Policy types
Group plans need not include all coverages, but most will include at least two or more. In addition, disability income coverage may be offered under a group arrangement, but it is usually offered separately from hospital, medical, and surgical coverage. T
Outpatient example
Eloise's employer provides a group insurance plan covering expenses incurred for hospital care of any type. Eloise is involved in an auto accident on her way home from work, and she is rushed to the hospital for emergency treatment. She is not admitted to
Some group policies might cover only surgical expenses.
Suppose Paul is hospitalized to have his appendix removed. His group policy specifies that the surgeon who performs an appendectomy will receive $450. The hospital charges are not paid. Although this would be fairly unusual today, such policies do exist,
five forms of group health coverage, all of which have counterparts in individual policies
disability income; accidental death and dismemberment; hospital expense; surgical expense; and medical expense.
Several provisions apply solely or primarily to group policies. They are provisions that:
describe who is eligible for the group plan;
describe when individuals become eligible for the plan; specify the minimum number of individuals and the minimum participation by eligible people required to sustain the plan; specify the amounts of insurance
Group Coverage Provisions
As was mentioned, not all members of a group are necessarily eligible for coverage under a group plan. An employer may establish certain eligibility requirements, such as limiting coverage to people who have been employed for a specified period. Often, an
Conversion Privilege
The conversion privilege allows the insured to convert group coverage to individual coverage without evidence of insurability. The insured has 31 days from the time of ineligibility to convert to the new plan of insurance. The new plan of insurance is an
Conversion privilege goes into effect only when the insured is no longer eligible for group coverage because of the following circumstances.
The insured's employment is terminated. The insured becomes ineligible for coverage because the class he was insured under is no longer eligible for coverage. (For example, to save expenses, a company that formerly provided coverage for all employees work
Dependent Coverage
Life or health insurance benefits may be extended to the primary insured's dependents. The insured's children can be stepchildren, foster children, or adopted children. Dependent children must be younger than a specified age (usually age 19, or up to 25 i
Dependents may be any of the following individuals:
The insured's spouse; The insured's children; The insured's dependent parents; Any other person who is dependent on the insured
Coordination of Benefits Provision
Many working couples are doubly covered by group health insurance. Both husband and wife often have employer-provided group coverage, and each is covered as a dependent by the other's plan. This type of double coverage can result in individuals being over
Coordination of Benefits Provision example
Basil and Kendra, a married couple, work at different companies. Both are covered by group plans that extend to dependents, so they have double coverage. Let's assume that Basil has $2,200 in medical bills resulting from an illness. Basil's policy is prim
subrogation
If it is discovered that an insured is covered by another policy that is responsible for a loss, an insurer may try to recover part or all of their losses from another policy. This is known as subrogation.
Records and Recordkeeping
This provision contains information as to whether the insurer or the policyholder will maintain records on the insureds. It provides for the policyholder to furnish the insurance company with necessary information to determine premiums and administer cove
Clerical Error
A clerical error provision provides that if there is an error or omission in the administration of a group policy, the person's insurance is considered to be what it would be if there had been no error or omission. This recordkeeping and clerical error pr
Clerical Error example
For example, an employer has the responsibility to send group enrollment forms for newly hired employees to the insurer. Sean is a new employee, and through an administrative error, his enrollment form is never forwarded to the insurance company. A few mo
Federal and State Regulations Affecting Group Policies
A number of federal regulations enacted over the past 20 years affect group life and health insurance policies. These are known by the acronyms COBRA, OBRA, TEFRA, and ERISA. Also, the health reform package, HIPAA, passed in 1996, has major implications f
Health Insurance Portability and Accountability Act (HIPAA)
took effect July 1, 1997, ensures portability of group insurance coverage and includes various mandated benefits that affect small employers, the self-employed, pregnant women, and the mentally ill
Portability
The new law makes it easier for individuals to change jobs and still maintain continuous health coverage. If an employer offers health benefits to its employees, the employer now must make full health care coverage available immediately to newly hired emp
Mandated Benefits
The law guarantees coverage for a 48-hour hospital stay for new mothers and their babies after a regular delivery (96 hours for a cesarean section birth). Also, it expands coverage for mental illness by requiring similar coverage for treatment of mental a
Consolidated Omnibus Budget Reconciliation Act (COBRA)
a federal law that requires employers with 20 or more employees to provide former employees and their families a continuation of benefits under the employer's group health insurance plan. Coverage may be continued for 18 to 36 months. Employees and other
Qualifying Event
an occurrence that triggers an insured's protection under COBRA. Qualifying events include the death of a covered employee, termination or reduction of work hours of the covered employee, Medicare eligibility for the covered employee, divorce or legal sep
Qualified Beneficiary
any individual covered under an employermaintained group health plan on the day before a qualifying event. Usually this includes the covered employee, the spouse of the covered employee, and dependent children of the employee. Changes made in 1996 amend t
Employers are obligated to provide notification statements to individuals eligible for COBRA continuation. This notification must be provided under the following circumstances:
When a plan becomes subject to COBRA; When an employee is covered by a plan subject to COBRA; When a qualifying event occurs. In addition to notifying current employees, the company must also notify new employees when they are informed of other employee b
Duration of Coverage
An employer is not required to make continuation coverage available indefinitely. The rationale behind COBRA is to provide transitional health care coverage until the employee or family member can obtain coverage or employment elsewhere. The maximum perio
There are also certain disqualifying events that can result in a termination of coverage before the specified time periods. The dates of these events are as follows:
The first day for which timely payment is not made; The date the employer ceases to maintain any group health plan; The first date on which the individual is covered by another group plan (even if coverage is less); The date the individual becomes eligibl
Plan Termination
In most states, if an employer discontinues its group insurance plan, employees must have the opportunity to convert to individual insurance without a medical exam or other evidence of insurability. Suppose Giovanni has been employed by the same company f
Omnibus Budget Reconciliation Act of 1989 (OBRA)
extended the minimum COBRA continuation of coverage period from 18 to 29 months for qualified beneficiaries disabled at the time of termination or reduction in hours. The disability must meet the Social Security definition of disability, and the covered e
Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)
intended to prevent group term life insurance plans (usually part of group health insurance programs) from discriminating in favor of key employees. Key employees include officers, the top 10 interest-holders in the employer, individuals owning 5% or more
Employee Retirement and Income Security Act (ERISA)
intended to accomplish pension equality, but it also protects group insurance plan participants. ERISA includes stringent reporting and disclosure requirements for establishing and maintaining group health insurance and other qualified plans. Summary plan
Age Discrimination in Employment Act (ADEA)
This act applies to employers with 20 or more employees and is directed toward employees age 40 or older. In general, this act prohibits compulsory retirement, except for those in executive or high policymaking positions. Employee benefits, which in the p
Americans with Disabilities Act (ADA)
This act has a widespread impact on almost all facets of American life. With respect to group insurance, it makes it unlawful for employers with 15 or more employees to discriminate on the basis of disability against a qualified individual with respect to
Among other things, the (ADA) law forbids exclusion or limitation of benefits for:
specific disabilities such as deafness or AIDS; individually distinct groups of afflictions, such as cancer, muscular dystrophy, or kidney disease; and disability in general.
Pregnancy Discrimination
In the past, pregnancy was treated differently from other medical conditions under both individual and group health policies. However, an amendment to the Civil Rights Act requires that women affected by pregnancy, childbirth, or related medical condition
Experience Rating Versus Community Rating
In general, premiums for group insurance are based on experience rating. This is a method of establishing the premium for a group based on the group's previous claims experience. The larger and more homogenous the group, the closer it comes to reflecting
State Regulation
Many states have some form of mandated group health benefits. These commonly include required coverage for adopted or newborn children, continued coverage for handicapped dependents, coverage for treatment of alcoholism or drug abuse, and coverage for mam
Extension of benefits
is similar to continuation of coverage. In this case, benefits that began to be paid while a health insurance policy was in force continue, or are extended, after the insurance contract is terminated. Some states require group policies to provide for exte