Module 8 Flashcards
(77 cards)
are employer-sponsored benefits other than wages, which enhance the economic
security of individuals and families and are partly or fully paid for by employers.
employee benefits
Basic Underwriting Principles
-Insurance Incidental to the Group.
-Flow of Persons Through the Group.
-Automatic Determination of Benefits.
-Minimum Participation Requirements.
-Third-Party Sharing of Cost.
-Simple and Efficient Administration.
which means the group should not be formed for the sole purpose of obtaining insurance. The purpose of this requirement is to reduce adverse selection against the insurer. If the group is formed for the specific purpose of obtaining insurance, a
disproportionate number of unhealthy persons would join the group to obtain low-cost insurance, and the loss experience would be unfavorable.
insurance incidental to the group
Ideally, in group life insurance, there should be a flow of younger
persons into the group and a flow of older persons out of the group. Without a flow of younger persons into the
group, the average age of the group will increase, and premium rates will likewise increase. Higher premiums
may cause some younger and healthier members to drop out of the plan, while the older and unhealthy members
will still remain, which would lead to still higher losses and increased rates.
flow of persons to the group
Benefits should be automatically determined by some formula
that precludes individual selection of insurance amounts. The amount of group life insurance can be based on
earnings, position, length of service, or some combination of these factors. The purpose of this requirement is to
reduce adverse selection against the insurer. If individual members were permitted to select unlimited amounts
of insurance, unhealthy persons would likely select larger amounts, while healthier persons would likely select
smaller amounts.
automatic determination of benefits
A minimum percentage of the eligible employees must
participate in the plan. If the plan is a noncontributory plan, the premiums are paid entirely by the employer and
100 percent of the eligible employees must be covered. If the plan is a contributory plan, the employee pays part
or all of the cost and a large proportion of the eligible employees must elect to participate in the plan. In a
contributory plan, it may be difficult to get 100 percent participation, so a lower percentage such as 50 to 75
percent is typically required.
minimum participation requirements
Ideally, individual members should not pay the entire cost of their
protection. In most groups, the employer pays part of the cost. A third-party sharing of cost avoids the problem
of a substantial increase in premiums for older members. In a plan in which the members pay the entire cost,
younger persons help pay for the insurance provided to older persons. Once they become aware of this fact,
some younger persons may drop out of the plan and obtain their insurance at lower cost elsewhere.
Third Party Sharing of Cost
The group plan should be simple and efficiently administered. Premiums are collected from the employees by payroll deduction, which reduces the insurer’s administrative expenses and keeps participation in the plan high.
Simple and Efficient Administration
Eligibility Requirements
- Be a full-time employee
- Satisfy a probationary period
- Apply for insurance during the eligibility period
- Be actively at work when insurance becomes effective
Group life insurance plans include the following:
- Group term life insurance
- Group universal life insurance
- Group accidental death and dismemberment insurance (AD&D)
- Worksite marketing programs
is the most important form of group life insurance.
Group Term Life Insurance
Types of Group Term Coverages
Basic amount of term insurance.
Supplemental term insurance.
Portable term insurance.
Employers typically provide a basic amount of term insurance on covered employees.
Basic amount of term insurance
Group life insurance plans typically include supplemental term insurance.
Supplemental term insurance
Some group plans have a portable term insurance option that allows employees
to continue their term insurance protection if they lose their eligibility for group coverage.
portable term insurance
is a voluntary life insurance product paid entirely by the employee through
payroll deduction.
Group Universal Life Insurance
that pays additional benefits if the employee dies in an accident or incurs certain types of bodily injury.
Group Accidental Death and Dismemberment (AD&D)
which allow an insurer to offer its insurance
products to interested employees.
worksite marketing programs
Group medical expense coverage is available from several providers including the following:
Commercial Insurers
Blue Cross and Blue Shield Plans
Managed Care Organizations
Self-Insured Employer Plans
are medical expense plans that cover hospital expenses, physician
and surgeon fees, ancillary charges, and other medical expenses.
Blue Cross and Blue Shield Plans
are another source of group medical expense benefits. These organizations generally are for-profit organizations that offer managed care plans to employers.
Managed Care Organizations
Many employers self-insure part or all of the benefits provided to their employees. Self-insurance (also called self-funding) means that the employer pays part or all of the cost of providing health insurance to the employees.
Self-insured employer plans
is an organized system of health care that provides
comprehensive medical services to its members on a prepaid basis.
health maintenance organizations (hmos)
is a generic name
for medical expense plans that provide covered services to the members in a cost-effective manner.
managed care
