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Chapter 15 Long-Term Care and Other Group Insurance Benefits 1 Group Dental Insurance • Providers • Insurance companies • Dental service plans: often called Delta Dental plans • The Blues • Managed care plans • DHMOs • Preferred-provider plans • Point-of-service plans • Self-funded plans 2 Eligibility • Many rules are similar to group medical expense plans • Probationary periods • May be longer than in medical expense plans • May be same as medical expense plans, but have waiting period for some expenses, such as orthodontics • Long probationary periods may be false economy if they postpone treatment and more expensive care is needed later 3 Eligibility (cont.) • Adverse selection • A problem because expenditures are postponable and somewhat predictable • Methods to counter • Reduce benefits for an initial period • Reduce maximum benefit for late enrollment • Exclude some benefits for a period of time 4 Benefits • Most plans cover all types of expenses, but some plans provide more limited coverage • Service level groupings: Most plans cover levels I, II, and III. Some plans also cover level IV • I—preventive and diagnostic services • II—basic services • III—major services • IV—orthodontic 5 Benefit payment methods • Some plans pay benefits on an indemnity basis and use reasonable and customary charges • Annual deductibles of $50 to $100 • Coinsurance: Highest (80 to 100 percent) for service level I and lowest (50 to 60 percent) for service levels III and IV • A few plans have maximum scheduled benefits and do not use deductibles or coinsurance • PPO plans typically have higher coinsurance percentages when network providers are used • DHMOs have no deductibles or percentage participation (except for service level IV) as long as network providers are used; copayments may apply to service levels II and III 6 Exclusions (common ones) • Purely cosmetic services • Replacement of lost, stolen, or missing dentures • Oral hygiene instruction • Service without uniform professional endorsement • Occupational injuries if covered under workers’ compensation • Free services received by government agencies • Services that began prior to coverage 7 Limitations • Calendar maximums ($500 to $2,500) but no lifetime maximum • Lifetime maximum only $1,000 to $5,000) • Both a calendar year maximum and a lifetime maximum • Frequency of treatment; for example, teeth cleaning only once every 6 months • Will only pay least expensive type of accepted treatment 8 Predetermination of benefits • Required if course of treatment exceeds $200– $300 • Failure to use does not invalidate benefits 9 Termination • Like group medical insurance • COBRA rules apply • Coverage provided after termination if charge for service incurred prior to termination and treatment completed within 60–90 days after termination 10 Table 15.1 11 Table 15.2 12 Table 15.3 13 Group Long-Term Care Insurance • Reasons for slow growth • Individual market still evolving • Uncertain tax picture which has been clarified by HIPAA • Uncertainty about inclusion in cafeteria plans. Also clarified by HIPAA. It can’t be included • Modest participation because older employees find it too expensive do not see reason for it 14 Reasons for coverage • An aging population • Increasing costs of institutionalization • Inability of families to provide care • Inadequate benefits under Medicare and medical expense policies 15 Sources of long-term care • Personal savings • Relatives and friends • Public assistance (Medicaid) • Continuing care retirement communities • Accelerated life insurance benefits • Individual LTC policies • Group policies 16 NAIC model legislation • Policy provisions • Marketing 17 Effect of HIPAA • Favorable tax treatment given to “qualified long-term care insurance” contract. • Employer contributions deductible and do not result in taxable income to employees. • Benefit received tax free except that benefits in excess of $230 per day (and subject to annual indexing) are excludible from taxable income only to the extent they represent actual costs for long-term services 18 Requirements for qualified policy • Only covers qualified long- term care services • Cannot pay expenses reimbursable under Medicare • Guaranteed renewable • No cash surrender value that can be borrowed or paid, assigned, or pledged as collateral for a loan 19 Requirements for qualified policy (cont.) • Refunds of premiums and policyholder dividends must be applied to future reductions in premiums or to increase benefits • Various consumer protection provision must be satisfied. • Benefits can only be paid to chronically ill individual who: • Is unable to perform two out of five or six permissible activities of daily living, or • Requires substantial services for protection due to a severe cognitive impairment 20 Table 15.4 21 Policy Characteristics • Eligibility for coverage • Active employees and spouse and often parents, parents-in-law, and children • Possibly retired employees • High maximum age, such as 85 • Cost • Usually based on 5-year brackets • Level once elected, but premiums can increase by class • Premiums may be paid for life or cease at retirement 22 Policy Characteristics (cont.) • Types of care covered • Nursing home care • Assisted-living facility care • Hospice care • Alzheimer’s facilities • Home health care • Care coordination • Alternative plans of care 23 Policy Characteristics (cont.) • Benefit variations • Facility-only policies • Home health care only policies • Comprehensive policies (include a. and b.) • Benefit amounts • Typically several choices in range of $100 to $200 per day for institutional care • Home health care equal to some percentage of institutional care • Reimbursement policies pay actual expenses up to policy limits • Per diem policies pay policy limit as long as benefit trigger satisfied 24 Policy Characteristics (cont.) • Period of benefits • Insured selects waiting period from available options in range of 0 to 365 days • Maximum benefit period also selected from several options that may be as long as 2 or 3 years to lifetime • Some policies have a pool of money concept and benefit period continues as long as money lasts 25 Period of benefits (cont.) • Some policies allow spouses to share each other’s benefit if they are covered under the same policy or with the same insurer • Some policies have prepackaged benefit options: low, medium, and high • Often a restoration of benefits provision if insured no longer needs long-term care for a period of time • Most states require that some type of inflation protection be offered • 5 percent compound interest increase most common • Simple interest and fixed percentage increases may also be available 26 Table 15.5 27 Table 15.6 28 Policy Characteristics (cont.) • Eligibility for benefits • Two and six ADLs • Substantial supervision needed • Exclusion: Usually those allowed by NAIC model legislation • Underwriting • Guaranteed issue may be used for employees if a group meets certain standards • Modified-issue is often used, particularly for employees. Only a few medical questions are asked on application, and most applicants are accepted • Simplified-issue asks more questions and answers may lead to a request for further information • Full individual underwriting may be used for very small groups and persons other than employees 29 Policy Characteristics (cont.) • Guaranteed renewability • Nonforfeiture benefit • Typically optional • Usually a shortened benefit period • Seldom elected because it is expensive • Portability: Coverage can be continued on direct payment basis if participant leaves employment 30 Group Legal Expense Plans • Development • Early plans were generally for union members and financed from union funds • Favorable tax treatment in 1976 resulted in significant growth, particularly for union employees as a result of collective bargaining • Employer-paid premiums under prepaid plans and benefits under self- funded plans are now taxable since Section 120 of the Internal Revenue Code expired 31 Types of plans • Referral and discount: members referred to attorney who provides services based on a fee schedule or at a discount • Access plans • Unlimited legal access over the telephone for most legal matters • Referrals to attorney for more complex matters 32 Types of plans (cont.) • Comprehensive plans • Scheduled plans contain a list of covered benefits such as: • Unlimited legal advice by telephone • Document review and consultations • Adoption • Bankruptcy • Civil actions • Driver’s license suspension • Divorce • Child custody and support • IRA audits • Common exclusions are • Business activities • Preparation of tax returns • Class action suits • Cases with contingent fees • Actions against the employer, union, or plan 33 Group Property and Liability Insurance • Reasons for slow growth • Unfavorable tax treatment • Minimal potential for cost savings • Lack of employer enthusiasm • Regulatory restrictions, but these are disappearing • Types of plans • Usually payroll deduction individual insurance • May be true group 34
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