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When applying for a contributory group plan, the employer needs to solicit enough employees to demonstrate to the insurer that a sufficient percentage want the coverage and are willing to pay a share of the premium. For a non-contributory plan, 100% of the eligible employees must be included.
There are several considerations that the insurer has when determining the group premiums. Average age of the group is an important consideration. The higher the average age of the group, the more instance of potential claims resulting in a higher premium.
Another consideration is the maximum indemnity period for loss of time benefits. The longer an insurer pays disability benefits, the higher the rate will be.
If a group policy covers occupational illness and/or injury, the degree of occupational hazard becomes an important factor. Again, the higher the occupational hazard, the higher the rate.
Group policy types. Group health plans may include any of several types of insurance discussed earlier. With no intention of becoming repetitive, let’s review some of those individual coverages.
A group health plan doesn’t have to include all coverages although most will include at least two or more. In addition, disability income coverage may be offered in a group arrangement but it is usually separate from hospital, medical and surgical coverage.
Therefore, the first possible group coverage pays benefits for lost earnings resulting from accident or sickness and is commonly called disability insurance.
Accidental loss of life and accidental loss of one or more limbs or eyesight is another common type.
Hospital expense is another type of potential group coverage. These policies can pay for hospital expenses whether inpatient or outpatient. Fees of an attending physician during hospital treatment may be covered. Some types of group policies may only cover surgical expenses.
Further, there are a number of provisions that apply only or primarily to group policies. These provisions:
§ Describe who is eligible for the group plan
§ Describe when individuals become eligible for the plan
§ Specify minimum number of participants and minimum participation by eligible people necessary to sustain the plan
§ Specify amount of insurance that individual group members are entitled
§ Describe the responsibilities of the master policy owner
We discussed earlier that not all members of a group are necessarily eligible under a group plan. Also, the employer may set certain eligibility requirements.
Often working couples both qualify for group health insurance through their employment whereby the spouse is covered by each plan. To prevent possible abuse, special provisions are required by law in most states. This is referred to as a Coordination of Benefits Provision and allows insureds as much coverage as possible while doing away with over insurance. Receiving dual benefits constitutes fraud and is punishable by law.
Businesses that offer group coverage are subject to certain provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). Terminated employees of companies that regularly employ more than 20 people may be eligible for extended group health insurance coverage after they leave their jobs.
COBRA requires that some group health plans offer a continuation of coverage at group rates or slightly higher to departing employees for up to 18 months. For dependents of deceased employees and in some other special cases, continuation of coverage can last for up to 36 months.
In most cases, if an employer discontinues group insurance, employees must be given the opportunity to convert to individual insurance without a medical exam.
Self-insurance is a situation where an employer provides health benefits to its employees by depositing money in a special self insured fund which pays for reimbursement of medical expenses from the fund. This is not a viable option for most employers which must be large enough to have a base from which to predict expected expenses.
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