Chapter 4 - Group Insurance The Basics Flashcards
Group Insruance
Policy covers multiple people to help
Reduce Costs
Reduce Adverse Selection - people who are sick or about to die are likely not part of a group.
Fixed Costs
Insurable groups: especially employee groups are generally good risks for an insurance company because of decreased adverse selection. The mixed pool and the natural employee turnover from older to younger.
Experience Rating vs Community Rating
Experience Rating: Underwriters look at the claims history for a group to determine premiums.
Community Rating: used for smaller or newer groups. Involves combining claims history over a class of group that are similar to the group.
Master Contract vs Certificate of Insurance
The one overriding contract that can affect the lives of the group and is between the insurance company’s and the ORGANIZING COMPANY (employer, association, ect). They are the policy owner.
The certificate of insurance: may simply be a booklet explaining the coverage and your id card. Informational only
Defining Groups: formed for a “defined” reason other than to just purchase insurance.
Associations: formed for some reason other than to purchase group insurance. In most states, you must have at least 100 members. MET (Multiple Employer Trust) small employers seeking the lower premiums available for a larger group. MEWA (Multiple Employer Welfare Assignment) larger employers who self fund their coverage. They band together to get the efficiency of having a trustee or third party administrator and handle the claims for the group. This is self funded and thus doesn’t involve an Insurer.
Creditors Groups: such as a bank, covers the borrower, repays the debt if the debtor (borrower) dies.
Labor Union: the Taft-Hartley Act prevents companies to pay premiums directly to the Union. This act does allow a company to endow a trust fund set up for the same purpose “Taft Hartley Trust”
Single Employer: Most common. Simply a plan administered by an employer to cover its employees.
Multiple Employer Group: two or more employers may join forces to meet minimum member requirements.
Non-contributory vs contributory groups
Non-contributory plan: entire cost of coverage for all eligible group members is covered by the company. There is a WAITING PERIOD, with no real rules, for when your policy is effective but still being reviewed. NO BENEFITS ARE PAYABLE DURING THE WAITING PERIOD. They use this to screen out new employees who got a job for say existing illnesses. If they are covered after the waiting period, they are covered 100%. A PROBATIONARY PERIOD refers to the the time period before an employee becomes eligible. Enrollment is automatic and DOESNT require proof of insurability.
Contributory plan: all or part of the coverage be paid by the insured. You can opt out if you spouse has a plan to join. Most states require at least 75% of eligible members to agree to the policy.
Voluntary Employer -Sponsored (Worksite) Plans.
Offer supplemental benefits to employers as on optional basis. Aflac. Makes a companies benefit plans more attractive. Workers choose what works best for them. (Life, Disability, auto, accident, hospital indemnity- additional money on top of insurance if you go to hospital. Does not indemnify, allows you go come out ahead.)
Group Persistency Rate
If a high number of members renew, we have a high persistency level. Groups strive for this but like turnover of older members.
