnant women
-mentally ill
•preexisting conditions
—>preexisting condition can be excluded for up to 12 months (18 months for a late enrollee)
•includes most health coverage
—>if an individual had prior creditable coverage of 12 months or more (18 months if a late enrollee), & there was NOT a gap of 63 or more days between coverage on the prior plan & the new plan, then the new plan would NOT be allowed to apply a preexisting condition exclusion
•guaranteed 48-hour hospital stay for new month era after regular delivery & 96 hours for C-section
•small employers CANNOT be denied
•privacy disclosures

Question 24

What type of information does ERISA require to be distributed to plan participants, their beneficiaries, the Department of Labor, & the IRS?

Answer 24

•summary plan description to each plan participant & the Department of Labor
•summary of material modifications that details changes in any plan description to each plan participant & the Department of Labor
•annual return or report (Form 5500 or one of its variations) submitted to the IRS
•summary annual report to each plan participant
•any terminal report to the IRS

Question 25

What is a state law that requires benefits that began to be paid while a health insurance policy was in force to counter to be paid after the policy is terminated known as?

Answer 25

Extension of benefits

Question 26

Employers must provide notification statements to individuals eligible for COBRA continuation within how many days?

Answer 26

14 days

Question 27

What is an illustration?

Answer 27

•computer-generated spreadsheet of both guaranteed & projected policy values
•when submitting a policy form for the superintendent’s approval, insurers must give notice as to whether the form will be marketed with or without an illustration