Bảo hiểm - Chapter 1: Employee benefits: group life and health insurance

Chapter 16Employee Benefits: Group Life and Health InsuranceAgendaMeaning of Employee BenefitsFundamentals of Group InsuranceGroup Life Insurance PlansGroup Medical Expense InsuranceTraditional Indemnity PlansManaged Care PlansConsumer-directed Health PlansRecent Developments in Employer-Sponsored Health PlansGroup Medical Expense Contractual ProvisionsGroup Dental InsuranceGroup Disability-Income InsuranceCafeteria PlansMeaning of Employee BenefitsEmployee benefits are employer-sponsored benefits, other than wages, that are partly or fully paid by employers, which enhance the financial security of individuals and familiesThese benefits include:Group life, medical and dental insurancePaid holidays, vacations, medical leaveEducational assistance, employee discountsEmployer contributions to Social Security and MedicareFundamentals of Group InsuranceGroup insurance differs from individual insurance in several ways:Many people are covered under one contractA master contract is formed between the group and insurerCoverage costs less to the individual than comparable insurance purchased individuallyIndividual evidence of insurability is usually not requiredExperience rating is usedGroup InsuranceGroup insurers observe certain underwriting principles:The group should not be formed for the sole purpose of obtaining insurance There should be a flow of persons through the groupBenefits should be automatically determined by a formulaThis is to reduce adverse selection against the insurerA minimum percentage of employees must participateIndividual members should not pay the entire costThe plan should be easy to administerGroup InsuranceEligibility for group status depends on company policy and state lawUsually a minimum size is requiredEmployees must meet certain participation requirements: Be a full time employeeSatisfy a probationary periodApply for coverage during the eligibility periodDuring the eligibility period, the employee can sign up for coverage without furnishing evidence of insurability Be actively at work when the coverage beginsGroup Life Insurance PlansThe most important form of group insurance is group term life insuranceProvides low-cost protection to employees Coverage is yearly renewable termThe amount of coverage can be based on the workers’ earnings, position, or it can be a flat amount for allIt is typically 1-5 times the annual salary or earningsCoverage usually ends when the employee leaves the companyCan convert to an individual cash value policy Group Life Insurance PlansMany group life insurance plans also provide group accidental death and dismemberment (AD&D) insurancePays additional benefits if the employee dies in an accident or incurs certain types of bodily injuriesSome plans offer voluntary accidental death and dismemberment insurance Employees pay the full costGroup Life Insurance PlansSome employers make available group universal life insurance for their employeesThe employer may offer a one or two plan designIn the single plan approach, the employee who wants only term insurance pays only the mortality and expense chargesIn the two plan approach, the employee who wants only term insurance pays into the term insurance plan; the employee who wants universal life insurance must pay higher premiums to accumulate cash valueEmployees select the amount of guaranteed coverageEmployees pay the full cost of universal life insurancePremiums are flexible; loans and withdrawals are possibleRetired employees can continue the coverageDependents can be added with a rider Group Medical Expense InsuranceGroup medical expense insurance pays the cost of hospital care, physicians’ and surgeons’ fees, and related medical expensesInsurance is available through:Commercial insurersBlue Cross and Blue Shield PlansManaged Care organizationsSelf-insured plans by employersCommercial life & health insurers sell medical expense coverage and also sponsor managed care plans Group Medical Expense InsuranceBlue Cross and Blue Shield plans sell individual, family and group coveragesBlue Cross plans cover hospital expensesBlue Shield plans cover physicians’ and surgeons’ feesMajor medical is also availableIn most states, plans operate as non-profit organizationsSome have converted to a for-profit status to raise capitalManaged care plans offer medical expense benefits in a cost effective mannerPlans emphasize cost control and services are monitoredMost organizations are for-profitA managed care organization typically sponsors a health maintenance organization (HMO)Comprehensive services are provided for a fixed, prepaid feeGroup Medical Expense InsuranceA large percentage of employers self-insure the health insurance benefits provided to their employeesSelf insurance means the employer pays part or all of the cost of providing health insurance to the employees Plans are usually established with stop-loss insuranceA commercial insurer will pay claims that exceed a certain limitSome employers have an administrative services only (ASO) contract with a commercial insurerThe commercial insurer only provides administrative services, such as claim processing and record keepingSelf-insured plans are exempt from state laws that require insured plans to offer certain state-mandated benefits Traditional Indemnity PlansUnder a traditional indemnity plan:Physicians are paid a fee for each covered serviceInsureds have freedom in selecting their own physicianPlans pay indemnity benefits for covered services up to certain limitsCost-containment has not been heavily stressedThese plans have declined in importance over timeSome plans have implemented cost-containment provisionsCommon types include basic medical expense insurance and major medical insuranceTraditional Indemnity PlansBasic medical expense insurance is a generic name for group plans that provide only basic benefitsCovers routine medical expensesNot designed to cover a catastrophic lossCoverage includes:Hospital expense insurancePlans pay room and board or service benefitsSurgical expense insurance Newer plans typically pay reasonable and customary chargesPhysicians’ visits other than for surgeryMiscellaneous benefits, such as diagnostic x-raysTraditional Indemnity PlansMajor medical insurance is designed to pay a high proportion of the covered expenses of a catastrophic illness or injuryCan be written as a supplement to a basic medical expense plan, or combined with a basic plan to form comprehensive coverageSupplemental major medical insurance is designed to supplement the benefits provided by a basic plan and typically has:High lifetime limitsA coinsurance provision, with a stop-loss limitA corridor deductible, which applies only to eligible medical expenses not covered by the basic planTraditional Indemnity PlansComprehensive major medical insurance is a combination of basic benefits and major medical insurance in one policy, and typically has:High lifetime limitsA coinsurance provisionA calendar-year deductible A plan may contain a family deductible provisionManaged Care PlansManaged care is a generic name for medical expense plans that provide covered services to the members in a cost-effective mannerAn employee’s choice of physicians and hospitals may be limitedCost control and cost reduction are heavily emphasizedUtilization review is done at all levelsThe quality of care provided by physicians is monitoredHealth care providers share in the financial results through risk-sharing techniquesPreventive care and healthy lifestyles are emphasizedManaged Care PlansA health maintenance organization (HMO) is an organized system of health care that provides comprehensive services to its members for a fixed, prepaid feeBasic characteristics include:The HMO enters into agreements with hospitals and physicians to provide medical servicesThe HMO has general managerial control over the various services providedMost services are covered in full, with few maximum limitsChoice of providers is limitedA gatekeeper physician controls access to specialty careProviders may receive a capitation fee, which is a fixed annual payment for each plan member regardless of the frequency or type of service providedManaged Care PlansThere are several types of HMOs:Under a staff model, physicians are employees of the HMO and are paid a salary or a salary and an incentive bonus to hold down costsUnder a group model, physicians are employees of another group that has a contract with the HMOGroup receives a capitation fee for each memberUnder a network model, the HMO contracts with two or more independent group practicesThe group practices receive a capitation fee for each memberUnder an individual practice association (IPA) model, an open panel of physicians agree to treat HMO members at reduced fees, on a fee-for-service basisMost IPAs have risk-sharing agreements with the HMOManaged Care PlansA preferred provider organization (PPO) is a plan that contracts with health care providers to provide medical services to members at reduced feesPPO providers typically do not provide care on a prepaid basis, but are paid on a fee-for-service basisPatients are not required to use a preferred provider, but the deductible and co-payments are lower if they doMost PPOs do not use a gatekeeper physician, and employees do not have to get permission from a primary care physician to see a specialistManaged Care PlansA point-of-service plan (POS) is typically structured as an HMO, but members are allowed to go outside the network for medical careIf patients see providers who are in the network, they pay little or nothing out of pocketDeductibles and co-payments are higher if patients see providers outside the networkManaged care plans generally have lower hospital and surgical utilization rates than traditional indemnity plansEmphasis on cost control has reduced the rate of increase in health benefit costs for employersManaged CareManaged care plans are criticized for:Reducing the quality of care, because there is heavy emphasis on cost controlDelaying care, because gatekeepers do not promptly refer patients to specialistsRestricting physicians’ freedom to treat patients, thus compromising the doctor-patient relationshipStudies show the quality of care is improving, but variations in evidence-based care cause many people to receive substandard careQuality varies widely depending on geographic location Consumer-Directed Health PlansA consumer-directed health plan is a generic term for an arrangement that gives employees a choice of health-care plans designed to:Make employees more sensitive to health-care costsTo provide a financial incentive to avoid unnecessary careTo seek out low-cost providersIn a defined contribution health plan, the employer contributes a fixed amount, and the employee has a choice of plans, such as an HMO, PPO, or POSIn a high-deductible health plan (HDHP), the employee is covered under a major medical plan with a high deductible and a health savings account (HAS) Recent Developments in Employer-Sponsored Health PlansHealth care costs continue to rise, and employers continue to emphasize cost control.Employers are shifting more cost to employees through higher deductiblesConsumer-directed health plans are now offered by 20% of large employersLarge employers are giving employees financial incentives to participate in health management programsLarge employers are using health risk assessments to learn about their employees’ health habitsEmployers are shedding medical coverage for retireesExhibit 16.1 Examples of Exorbitant Charge by Some Out-of-Network Physicians in New York and North Carolina, 2008 (cont.)Exhibit 16.1 Examples of Exorbitant Charge by Some Out-of-Network Physicians in New York and North Carolina, 2008Exhibit 16.2 Average Annual Premiums for Single and Family Coverage,1999–2009Exhibit 16.3 Enrollment in Consumer-Directed Health Plans Grows in 2008 (percentage of all covered employees enrolled in each plan type)Exhibit 16.4 Medical Plan Cost Per Employee, 2007–2008Exhibit 16.5 Offerings of Retiree Medical Plans Have Fallen Sharply Over the Past Decade (percentage of large employers)*Group Medical Expense Contractual ProvisionsImportant provisions in group medical expense insurance plans include:A preexisting condition provision that excludes coverage for a preexisting medical condition for a limited period after the worker enters the planPeriod is restricted to 12 months by the Health Insurance Portability and Accountability Act of 1996 (HIPAA)The act also establishes the portability of insurance coverage, whereby insurers must give an employee credit for previous coverage Group Medical Expense Contractual ProvisionsA coordination-of-benefits provision specifies the order of payment when an insured is covered under two or more group health insurance plansCoverage as an employee is usually primary to coverage as a dependentWith respect to dependent children, the plan of the parent whose birthday occurs first during the year is primaryThe Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) gives employees the right to stay in the employer’s plan for a limited period after leaving employmentGroup Dental InsuranceGroup dental insurance helps pay the cost of normal dental careAlso covers damage to teeth from an accidentCovers x-rays, cleaning, fillings, extractions, etc.Some plans cover orthodontiaEncourages insureds to see their dentists on a regular basisCoinsurance requirements vary depending on the type of service providedMaximum limits on benefits and waiting periods for certain types of services are used to control costsA predetermination-of-benefits provision informs the employee of the amount that the insurer will pay for a service before the service is performedGroup Disability-Income Insurance Group disability-income insurance pays weekly or monthly cash payments to employees who are disabled from accidents or illnessUnder a short-term plan, benefit payments range from 13 weeks to two yearsMost cover only nonoccupational disability, which means that an accident or illness must occur off the jobEmployee must be totally disabled to qualifyYou are considered totally disabled if you are unable to perform each and every duty of your regular occupationUnder a long-term plan, the benefit period ranges from 2 - 65 yearsFor the first two years, you are considered disabled if you are unable to perform all of the material duties of your own occupation. After two years, you are still considered disabled if you are unable to work in any occupation for which you are reasonably fitted by education, training, and experiencePlans typically cover occupational and nonoccupational disabilityIf the disabled worker is receiving Social Security or other disability benefits, the payments are reduced to discourage malingeringCafeteria Plans A cafeteria plan allows employees to select those benefits that best meet their specific needsIn many plans, the employer gives each employee a certain number of dollars or credits to spend on benefits, or take as cashMany plans allow employees to make their premium contributions with before-tax dollarsMany plans include a flexible spending account which is an arrangement that permits employees to pay for certain unreimbursed medical expenses with before-tax dollars