The Group Policy is a document between the employer and the insurance company, mostly of an administrative nature. The individual employee’s coverages are provided in a Certificate of Coverage and details of coverage, benefits and provisions are provided in the Certificate. For purposes of this text, the provisions of the Certificate will be discussed.
As stated earlier, there are many similarities between the provisions of a Major Medical individual policy and a Group Certificate of Coverage. Therefore, the provisions that are similar will be only mentioned below, with special attention to those provisions that pertain only to Group Insurance.
Since a Group Contract can cover from one (in some states) to several thousand employees, the benefit structure will vary greatly. Most insurers offer coverage for small groups (such as those from 1 or 2 to 10 employees), medium size groups (from 11 to 50 employees) and large groups (51 employees and up). Additionally, the types of groups available include Health Maintenance Organizations (HMO’s), Preferred Provider Organizations (PPO’s), Point-of-Service Plans (POS), Fee-for-Service Plans (FFS) and a wide variety of Provider organizations and plans offering flexibility between the FFS (highest flexibility) and the HMO (least flexibility). Additionally, there are plans sold under ERISA, administered by Trusts.
For simplicity purposes, a POS plan Certificate of Coverage is used as an illustration. A POS plan has many of the cost-containment features of the PPO with a little more flexibility of the PPO, and is quite popular.
In 1996, H.R. 301, the Kassebaum-Kennedy bill, Health Insurance Portability and Accountability Act (HIPAA) was enacted. Because of this Act, some provisions in Group Insurance will change in respect to coverage for employees who leave their employment and who want to continue with their health insurance coverage. Many details are still in transition, but the bill will be discussed separately at the end of this Section.
Provisions are listed in order as they appear in a typical Certificate of Coverage. However, the arrangement can vary decidedly, therefore the order they are shown is of little consequence.
(Note: As in the previous discussion, Consumer Applications are headed “C.A.” and are illustrations as to how a particular provision(s) affect an insured or potential insured.)
SCHEDULE OF BENEFITS
The Schedule of Benefits shown below is used only for illustration purposes, as the amount, percentages and other information on the Schedule can be changed, depending upon the needs of the Employer. Later illustrations may use these benefits as shown below.
INSUREDS' FINANCIAL RESPONSIBILITIES FOR COVERED SERVICES
1. Calendar Year Deductible:
a. Individual Deductible $300
b. Aggregate Family Deductible $900
2. Hospital Per Admission Deductible (Non PPO) Hospitals Only) $100
3. Coinsurance Percentage Payable By YOUR INSURANCE COMPANY:
a. PPO Providers 90% of the PPO Schedule Amount.
b. All other Providers 70% of the Allowance.
4. Coinsurance Requirement Limits Per Calendar Year:
a. Individual Coinsurance Requirement Limit $1,000
b. Aggregate Family Coinsurance Requirement Limit $3,000
NOTE: Coinsurance Requirement Limits do not include the Calendar Year Deductible amount, the Hospital Per Admission Deductible amount, any benefit penalty reduction, non covered charges or any charges in excess of the Allowed Amount.
BENEFIT MAXIMUMS
1. Lifetime Maximum Benefit Per Insured $1,000,000
2 Alcohol And Drug Dependency Benefit Lifetime Maximum Per Insured
(inpatient, Outpatient or any combination) . $2,000
a. Inpatient Care treatment provided in a general, specialty or rehabilitative Hospital.
b. Outpatient Care limited to 44 Outpatient Visits up to a maximum of $35.00 per Visit
for treatment provided by a Physician or Psychologist.
3. Mental And Nervous Disorder Benefit Maximum Per Insured Per Calendar Year:
a. 31 inpatient days or combination of inpatient and Partial Hospitalization.
b. outpatient care $1,000
4. Hospice Benefit Lifetime Maximum Per Insured $5,200
5. Home Health Care Benefit Maximum Per Insured Per Calendar Year $1,000
6. Skilled Nursing Facility Days Maximum Per Insured Per Calendar Year 60
7. Accident Care Benefit Maximum, Not Subject To Deductible and Coinsurance $500
C.A.
Consolidated Inc. is the Contractholder of a Group Health Insurance plan. Mike is an employee that has just become eligible for Group Health insurance with Consolidated. Coverages are as used in the illustration above. He has to pay only for Dependents coverage as the employer pays for the employee’s premium. Mike has a wife (Marie) and two children, a son age 17 and daughter age 18.
Marie becomes ill and after 2 weeks and 4 visits to the family physical (approved Provider) she was admitted to a non-approved hospital. She was in the hospital for 4 days and released. Her Doctor and Laboratory bills total $1,500. The Hospital bill was $5500, including drugs etc. Mike is concerned as to how much he will have to pay out of his pocket.
Total bills $7,000
Deductible $300
Non PPO Hospital Deductible $100
Total after deductibles $6,600
10% of Coinsurance $660
Total Deduc. & Coins. $1,060
Total paid by insurer $5,540
Mike must pay $1060 for the deductible and 10% of the coinsurance. If the coinsurance percentage (10%) exceeded 10$, Mike has a limit of $1,000 and the insurer would pay the excess.
C.A.
Mike was stricken with a kidney disease and when he was released from the (PPO Approved) hospital, was sent to a Skilled Nursing Facility for 45 days, and then was sent home. He required Home Health Care for 3 weeks until he could leave his house and no longer required assistance. In addition to Deductible of $300, (no approved-hospital deductible), he paid 10% of his hospital bill. He only had to pay up to $1,000 on his coinsurance, so his total was $1,300. In addition, his Home Health Care bill was $75 per day for 21 days, or $1,575. The coverage only pays $1,000, so Mike had to pay the $575, bringing his total to $1,875.
UTILIZATION MANAGEMENT PROGRAMS WITH POTENTIAL PENALTIES
1. Admission Certification
a. PPO Provider No penalty for Insured.
b. Non PPO Provider All admissions must be certified. The Allowed Amount is reduced
by 25% for any non certified admission. The Insured is responsible for the penalty.
2. Second Surgical Opinion
a. PPO Provider not required.
b. Non PPO Provider The Allowed Amount will be reduced by 25% if confirming
opinion is not received. The Insured is responsible for the penalty.
C.A.
Assume that Mike’s doctor wanted a second opinion before sending him to the hospital. If the confirming doctor charged $1,500 for his services, if he were an approved physician the insurer would pay the entire amount (subject to deductible and coinsurance). If the doctor were non-approved, the insured would have to pay an additional $375 (25% penalty).
REPRESENTATIONS ON APPLICATION AND ENROLLMENT FORMS
Similar to Individual Major Medical plans, inasmuch as the contract can be voided or cancelled if there is fraud, misrepresentation, omission, concealment of facts, etc., on the Group Application or the individual Enrollment Forms.
ELIGIBILITY FOR COVERAGE
A unique provision of Group insurance is the requirement of eligibility. Most Group insurance is not subject to individual medical conditions so certain provisions such as Eligibility is a method of underwriting.
Please note that some of the eligibility requirements may not apply in some jurisdictions because of recent legislation. The purpose of this provision is to justify the premiums by ensuring that the employee falls within the requirements.
The following individuals only are eligible to apply for coverage under this Contract. YOUR INSURANCE COMPANY may require acceptable documentation that an individual meets and continues to meet the eligibility requirements (e.g., court order naming the Certificateholder as the legal guardian or Adoption documentation).
Bona fide employees of the Contractholder who meet each of the following requirements are eligible to apply for coverage under this Contract:
1. the employee's job must fall within a job classification set forth on the Group Application;
2. the employee must be scheduled to work and actually work on a full time basis at least 25
hours or more each week. Part time, temporary or substitute employees are not eligible;
3. the employee must be actively at work on the Effective Date of coverage; and
4. the employee must have completed any applicable Waiting Period set forth on the Group
Application.
The Certificateholder eligibility classification may be modified, and may be expanded to include:
1. retired employees;
2. additional job classifications;
3. employees of affiliated or subsidiary companies of the Contractholder, provided such companies and the Contractholder are under common control; and
4. other individuals as determined by YOUR INSURANCE COMPANY (e.g., members of associations or labor unions).
Any expansion of the Certificateholder eligibility class must be approved in writing by YOUR INSURANCE COMPANY and the Contractholder prior to such expansion, and may be subject to different Rates.
The following individuals are eligible to apply for coverage under this Contract:
1. the Certificateholder's present lawful spouse; and/or
2. the Certificateholder's unmarried natural, newborn, Adopted, Foster, or stepchild(ren), or a child for whom the Certificateholder has been court appointed as legal guardian or legal custodian, who is under the limiting age.
C.A.
When Mike first went to work for Ajax, he was on a part-time basis, working 20 hours a week. He wanted the health insurance benefits, but did not qualify as he did not work 25 hours a week. After 6 months, he was put on full-time and worked 40 hours a week. He reapplied and was accepted as he was full time and had satisfied the 90 day waiting period.
Mike immediately requested coverage for his wife and 2 dependent children. Both children reside with Mike and both are students under the age of 19.
Mike does not hold a hazardous job and since the group consists of over 50 employees, there were no health questions asked. Mike and his family all became insured on the first of the month that Mike became eligible. He is required to pay 75% of the premium for his family (the employer pays all of Mike’s premium).
EXTENSION OF ELIGIBILITY FOR DEPENDENT CHILDREN:
Group provisions closely follows those of Major Medical plans.
ENROLLMENT AND EFFECTIVE DATE OF COVERAGE
Whereas individual policies have effective dates affecting only an individual policyowner, Group insurance effective dates for employees depend upon the eligibility rules, date of employment, actively-at-work requirements, etc.
Employees who are eligible to apply for coverage under this Contract may do so by completing an Individual Application for Group Insurance/Membership form and forwarding it to the Contractholder. When the Eligible Employee completes the Individual Application for Group Insurance/Membership form, the Eligible Employee must elect one of the types of coverage available under the Contractholder's program. Such types may include:
1. Employee Only Coverage. This type of coverage provides coverage for tile Eligible Employee
only.
2. Employee/Spouse Coverage This type of coverage provides coverage for the Eligible
Employee and the employee's present lawful spouse only.
3. Employee/Child(ren) Coverage. This type of coverage provides coverage for the Eligible
Employee and the employee's eligible child(ren) only.
4. Employee/Family Coverage. This type of coverage provides coverage for the Eligible
Employee and the employee's Eligible Dependents.
There may be an additional Premium charge for each Dependent based on the coverage selected by the Contractholder.
Eligible Employees and Eligible Dependents who become covered under this Contract will be referred to as "Insureds". To become an Insured, the employee must:
1. Complete and submit, through the Contractholder, a written request for coverage, using
enrollment forms approved by YOUR INSURANCE COMPANY;
2. Provide any additional information needed to determine eligibility, if requested by YOUR
INSURANCE COMPANY; and
3. Agree to pay his or her portion of the required premium, if required by the Contractholder.
An employee who is an Eligible Employee must enroll within the Initial Enrollment Period. An Eligible Employee who has been covered under another health benefit plan established and maintained by the Contractholder, and who now wants to change to this Contract, must enroll for such coverage change during an Annual Open Enrollment Period or Special Enrollment Period.
If an Eligible Employee does not enroll for coverage under this Contract during one of the periods described above, and later requests to enroll (, he or she will be considered a Late Enrollee. See the Late Enrollee provision below.
In many policies, there is a lengthy description of the Employee Effective Date. Basically, if an employee meets the eligibility requirements when the policy becomes effective, there is an enrollment period and the effective date can be either the date when the policy become effective or a later prescribed date. These policy provisions (eligibility and effective date) should be discussed in detail at time of placing the policy of the group. The enrollment of a Dependent is discussed below.
A Covered Dependent is an Eligible Dependent of a Certificateholder who becomes an insured under this Contract. For an Eligible Dependent to become an Insured, the Certificateholder must:
1. Complete and submit through the Contractholder a written request for such Eligible
Dependent's coverage, using enrollment forms approved by YOUR INSURANCE COMPANY;
2. Provide any information needed to determine eligibility, it requested by YOUR INSURANCE
COMPANY; and
3. Agree to pay his or her portion of the appropriate premium, as required by the
Contractholder, for the Eligible Dependent's coverage.
To add Eligible Dependents on the Certificateholder's Effective Date, the Certificateholder must enroll his or her Eligible Dependents at the same time he or she initially enrolls during the Initial Enrollment Period.
To add a newborn, an Adopted newborn, or an Adopted child after the Certificateholder's Effective Date, the Certificateholder must enroll the Eligible Dependent within thirty (30) (lays after eligibility.
To add any other Eligible Dependent including Foster Children or court ordered coverage for a spouse or a minor child after the Certificateholder's Effective Date, the Certificate holder must enroll the Eligible Dependent within thirty (30) days after eligibility begins or thirty (30) days after the court order is issued.
The Effective Date of an Eligible Dependent's coverage under this Contract, excluding Late Enrollees, depends on when the Eligible Dependent is enrolled:
1. If the Eligible Dependent is eligible for coverage on the Effective Date of this Contract, coverage will become effective on the Contract Effective Date if the Certificateholder enrolls the Eligible Dependent for coverage at the same time he or she enrolls during the Initial Enrollment Period.
2. If the Certificateholder through whom the Eligible Dependent is eligible first becomes eligible after the Contract Effective Date and the Certificateholder enrolls himself or herself and his or her Eligible Dependents. During the Initial Enrollment Period, coverage for the Eligible Dependents will be effective on the same date that the Certificateholder's coverage becomes effective.
3. If the Eligible Dependent is first becomes eligible after the Certificateholder's Effective Date, and the Certificateholder enrolls the Eligible Dependent within thirty (30) days after eligibility, that Eligible Dependent's coverage will become effective on the date the enrollment form is received by YOUR INSURANCE COMPANY.
A standard provision covering Adopted and Foster children frequently is part of this contract. Generally, Adopted and Foster children are accepted on the first billing date that they are legally the responsibility of the insured employee. Interestingly, some group policies waive pre-existing conditions for Adopted children, but not on Foster children. This may change in some jurisdictions because of recent legislation.
In the event the Certificateholder wishes to delete a Dependent from coverage, a Member Status Change Request form should be forwarded to YOUR INSURANCE COMPANY. That Dependent's coverage will terminate on the first billing date following YOUR INSURANCE COMPANY's receipt of such form.
An Eligible Employee or Eligible Dependent who does not enroll under this Contract during the Initial Enrollment Period and who does not qualify for the Special Enrollment Period (see the Special Enrollment Period provision) is a Late Enrollee. Being considered a Late Enrollee has two important consequences:
1 . The Effective Date of the enrollee's coverage may be delayed, as described in the Late Enrollee Enrollment, Effective Dates and Pre existing Conditions Limitations provision; or
2 . The period during which Pre existing Conditions will not be covered may be extended, as described in the Late Enrollee Enrollment, Effective Dates and Pre existing Conditions Limitations provision.
An Eligible Employee or Eligible Dependent requesting to enroll under this Contract outside of the Initial Enrollment and Annual Open Enrollment Period will not be considered a Late Enrollee if:
1. The individual was covered under another employer provided health benefit plan as an employee or Dependent at the time he or she was initially eligible to enroll for coverage under this Contract;
• When offered coverage under this Contract at the time of initial eligibility, states, in writing, that coverage under another employer provided health plan was the reason for declining enrollment;
• Demonstrates that he/she has lost coverage under another employer health benefit plan within the past thirty (30) days as a result of the termination of employment, divorce, a change in employment status that impacts benefits, the termination of the other plan’s coverage, or the death of a spouse; and Requests enrollment within thirty (30) days after the termination of coverage under another employer health benefit plan.
2. A court has ordered coverage to be provided for a spouse or minor child under the covered employee's plan and a request for enrollment is made within thirty (30) days after issuance of the court order.
When coverage is requested in accordance with paragraphs 1. or 2. above, enrollment will be allowed outside of the Initial and Annual Open Enrollment Periods, with coverage becoming effective on the date the enrollment request is received by YOUR INSURANCE COMPANY.
If enrollment is riot completed in accordance with paragraphs 1. or 2. above: that individual will be considered a late Enrollee and subject to the Late Enrollee Enrollment, Effective Dates and Pre existing Conditions Limitations provision.
C.A.
Mike’s 18 year-old daughter recently graduated from high school. She decided to work for a living and was planning on being insured under her employer’s group plan. Therefore, Mike did not list her as a dependent when he became eligible for group insurance. After 3 months of working, his daughter changed her mind and decided to attend the local Junior College full time.
Since it was more than 30 days after Mike became eligible for coverage, Mike had to complete enrollment forms for his daughter. Her enrollment date then became the first of the month after the insurance company received the application. There were no pre-existing condition provisions under the group plan, but if there had been, she would have been subject to the pre-existing clause.
ENROLLMENT RECORDS
Because of the importance of timely and accurate records, Group policies contain specific and detailed instructions as to the establishment and maintenance of employee insurance records. These are spelled out in detail and vary by company. When the Group policy is delivered, this section should be reviewed in detail so it is important that the agent be familiar with the particular policy delivered.
The following other provisions regarding the enrollment and effective dates of coverage are unique to Group Health insurance.
1. Rehired Employees
Individuals who are rehired as employees of the Contractholder are considered newly hired employees for purposes of this Contract. The provisions of this Contract which are applicable to newly hired Eligible Employees and their Eligible Dependents (e.g., enrollment, Effective Dates of coverage, Pre existing Conditions limitation, and Waiting Period) are applicable to rehired Eligible Employees and their Eligible Dependents.
2. Premium Payments
In those instances where an individual is added to coverage under this Contract (e.g., a new Eligible Employee or a new Eligible Dependent, including a newborn or Adopted child), that individual's coverage shall be effective, as set forth in this Section, provided YOUR INSURANCE COMPANY receives the applicable additional Premium payment within 30 days of the date YOUR INSURANCE COMPANY notified the Contractholder of such amount. In no event shall an individual be covered under this Contract if YOUR INSURANCE COMPANY does not receive the applicable Premium payment within such time period.
3. Prior Coverage under an Extension of Benefits
The Contractholder's prior carrier may be required to provide certain benefits to the Insured under an extension of benefits provision. In no event shall YOUR INSURANCE COMPANY pay any claims for services or supplies which are covered under any provision in the prior carrier's plan relating to extension of benefits after plan termination.
C.A.
When Mike applied for dependent coverage on his daughter, he paid the premium to cover her at time of application for coverage. The Human Resources Department of Consolidated completed the necessary forms and notified the insurer immediately. His daughter met all requirements for dependent’s coverage.
Mike’s foreman, Bill, left the employ of Consolidated and moved to Georgia and a new job. His wife did not like Georgia and wanted to return home. After 8 months, Bill applied for his old job at Consolidated and was rehired in a similar position. He applied for health insurance benefits but had to wait for 90 days before he became eligible for coverage. However, in the state where Consolidated is located, a “key man” exception is allowed, whereby if the employer can attest to the fact that the employee is a “key man” the insurer may waive the waiting period. In this case, Bill held 2 engineering degrees and Consolidated showed how they had not been able to fully replace Bill when he left, even with the hiring of 3 persons. The insurer would probably allow a waiver of the waiting period in actual practice.
PAYMENT OF PREMIUMS
YOUR INSURANCE COMPANY requires the regular and timely payment of Premiums on a prospective basis. The first payment must be received by YOUR INSURANCE COMPANY before YOUR INSURANCE COMPANY issues this Contract. After such first payment, Premiums are due on the 1st day of each month, unless YOUR INSURANCE COMPANY and the Contractholder agree to have the 15th day of each month as the Premium due date. The Contractholder is solely responsible for the timely payment of Premiums. In the event this Contract terminates for any reason, the Contractholder is responsible for all due and unpaid Premiums. Other than as specifically set forth in this Contract, YOUR INSURANCE COMPANY is not obligated to provide any coverage for any individual(s) for whom Premiums have not been received by YOUR INSURANCE COMPANY in advance, or to refund Premiums paid on behalf of any individual(s) who was listed on YOUR INSURANCE COMPANY's Enrollment Records as an Insured.
C.A.
Consolidated pays their premiums on the 1st of each month. Their customers usually pay their bills towards the middle of the month in order to take advantage of any discounts. However, Consolidated’s suppliers generally require payment by the fist of the month. With the expansion of Consolidated and the additional new employees becoming eligible for benefits, the payment gap causes a strain on the finances of Consolidated. They requested that their billing date be moved to the 15th of the month.
GRACE PERIOD
Note the abbreviated Grace Period [compared to Individual plans] and the difference in the payment of premiums provision, due to the premiums being submitted by the employer.
YOUR INSURANCE COMPANY allows a 10 day Grace Period for the payment of Premiums. Any Premium which is not paid by the applicable due date may be paid within the 10 day period immediately following such due date. in the event the Premium payment is received by YOUR INSURANCE COMPANY within the Grace Period, this Contract will remain in force. In the event the Premium payment is not received by YOUR INSURANCE COMPANY within the Grace Period, this Contract will terminate as of the due date and the Contractholder shall be liable to YOUR INSURANCE COMPANY for any claim payments made by YOUR INSURANCE COMPANY for services or supplies rendered subsequent to such due date.
C.A.
After Consolidated and the insurer agreed to the 15th of the month as billing date, the following month the corporate comptroller forgot that the due date had been changed, and waited until the 5th of the following month to submit the premiums. Since the new billing date was the 15th, and there was a 10-day Grace Period, the policy had lapsed as of the 25th of the month. The insurer did not receive the premium payment until the 5th of the next month. Technically, this policy lapsed and the insurer had no liabilities. However, as a matter of practice and to conserve the business, the insurer will work with the Contractholder, and with payment of back premium, would in nearly all cases, reinstate the policy. They would probably bill Consolidated for an additional 2 weeks of premium. Of course, if for some reason, the insurer is not interested in continuing the group coverage of Consolidated (high claims ratio, for instance), they are within their right to terminate the group policy and refuse to reinstate.
OTHER PREMIUM PAYMENT REQUIREMENTS
1. YOUR INSURANCE COMPANY reserves the right to suspend claims payments for claims incurred after the applicable due date in the event YOUR INSURANCE COMPANY does not receive the payment prior to the applicable due date.
2. YOUR INSURANCE COMPANY shall not be required to retroactively terminate this Contract or coverage for any Insured under this Contract.
INSUREDS’ FINANCIAL RESPONSIBILITIES
1 Individual Calendar Year Deductible requirement
The Individual Calendar Year Deductible requirement is set forth on the Schedule of Benefits. This requirement must be satisfied by each insured each Calendar Year, as determined by YOUR INSURANCE COMPANY, before any payment will be made by YOUR INSURANCE COMPANY for any claim. Only those charges indicated on claims received by YOUR INSURANCE COMPANY for Covered Services will be credited by YOUR INSURANCE COMPANY towards the Individual Calendar Year Deductible requirement, and only up to the applicable Allowed Amount.
2. Aggregate Family Calendar Year Deductible Requirement Limit
The Aggregate Family Calendar Year Deductible requirement limit is set forth on the Schedule of Benefits. Once the Certificateholder's family has reached such limit, no Insured in that family will have any additional Deductible responsibility for the remainder of that Calendar Year. The maximum amount that any Insured in the family can contribute to the Aggregate Family Calendar Year Deductible requirement is the Individual Calendar Year Deductible amount.
3. Annual Carryover
Any charges credited by YOUR INSURANCE COMPANY towards the Calendar Year Deductible requirements during the last three months of the prior Calendar Year will be carried over to reduce the Calendar Year Deductible requirement for the next Calendar Year.
4. Prior Coverage Credit
Any charges credited by the Contractholder's prior insurer towards an Insured's Deductible requirement during the 90 days prior to the Effective Date of this Contract, under a policy which was replaced by this Contract, shall be credited to that Insured's Calendar Year Deductible requirement for the initial Calendar Year of coverage under this Contract, but only to the extent those charges were for Covered Services. Prior coverage credit only applies at the initial enrollment of the group. The Contractholder and/or Insured is responsible for providing YOUR INSURANCE COMPANY with the information necessary for YOUR INSURANCE COMPANY to apply this prior coverage credit.
The Hospital Per Admission Deductible requirement is set forth on the Schedule of Benefits. The Hospital Per Admission Deductible requirement must be satisfied by each Insured, as determined by YOUR INSURANCE COMPANY, before any payment will be made by YOUR INSURANCE COMPANY for any claim for services or supplies rendered by or at a Hospital. The Hospital Per Admission Deductible requirement applies regardless of the reason for the admission and is in addition to the Calendar Year Deductible requirement.
COINSURANCE REQUIREMENT
The wording very closely resembles that of the similar provision on Major Medical Plans.
C.A.
Consolidated received a notice of premium increase from their Group Health Insurance carrier, which they felt was exorbitant. Therefore, they changed carriers effective August 1st. The plan benefits remained the same.
Mike had been to the doctor for the Asian Flu that raged through his community, and he had accumulated $200 towards his deductible ($300). His wife also was sick and had accumulated $150 towards the deductible. On September 15th, Mike contracted a skin disease that required treatment and the total bill was $300.
Under the Prior Coverage Credit provision of the policy, the amounts that Mike and Marie had spent during the calendar year and while they were under the prior carrier, was waived. In effect Mike’s deductible was satisfied and his new carrier would pick up its coinsurance share of $200 ($180). If Marie receives medical services, after $150 is billed, her deductible would also have been satisfied.
C.A.
Mike resides in a suburban area served by a Regional Hospital, located approximately 1 mile from his home. He noted that under the new PPO group insurance policy, the Regional Hospital was not an approved hospital. However, the City Hospital was 12 miles from his residence, and City is an approved hospital.
If Mike needs to be hospitalized, if he uses Regional, he will have to pay $100 deductible for each admission. This deductible will not need to be paid if he uses City. However (explained later in the text) if he needs immediate hospitalization &/or Emergency Room care, he can use Regional if time is of the essence.
RESTORATION OF BENEFITS
The wording very closely resembles that of the similar provision on Major Medical Plans.
HEALTH CARE PROVIDERS
Wording regarding the PPO Providers (when applicable) are the same as with individual Major Medical plans. As a rule, Provider-type plans are established the same for Group and Individual plans. Note the illustrated Schedule of Benefits on the first page shows a difference in approved and non-approved Providers in coinsurance percentages. Since some groups are multi-state, there can be special consideration given if there are employees in an area not served by participating Providers. Some plans allow a choice with higher co-payments or some other added cost if approved Providers are not used. Again, because the size of the group determines the type of plan and the benefits provided, there are more alternatives to this and other similar provisions than could be outlined in a text of this size and type.
COVERED SERVICES
Hospital Care, Physician Care, Ambulatory Surgical Center Care, Accident Care, Accident Dental Care, Prescription Drugs, Complications of Pregnancy, Sterilization, Newborn Child and Well-Child Care, Organ Transplant, Mental-Nervous Disorder treatment, Alcohol-Drug Dependency treatment, Therapeutic Services, Mammogram, Skilled Nursing Care, Home Health Care, Ambulance Services, Prosthetic & Orthotic Devices & Durable Medical Equipment, are all comparable to the provisions and terminology of the individual Major Medical plans. The only two sections of interest that are not defined under Major Medical provisions, are Maternity and Hospice Care. (See below)
MATERNITY CARE
Maternity Health care services and supplies, including prenatal care, delivery and postnatal care, provided to an Insured other than the Certificateholder's child, by a Doctor of Medicine (M.D.), Doctor of Osteopathy (D.O.), Hospital, Birth Center, midwife or Certified Nurse Midwife may be Covered Services.
Maternity benefits are provided for a Certificateholder's Dependent daughter only when: 1) the Certificateholder has employee/children or employee/family type coverage; 2) the Contractholder has purchased the optional Dependent daughter maternity benefits Rider from YOUR INSURANCE COMPANY; and 3) the Dependent daughter was covered under such Rider for at least 30 days prior to the date of conception of such Dependent's pregnancy, as determined by a Physician.
Complications of Pregnancy: Health care services and supplies provided to an Insured for the treatment of complications of pregnancy may be Covered Services. Coverage for complications of pregnancy is limited to Covered Services to treat the Condition covered by the complication, and does not include maternity coverage.
Additionally, coverage for complications of pregnancy is subject to any Pre-existing Condition limitations. For purposes of this Section, the phrase complications of pregnancy" means a Condition which is diagnosed as a separate Condition from the pregnancy.
Complications of Pregnancy definitions and limitations closely follow those outlined in the Major Medical policy.
C.A.
Mike’s daughter had been “going steady” with her high school sweetheart for 2 years. When Mike and Marie discovered that the daughter and her boyfriend were having intimate relations, they became concerned. They were afraid that their daughter might become pregnant, even though they attempted to stop such irresponsible behavior.
Marie had a friend whose husband also worked for Consolidated, and had a similar situation arise, but when the daughter became pregnant, they discovered that they had had to purchase a special Maternity Rider before a dependent would be covered. Mike, took immediate action and purchased the Rider. The action was correct as soon afterwards, their daughter informed them that she was pregnant. She and her parents decided that she should continue in college and when the baby was born, Marie would keep her while her daughter continued her education.
It was determined that the daughter had become pregnant about 45 days before the Maternity Rider was purchased (if it had been less than 30 days, she would not have been covered under Consolidated’s group plan). She elected to have her baby at a birth center near their home and to use the services of a Certified Nurse Midwife as she felt more comfortable with these people (as they were approved Providers, the plan would cover those expenses). However, she started having pains prior to her due date, and as a precaution she was sent to Regional Hospital, close to her home (not-approved, so there would be an additional $100 deductible), and brought in the services of an obstetrician (approved Provider). It was determined that a Cesarean should be performed. The surgery was performed, and the daughter gave birth to an 8-pound baby girl.
Since the Cesarean was necessary, the Maternity provision would not apply, however, the Complications of Pregnancy provision would apply and her expenses would be covered. She would be responsible for the $300 deductible, plus the $100 Hospital Deductible, plus 10% of the remaining bills up to a maximum of $1,000, for a total cost of $1,400.
HOSPICE CARE
(Typically, hospice care is not covered under individual Major Medical policies)
Health care services and supplies provided to an Insured in connection with a Hospital treatment program may be Covered Services provided the Hospice treatment program is approved by the Insured’s Physician who advises that the Insured is not expected to live more than one year. Benefits for Covered Services for Hospice are limited as indicated in the Schedule of Benefits.
C.A.
Mike’s Brother-in-law, Sam, also works for Consolidated and is covered under their Group Insurance Plan. Sam was a very heavy smoker, and had a lingering, hacking cough. He went to his doctor for a checkup, and was diagnosed as having lung cancer, requiring immediate surgery.
During the operation, it was discovered that the cancer had spread throughout his body. After surgery and a week in the hospital, the doctors sent him home, as there was nothing more they could do for him. They gave him less than a month to live.
Sam’s doctor recommended Hospice service, and set up a planned treatment program. The Hospice installed a hospital bed in his home and spent time with the family, instructing them on how to treat him during his last hours. The “Do Not Resuscitate” sign was posted in his room. He very soon could not eat solid foods, and had to have a special diet of Ensure. The surgery left a hole in his chest for drainage, and the bandages had to be changed 2 or 3 times a day. He passed away 4 weeks after hospital discharge.
The Hospice expenses would be covered under the group insurance plan.
SECOND SURGICAL OPINION
In general, Second Opinions are more closely regulated under Group insurance coverage than with individual Major Medical policies. This will vary by company, policy form and jurisdiction, however the following illustrated wording is typical for many plans.
Under this program, each Insured is required to obtain a confirming surgical opinion from a Physician who is participating in this program when a Non PPO Physician intends to perform any Procedures of the Planned (i.e., surgery that is not all emergency or urgent) surgical procedures listed below. There is no Coinsurance or Deductible responsibility for insureds when receiving covered consultations under this Program. In the, event an Insured does not obtain such confirming opinion, the Allowed Amount will be reduced by 25%. This penalty is the Insured's responsibility and is in addition to all applicable obligations and limitations under this Contract. The benefit reduction amount will not be applied towards the Coinsurance requirement limits (for example, the individual Coinsurance requirement limit).
1. Planned Surgical Procedures Requiring a Confirming Opinion
Insureds must obtain a confirming opinion for the following planned surgical procedures when they are to be performed by a Non PPO Physician:
• arthroplasty plastic operation on a joint or the formation of an artificial joint when performed on the knee or hip;
• arthroscopy internal examination performed by the use of a scope, when performed on the knee;
• bunionectomy surgical removal of a bunion;
• cataract removal removal of the opacity of the crystalline lens of the eye;
• cholecystectomy removal of the gall bladder;
• coronary bypass and pacemaker insertion;
• D&C dilation and curettage;
• subcutaneous mastectomy excision of cyst, tumor, or lesion of the breast;
• hemorrhoidectomy removal of a mass of swollen varicose veins in the rectal mucous membrane
• hysterectomy removal of the uterus by excision;
• laminectomy or laminotomy removal of or incision into a disk
• prostatectomy (including transurethral resection) excision of the prostate gland;
• submucous resection/rhinoplasty surgical correction of deviated septum, plastic surgery on the nose; and
• tonsillectomy/adenoidectomy removal of the tonsils and adenoids.
2. How to Obtain a Second Opinion
Insureds must obtain the confirming opinion from a Physician who is participating in YOUR INSURANCE COMPANY's Second Surgical Opinion program in order to avoid the 25% penalty. Insureds may obtain a list of such participating Physicians by contacting YOUR INSURANCE COMPANY. Additionally, upon request YOUR INSURANCE COMPANY will provide tile insured with a Medical Records Release Authorization form which will allow the insured's Physician to transfer records to the consulting Physician.
In the event the consulting Physician does not confirm the need for the Planned surgery, the Insured may seek a third opinion from a Physician participating in YOUR INSURANCE COMPANY's Second Surgical Opinion program.
C.A.
Mike suffered from hemorrhoids and since he had to sit nearly all day at his job, they became intolerable. Mike went to a local clinic and was checked by a non-approved physician, who wanted to perform a hemorrhoidectomy in the Regional Hospital. However, he needed a second opinion, preferably from an approved Physician to avoid a 25% penalty. The doctor that gave the second opinion felt that the operation was not needed at this time. Mike’s original doctor then asked for a third opinion (again, approved Physician) and the third opinion agreed. Mike then entered the hospital and had a hemorrhoidectomy. Note: At the Regional hospital, he still would have to pay an additional $100.
MEDICAL NECESSITY
The wording under Group policies and Individual Major Medical are approximately the same – primarily the decision as to whether a procedure is medically necessary is the decision of the insurance company.
PRE EXISTING CONDITIONS
Pre-existing conditions differ considerably between Group insurance and Individual Major Medical insurance, however because of liberalization of provisions due to politics-driven regulations, the difference is narrowing and in particular with respects to the HIPA Act as discussed later in this text.
Except as otherwise provided in this Contract, if the Insured enrolled for coverage under this Contract during the Initial Enrollment Period or during an Annual Open Enrollment Period, the period during which coverage for Pre-Existing existing will be limited depends on whether or not the Insured had Qualifying Previous Coverage.
Except as otherwise provided in this Contract, insureds who had employer based group health Qualifying Previous Coverage will be given credit for the partial satisfaction of a Pre existing Condition limitation waiting period if that person was subject to a Pre existing Condition limitation under the previous coverage and had not satisfied a 12 month Pre existing Condition waiting period:
1. If the Insured employee is newly hired by the Contractholder and enrolls himself or herself and his or her Eligible Dependents within 30 days before the Effective Date of his or her new coverage under this plan, exclusive of any waiting period, or;
2. If the Insured employee, and his or her Eligible Dependents, were covered under another health benefit plan established and maintained by the Contractholder and maintained that coverage under that plan up to the beginning date of the Annual Open Enrollment Period, and now desires to change to this Contract during an Annual Open Enrollment Period.
An insured who had employer based group health Qualifying Previous Coverage will not be subject to Pre existing Condition Limitation waiting period if they were covered continuous to a date not more than thirty (30) days prior to the Effective Date of coverage, exclusive of any waiting period.
An insured who had individual Qualifying Previous Coverage that was in effect for 12 months or longer will not be subject to a Pre existing Condition limitation waiting period if they were covered continuously under the Qualifying Previous Coverage continually to a date 30 days before the Effective Date of this Contract, exclusive of any waiting period.
If the Insureds (not including Late Enrollees) did not have Qualifying Previous Coverage, the following rules apply:
1. If the Contractholder has 3 or more employees,
Pre Existing Conditions which manifested themselves, or for which medical advice or treatment was received, within the 6 month period immediately preceding the Insured’s Effective Date will be considered pre existing and will not be covered until the insured has been covered under this Contract for 12 consecutive months.
2. If the Contractholder has less than 3 employees, Pre existing Conditions which manifested themselves, or for which medical advice or treatment was received, within the 24 month period immediately preceding the Effective Date will be considered pre existing and will not be covered until the insured has been covered under this Contract for 24 months.
Late Enrollees
A Late Enrollee can enroll for coverage under this Contract in one of the, following ways.
1. If the Late Enrollee waits until the next Annual Open Enrollment Period to enroll, Pre-existing Conditions Limitations which had manifested themselves or for which there was medical advice or treatment:
• within the 6 month period immediately preceding the Insured’s Effective Date will not be covered under this Contract until the Insured has been covered under this Contract for 12 consecutive months for an employee of a Small Employer with 3 or more employees, or;
• within the 24 month period immediately preceding the Insured’s Effective Date will not be covered under this Contract until the Insured has been covered under this Contract for 24 consecutive months for an employee of a Small Employer with less than 3 employees.
2. YOUR INSURANCE COMPANY will allow a Late Enrollee who wants to apply prior to the next Annual Open Enrollment Period to apply at any time, however, he/she will be required to submit a Medical Statement Application and will be subject to the following rules:
If the Late Enrollee's Medical Statement Application is acceptable to YOUR INSURANCE
COMPANY:
Coverage will become effective on the date YOUR INSURANCE COMPANY accepts the Late Enrollee for coverage but
• For individuals whose coverage is provided by a Small Employer who has 3 to 50 employees:
Pre existing Conditions, which manifested themselves, or for which treatment or advice was received, 6 months prior to the individual's Effective Date, will not be covered for a period of 12 months following the individual's Effective Date (with proper credit for Qualifying Previous Coverage, if any).
• For individuals whose coverage is provided by a Small Employer who has 1 or 2 employees:
Pre existing Conditions, which manifested themselves, or for which treatment or advice was received, 24 months prior to the individual's Effective Date, will not be covered for a period of 24 months following the individual's Effective Date of coverage (with proper credit for Qualifying Previous Coverage, if any).
If the Late Enrollee's Medical Statement Application is not acceptable to YOUR INSURANCE COMPANY, then the Late Enrollee will be required to reapply at the next Annual Open Enrollment Period. Once the Late Enrollee reapplies:
• For individual's whose coverage is provided by an employer who has 3 to SO employees and who did not have Qualifying Previous Coverage:
Pre existing Conditions which manifested themselves, or for which treatment or advice was received, 18 months prior to the individual's first (original) date of application will not be covered for a period of 18 months following the individual's Effective Date of coverage, with credit for the number of months for which he/she was totally excluded from coverage, i.e., the number of months between the original date of the individual's application and the individual's Effective Date of coverage.
• For individual's whose coverage was provided by an employer who has 1 or 2 employees and who did not have Qualifying Previous Coverage:
Pre existing Conditions which manifested themselves, or for which treatment or advice was received 24 months prior to the individual's first (original) date of application will not be covered for a period of 24 months following the individual's Effective Date of coverage, with credit for the number of months for which he/she was totally excluded from coverage, i.e., the number of months between the original date of the individual's application and the individual's Effective Date of coverage.
YOUR INSURANCE COMPANY reserves the right to collect from the Insured the cost of any service or supply paid as benefits by YOUR INSURANCE COMPANY for a Pre existing Condition in error.
C.A.
One of Consolidated’s suppliers, WidgetOne Corporation, provided their 8 employees with health insurance, with benefits the same as Consolidated as most of their employees had formerly worked for Consolidated and wanted the same benefits when possible. The principal difference between the plans was that as a smaller group, the employees were subject to a pre-existing condition clause.
WidgetOne hired Donald, who had formerly worked for Consolidated. Donald enrolled in the WidgetOne health benefits program. Because he had enrolled directly from one plan to another, the pre-existing conditions provision was waived as Donald had been with Consolidated for several years.
However, new employee Harold, came from another small company, and had only had coverage for 6 months prior to coming to work for WidgetOne. Therefore, he would have a 6-month pre-existing condition provision.
Harold’s previous company only had 2 employees (Harold and the owner), so their group plan had a 24 month pre-existing clause. By joining a larger group, he reduces his pre-existing condition clause to 18 months.
Prior to joining Consolidated, Harold had suffered severe chest pains on 3 separate occasions. At first he thought it was simply gas pains, took some Tums, and the pain left. Later he became concerned, but since he knew he was going to Consolidated who had a better health plan in respect to pre-existing conditions. Soon after joining Consolidated, he again suffered chest pains and his wife rushed him to the hospital, where it was determined that he had suffered a heart attack. (Continued on next page)
Harold insisted that this was not a “pre-existing condition” as he had not gone to a doctor. However, during his physical examination and chest x-rays, it became obvious that he had had at least 3 myocardial infarctions as there were sports of injured muscle on his heart. The insurance company referred to their definition of pre-existing “which manifested themselves, or for which medical advice or treatment was received during this period”, particularly to the “condition which manifested itself” during this period. (Some policy provisions further specify that “any condition that would cause a reasonable person to seek medical care” is considered pre-existing if it falls within the appropriate time period).
BENEFIT LIMITATIONS
Restrictions and limitations such as those for various devices and equipment limited to the most cost effective; Multiple Surgical Procedures; Incidental Surgical Procedures; Allowance For Surgical Assistant; Allergy Testing; Physician In-Hospital Visits; Limitation For Physical Therapy, etc., are outlined in a group contract and closely resemble the wording and provisions of an individual Major Medical policy.
EXCLUSIONS
Not surprisingly, the Exclusions under a Group policy closely resembles the Exclusions under a Major Medical program, except for noted exceptions, such as Maternity and Hospice coverage.
COORDINATION OF BENEFITS
Coordination of Benefits provisions in individual policies vary from those used in group policies primarily because group policies are subject to COBRA [described later in this text] and approach the problem of duplicate coverage from a different [group & employer furnished benefits] perspective.
Coordination of Benefits is a limitation of benefits for Covered Services under this Contract and is designed to avoid the duplication of payment for health care services and supplies. Coordination of Benefits applies when an Insured is covered under other plans, programs, or policies providing benefits for health care services and supplies which contain a COB provision or are required by law to contain a COB provision. Such other plans, programs, or policies may include, but are not limited to:
1. Any group or individual insurance (including automobile PIP and/or medical payments), group self insurance, health maintenance organization, or other plan, program, or policy; or
2. Any group or individual plan, program, or policy underwritten or administered by YOUR INSURANCE COMPANY.
YOUR INSURANCE COMPANY's payment for Covered Services depends on whether YOUR INSURANCE COMPANY is the primary payer, as determined in accordance with the provisions set forth below. In the event YOUR INSURANCE COMPANY is the primary payer, YOUR INSURANCE COMPANY's payment for Covered Services, if any, will not be reduced due to the existence of other coverage and will be made without regard to the Insured's other plans, programs, or policies.
In those instances where COB applies and YOUR INSURANCE COMPANY is not the primary payer, YOUR INSURANCE COMPANY's payment for Covered Services, if any, will be reduced so that when such payment is combined with the payments made under the Insured's other health care plans, programs, or policies, the total payment will not exceed 100% of the "total reasonable expenses" actually incurred by the Insured. In the event an Insured receives Covered Services from a PPO or a Participating Provider, "total reasonable expenses" shall equal the amount YOUR INSURANCE COMPANY is obligated to pay to the Provider pursuant to the applicable agreement YOUR INSURANCE COMPANY has with such Provider.
The following rules shall be used by YOUR INSURANCE COMPANY to determine if YOUR INSURANCE COMPANY is the primary payer:
1. The benefits of a policy, plan, or program which covers the person as all employee, member, or Insured, other than as a Dependent, are determined before those of the policy, plan, or program which covers the person as a Dependent.
However, if the person is also a Medicare beneficiary, and if the rule established under the Social Security Act of 1965, as amended, makes Medicare secondary to the plan covering the person as a Dependent of an active employee, the order of benefit determination is:
a. First, benefits of a plan covering persons as an employee, member, or subscriber.
b. Second, benefits of a plan of an active worker covering persons as a Dependent.
c. Third, Medicare benefits,
2. Except as stated in paragraph 3, when two or more policies, plans, or programs cover the same child as a Dependent of different parents:
a. The benefits of the policy, plan, or program of the parent whose birthday, excluding the year of birth, falls earlier in a year are determined before those of the policy, plan, or program of the parent whose birthday, excluding year of birth, falls later in the year; but
b. if both parents have the same birthday, the benefits of the policy, plan, or program which covered the parent for a longer period of time are determined before those of the policy, plan, or program which covered the parent for a shorter period of time.
However, if a policy, plan, or program subject to the rule based on the birthday of the parents as stated above coordinates with an out of state policy, plan, or program which contains provisions under which the benefit of a policy, plan, or program covers a person as a Dependent of a male are determined before those of a policy, plan, or program which covers the person as a Dependent of a female and if, as a result, the policies, plans, or programs do not agree on the order of benefits, the provisions of the other policy, plan, or program shall determine the order of benefits.
3. If two or more policies, plans, or programs cover a Dependent child of divorced or separated parents, benefits for the child are determined in this order:
a. First, the policy, plan, or program of the parent with custody of the child;
b. Second, the policy, plan, or program of the spouse of the parent with custody of the child; and
C. Third, the policy, plan, or program of the parent not having custody of the child.
However, if the specific terms of a court decree state that one of the parents is responsible for the health care expenses of the child, and if tile entity obliged to pay or provide the benefits of the policy, plan, or program of that parent has actual knowledge of those terms, the benefits of that policy, plan, or program are determined first. This does not apply with respect to any claim determination period or plan, policy, or program year during which any benefits are actually paid or provided before that entity has the actual knowledge.
4. The benefits of a policy, plan, or program which covers a person as an employee who is neither laid off nor retired, or as that employee's Dependent, are determined before those of a policy, plan, or program which covers that person as a laid off or retired employee or as that employee's Dependent. If the other policy, plan, or program is not subject to this rule, and if, as a result, the policies, plans, or programs do not agree on the order of benefits, this paragraph shall not apply.
5. If none of the rules in paragraph 1., paragraph 2., paragraph 3., or paragraph 4. determine the order of benefits, the benefits of the policy, plan, or program which covered an employee, member, or Insured for a longer period of time are determined before those of the policy, plan, or program which covered that person for the shorter period of time.
If an individual is covered under a COBRA continuation plan as a result of the purchase of coverage as provided under the Consolidation Omnibus Budget Reconciliation Act of 1985, as amended, and also under another group plan, the following order of benefits applies:
a. First, the plan covering the person as an employee, or as the employee's Dependent.
b. Second, the coverage purchased under the plan covering the person as a former employee, or as the former employee's Dependent provided according to the provisions of COBRA.
Coordination of benefits shall not be permitted against an indemnity type policy, an excess insurance policy as defined in State Statutes, a policy with coverage limited to specified illnesses or accidents, or a Medicare supplement policy.
C.A.
Mike’s father-in-law also works for Consolidated. He turned age 65 and was eligible for Medicare. Medicare, by law, is secondary to the group plan of Consolidated. Since Consolidated pays for the employee’s insurance, he elected to keep his group coverage.
Bill (also employed at Consolidated) has a son, Reginald, who has been a sickly child and requires considerable medical attention. Bill’s wife, Joanne, works for another company and is insured under their health plan as the employer pays all of the premiums. Because of Reginald’s health, both parents carry Reginald as a dependent on their insurance. Until recently, Reginald’s medical costs had been a series of small doctor’s bills, but recently he has had rather costly CAT Scans and MRI’s, plus new expensive medical treatment.
In determining which plan would be primary, it was first determined whether Bill or Joanne had the earliest birthday, and by coincidence (they never forget each other’s birthdays) they both were born on March 4. Therefore, the policy then called for the one that had had coverage the longest. Since Bill had returned from Georgia and went back to his old job, Joanne had only recently gone to work. Therefore, Bill’s insurance would be primary. (Continued on next page)
Interestingly, in some states, with the same birthdays, the coverage of the male (Bill) would be primary anyway. In some other jurisdictions Bill’s coverage would be primary regardless of the incidence of birthdays.
SUBROGATION
The wording very closely resembles that of the similar provision on Major Medical Plans
TERMINATION OF THE GROUP CONTRACT
Termination provisions of a Group Contract differs from those of an individual plan because the policyholder is actually the employer. Therefore, provisions must be made for cancellation by the employer and termination of coverage for individual employees. A provision in the renewability section allows the insurer to cancel a group contract if continued exposure could injure the insurer financially, with the Department of Insurance’s permission. It is conceivable that a company may have a very large group that could have so many claims the insurer would be financially injured if they kept it on the books, a situation that obviously would not arise in an individual policy.
This Contract shall remain in effect until terminated by either party in a manner consistent with this Contract.
The Contractholder may terminate this Contract at any time without cause upon at least 45 days prior written notice to YOUR INSURANCE COMPANY.
This Contract is renewable at the option of the Contractholder except that YOUR INSURANCE COMPANY may terminate or not renew this Contract for any of the following reasons:
• non payment of required premiums;
• fraud or misrepresentation of the Contractholder;
• non compliance with required Contract provisions;
• non compliance with YOUR INSURANCE COMPANY's minimum participation requirements;
• non compliance with YOUR INSURANCE COMPANY's Contractholder contribution
requirements
• the Contractholder's termination of the business in which it was engaged on the Effective Date
of this Contract;
• the Department of insurance determines that continuation of coverage is not in the best interest of the Contractholder or Insureds or will impair YOUR INSURANCE COMPANY's ability to meet its contractual obligations. In such instances, the Contractholder may seek assistance from the Department of Insurance in finding replacement coverage.
This Contract will automatically terminate as of the applicable Premium due date in the event YOUR INSURANCE COMPANY does not receive the applicable Premium payment prior to the end of the Grace Period. In no event will such termination relieve the Contractholder of its obligation for claims payments made by YOUR INSURANCE COMPANY for services or supplies rendered subsequent to such due date. YOUR INSURANCE COMPANY shall provide to the Contractholder written notification of any termination by YOUR INSURANCE COMPANY. Upon receipt of such notification, the Contractholder shall immediately notify each Certificate holder of the termination.
C.A.
Consolidated does not have a participation problem inasmuch as they pay the premium for their employees. Therefore, there is no logical reason for an employee not to accept the health insurance. If they are covered under their spouse’s health insurance with other groups, they are not considered “eligible”, so it will not affect the ratio.
If Consolidated only paid for 50% of the employees premium, many employees would feel that they could not afford the 50% premium from their paycheck and would not accept the insurance when they became eligible. This would create problems as traditionally, the younger and healthier individuals are the ones who feel that they can’t afford health insurance, and since they are healthy, they feel they don’t need it. Therefore, the ones remaining in the group (if there are enough eligible employees to maintain the participation requirements) are the least healthiest, those who are suffer from poorer health, or are older and more susceptible to ill health. This creates an anti-selection problem, as claims would increase which would increase the overall premium for the group. As the premium increases, more healthy employees will refuse or drop out of group health coverage as they feel they cannot afford it – and again they will be the healthy ones. The cycle could continue. It may be more cost-efficient for the employee to pay for all of the premiums on the employees.
COBRA CONTINUATION OF COVERAGE
A provision unique to Group insurance is the COBRA provision. In effect, this allows employees who have been insured under a Group insurance policy, that leaves the group, to remain covered under the same policy for a period of time (normally 18 months, except if disability is involved - see below). This provision was legislated by the Federal Government, with the result that very detailed explanation of this benefit is required and is strenuously enforced. COBRA is mandated for all Groups of 20 or more employees, but some states have enacted a similar provision for smaller groups – usually groups 5 to 20 employees. The principal features of the COBRA provision is that benefits extend for 18 months, maximum 36 if disability is involved as outlined below; and that it affects groups of 20 or more employees. It is the employers responsibility to notify the ex-employee of his/her COBRA benefits, however in at least one state that has a State COBRA – like law for smaller groups, the responsibility is that of the insurance company).
Federal continuation of coverage requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), as amended, also known as Section 4980B of the Internal Revenue Code of 1986, may apply to the Contractholder. If COBRA applies to the Contractholder, an Insured may be entitled to continue his or her group health coverage for a limited period of time, if the Insured meets the applicable requirements, makes a timely election, and pays the proper Premiums.
An Insured must contact the Contractholder to determine if he/she is entitled to COBRA continuation of coverage. The Contractholder is solely responsible for meeting all of the obligations under COBRA, including the obligation to notify all covered employees and Dependents of their rights under COBRA. If the Contractholder or the Insured fails to meet its obligations under COBRA and this Contract, YOUR INSURANCE COMPANY shall not be liable for any claims incurred by the Insured after his/her termination of coverage.
Solely for the convenience of the Contractholder, a summary of the COBRA rights of an Insured and the general conditions for an Insured's qualification for COBRA continuation coverage is provided below. This summary is not meant as a representation that any of the COBRA obligations of the Contractholder are met by the purchase of this Contract; the duty to meet such obligations remains with the Contractholder.
Insureds may elect, if COBRA applies to the Contractholder and the Insured is eligible for such coverage, to continue their group health insurance if they qualify under one of the following circumstances:
1. If coverage would otherwise be lost due to the death of a covered active or retired employee of the Contractholder, the surviving spouse and Dependent children may qualify to elect to continue their group health coverage for a period of time not to exceed 36 months from the date of death.
2. A spouse who would otherwise lose coverage due to a divorce or legal separation from a covered active or retired employee of the Contractholder, and Dependent children who would otherwise lose coverage due to the divorce or legal separation, may quality to elect to continue their group health coverage for a period of time not to exceed 36 months from the date of divorce or legal separation.
3. A spouse or Dependent child of a covered active or retired employee who would otherwise lose coverage due to the employee's (or retired employee's) entitlement to Medicare, may quality to elect to continue their group health coverage for a period not to exceed 36 months from the date the employee or covered retiree first becomes entitled to Medicare.
4. Children of a covered active or retired employee, who would otherwise lose coverage due to a failure to meet the group health plan's eligibility requirements (e.g., exceeding the limiting age), may qualify to elect to continue group health coverage for a period not to exceed 36 months from the date the child ceased to meet such eligibility requirements.
5. a. Covered employees, their covered spouse and Dependent children may qualify to elect to continue their group health coverage if coverage would otherwise be lost due to termination of employment with the Contractholder (other than for reasons of gross misconduct), or due to a reduction in hours of employment with the Contractholder. This continuation of coverage may continue for a period not to exceed 18 months from the (late of termination or reduction in hours.
b. If, at the time of the employee's termination or reduction in hours, an Insured is totally disabled (as defined by the Social Security Administration) and all notification and eligibility requirements are met, an extension of coverage of up to 11 additional months may be available (29 months total). Extension of coverage will not be provided if the Insured fails to inform the Contractholder in writing of the disability before the continuation of coverage expires and within the time periods required by COBRA.
6. If an Insured is receiving continuation coverage under paragraph 5, such coverage may continue for a period longer than the time stipulated in that paragraph if an event that would otherwise have entitled the Insured to COBRA continuation coverage (e.g., divorce, legal separation, or death) later occurs. But in no case will the Insured receive coverage beyond 36 months from the event that originally made him or her eligible for coverage.
7. If a bankruptcy or other proceeding under Title 11 of the United States Code commences with respect to the Contractholder, continuation rights shall be provided to the Insured to the extent required under COBRA.
In order for the group health coverage to continue pursuant to COBRA, under this Contract, the following conditions must be met:
1. a. If coverage would be lost due to a reduction in hours or termination of employment (for reasons other than gross misconduct), the Contractholder must notify the employee and Dependents of their continuation of coverage rights under COBRA within 14 days of the termination of employment or reduction in hours causing loss of coverage.
b. If coverage would be lost due to Medicare entitlement, divorce, legal separation, or the failure of a covered Dependent child to meet eligibility requirements, the employee or Dependent must notify the Contractholder, in writing, within 60 days of any of these events. The Contractholder must notify the Dependents of their continuation of coverage rights within 14 days of receipt of such notice from the employee or Dependent.
2. The qualified Insured must elect to continue, the group health insurance within 60 days of the later of the date that the coverage terminates or the date the notification of continuation of coverage rights is sent by Contractholder.
3. The qualified Insured who elects continuation coverage must not be covered under any other group health insurance plan. However, COBRA coverage may continue if the new group health insurance plan contains exclusions or limitations due to a Pre existing Condition that would affect the continuant's coverage.
4. The qualified Insured who elects continuation of coverage, must not become after electing, entitled to Medicare.
5. A Totally Disabled Insured who is eligible to extend and who elects to extend his or her continuation of coverage after 18 months may not continue such coverage more than 30 days after a determination by the Social Security Administration that the Insured is no longer disabled. The Insured must inform the Contract holder of the Social Security determination within 30 days of such determination. For purposes of this Section, a Totally Disabled Insured is an Insured who is determined to be disabled under the Social Security Acts (Title 11, OASDI or Title XVII, SSI).
6. The qualified Insured electing continuation of coverage, must meet all Premium payment requirements, and all other eligibility requirements set forth in COBRA, and, to the extent not inconsistent with COBRA, in this Contract.
7. The Contractholder must continue to provide group health coverage to its employees through YOUR INSURANCE COMPANY.
An election by an employee or spouse shall be deemed to be an election for any other qualified beneficiary related to that employee or spouse, unless otherwise specified in the election form.
The Insured does not need to show insurability to receive COBRA continuation of coverage. However, the Insured must pay the applicable Premiums charged by the Contractholder and this Contract.
In the case of a qualified Insured whose maximum period of continuation of coverage expires, the Contractholder must, during the 180 days period prior to such expiration date, provide the qualified Insured the option of enrolling in an individual conversion policy made available to the Insureds of the Contractholder by YOUR INSURANCE COMPANY.
NOTE: This Section of this Contract shall not be interpreted to grant to any Insured any continuation rights in excess of those required by COBRA and/or Section 4980B of the Internal Revenue Code. Additionally, this Contract shall be deemed to have been modified, and shall be interpreted, so as to comply with COBRA and changes to COBRA that are mandatory with respect to the Contractholder.
C.A.
Assume that Mike leaves Consolidated and decides to go into business for himself as a consultant. He is qualified for COBRA coverage. Mike continues coverage for himself and his family on the same basis as he had when he was working for Consolidated. However, his premium jumped considerably as Consolidated had paid for his insurance coverage so he had to pay the premiums previously paid by Consolidated.
Mike and his family are in relatively good health, but if a Mike or a dependent became disabled, the COBRA period would extend from 18 months to 24 months.
If Mike finds that the premium is excessive, he should investigate individual Major Medical coverage as an alternative. Since individual policies are underwritten, if they qualify for coverage, the premium should be less. The principal feature that they would lose would be Maternity, however since they are over childbearing age, except for their daughter so arrangements will have to be made for her. Perhaps she could qualify for an individual policy with a maternity rider.
If Mike elects to continue with the COBRA coverage, after the COBRA plan has been in existence for 18 months he must then either accept the conversion policy or at that time, apply for an individual policy. Since he has exhausted COBRA, he qualifies for a conversion policy under the provisions of HIPAA (See details later in text). HIPAA requires that insurers offer 2 of their most popular plans to those qualifying for the conversion plan, but if there is no regulations requiring competitive pricing, the premiums for the conversion policies may be quite expensive. If this situation continues, Mike would probably be better off with individual policies, providing he and his family can meet the underwriting and health requirements at the end of the COBRA period.
CONVERSION TO AN INDIVIDUAL POLICY
A conversion policy must be offered to an ex-employee covered under the plan as stated below, is entitled to a conversion policy, i.e. an individual policy under certain situations, as listed below. Because of the HIPAA legislation, and subsequent legislation relating to portability of insurance, regulations are in effect in most jurisdictions to specify the policies that may be offered, in addition to those provisions provided under HIPAA.
Any Insured who has been continuously covered for three (3) months under this Contract, or under any group policy providing similar benefits that this Contract immediately replaced and whose coverage has been terminated for any reason, including discontinuance of this Contract in its entirety and termination of continued coverage under COBRA, is entitled to apply for a YOUR INSURANCE COMPANY individual conversion policy. YOUR INSURANCE COMPANY must receive the completed conversion application and the applicable Premium payment within the 30-day period beginning on the date the coverage under this Contract terminated.
In the event YOUR INSURANCE COMPANY does not receive the conversion application and the initial Premium payment within such 30-day period, the Insured's conversion application will be denied and the Insured is not entitled to a conversion policy.
Additionally, an Insured is not entitled to a conversion policy if:
1. the Insured is eligible for or covered under the Medicare program;
2. the Insured's coverage under this Contract terminated because the Insured's Certificateholder failed to make any Premium contribution payment on a timely basis;
3. this group Contract was replaced by any group policy, contract, plan, or program, including a
self insured plan or program, that provides benefits similar to the benefit provided under this
Contract; or
4. a. the Insured is covered under any Hospital, surgical, medical or major medical policy or
contract or under a prepayment plan or under any other plan or program that provides benefits which are similar to the benefits provided under this Contract;
b. the Insured is eligible, whether or not covered, under any arrangement of coverage for individuals in a group, whether as an insured, uninsured, or partially insured basis, for benefits similar to those provided under this Contract; or
c. benefits similar to the benefits provided under this Contract are provided for or are available to the Insured pursuant to or in accordance with the requirements of any state or federal law (e.g., COBRA, Medicaid); and
d. the benefits provided under the sources referred to in paragraph 4a or the benefits provided or available under the source referred to in paragraph 4b and c above, together with the benefits provided by YOUR INSURANCE COMPANY's conversion policy would result in overinsurance in accordance with YOUR INSURANCE COMPANY's overinsurance standards, as determined by YOUR INSURANCE COMPANY.
It is the sole responsibility of the Insured to exercise this conversion privilege by submitting a YOUR INSURANCE COMPANY conversion application and the initial Premium payment to YOUR INSURANCE COMPANY on a timely basis. The conversion policy may be issued without evidence of insurability and shall be effective the date the individual’s coverage under this contract terminates.
MEDICARE SECONDARY PAYER PROVISIONS
If an employee becomes eligible for Medicare, and continues to be eligible to be covered under the contract, the benefits of the Group policy are primary and Medicare is secondary. The person insured can elect Medicare as primary, in which case the Group policy becomes secondary. For larger groups, there are provisions for employees who are covered under Medicare disability, and for those working employees who have end stage renal disease. For disabled employees, Medicare will become primary and the Group becomes primary. If a covered employee who has (will be undergoing) renal dialysis, or have (will) receive a kidney transplant, group coverage will continue primary for 12 months after the start of dialysis, or a month after which the individual has a kidney transplant, or a combination of 2 months after hospital admission if the individual enters the hospital up to 2 months prior to a transplant.