Contributory vs Non-Contributory

MR. WATSON: With group insurance, if it's a contributory plan, most insurance companies want to see the business cover 75% of all eligible members. If it's noncontributory plan, most insurance companies want us to cover 100%.

MR. WATSON: That's an insurance company rule to protect the insurance company against adverse selection. The insurance company feels like if it's a contributory plan where the employees are required to contribute, not enough of them will join, and they need the good risks paying for the bad risks. You understand what the concern is? Some states have laws that impose minimum requirements while others don't, but the point here is to know those percentages and that these are industry standards to prevent adverse selection.

ALL: Yes.

MR. WATSON: This is an insurance company rule for what reason? To prevent adverse selection. Do y'all agree?

ALL: Um-hmm.

MR. WATSON: With group insurance, you get a lower cost than with an individual plan, because of administration costs. Also, the business will predetermine the benefits. The business owner chooses the benefits. Got it?

 

Underwriting practices

MR. WATSON: The insurance company looks at the group as a whole. They can not take the group and then exclude a high risk person with a lot of health problems. They look at the group as a whole. Got it?

ALL: Yes.

 

Conversion Rights

MR. WATSON: Convert means to change. You could convert from group life to individual life, 31 days. Group health is the same thing. With group life, we could not ask you about your health. With group health, we can ask about your health. We can't turn you down, but we reserve the right to charge you for that extra risk. So when you leave the company, you can convert it. You can convert it to an individual plan. Even if you don't convert you are still covered for those 31 days. Remember this, you are STILL covered, you will see this on the exam. Can they ask you about your health?

ALL: Yes.

MR. WATSON: Can we turn you down?

ALL: No.

MR. WATSON: But can we jack the premium up?

WOMAN: Oh, yes.

MR. WATSON: Insurers are allowed to evaluate the individual and charge an appropriate premium, whether it's standard or substandard rate. However, the individual cannot be denied coverage even if they become uninsurable. You have 31 days. Even if you don't' convert, you still have coverage for this amount of time.

WOMAN: Is this COBRA?

MR. WATSON: No, this is converting, COBRA is a continuation. So conversion has nothing to do with COBRA. We'll talk about COBRA shortly.

 

Pre-existing Conditions

MR. WATSON: The Affordable Health Care Act does not allow for insurers to exclude preexisting conditions. For group insurance, a preexisting condition is a condition for which medical advice or treatment was recommended or received with-in the last six months. HIPAA limited the amount of time that preexisting conditions could be excluded. Companies could only exclude them for a maximum of one year. But, the ACA mandates that ALL preexisting conditions be covered immediately.