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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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