Group Benefits Plan Concepts Flashcards

Under a group benefits plan, what is the purpose of a 'coordination of benefits' (COB) provision?

Answer: To prevent an employee from receiving duplicate payments exceeding 100% of eligible expenses when covered under two plans

COB provisions ensure that combined payments from primary and secondary group plans do not exceed the actual eligible expenses incurred.

A group insurer uses 'experience rating' to set renewal premiums. What does this mean?

Answer: Premiums are based on the group's own claims history over the prior period

Experience rating adjusts a group's renewal premium up or down based on the actual claims paid for that specific group in the prior policy period.

Which of the following best describes a 'non-contributory' group benefits plan?

Answer: The employer pays 100% of the premiums and employee participation is mandatory

In a non-contributory plan the employer funds the entire premium, and because there is no employee cost-sharing, 100% enrollment is typically required.

What is a 'flex benefits' or cafeteria plan in the context of group benefits?

Answer: A plan that gives employees a set dollar allowance to choose among various benefit options

Flex or cafeteria plans provide employees with credits they allocate among benefit options such as health, dental, life, and disability according to their personal needs.

Under group life insurance, what is the typical tax treatment of employer-paid premiums for coverage up to $50,000 (US context)?

Answer: Employer-paid premiums for coverage up to $50,000 are excluded from the employee's taxable income

Under IRS rules, employer-paid group-term life insurance premiums for coverage up to $50,000 are excluded from an employee's gross income.

What is the significance of the 'actively-at-work' clause in a group benefits plan?

Answer: Coverage only becomes effective for a new employee if they are actively working on the date coverage is scheduled to begin

The actively-at-work clause delays the start of coverage for any employee who is absent due to illness or injury on the effective date of coverage.

In group insurance, what does 'pooling' refer to in the context of large claims?

Answer: A mechanism where very large individual claims above a set threshold are absorbed by the insurer's broader pool rather than charged entirely to the group's experience

Pooling limits the impact of catastrophic individual claims on a group's experience rating by capping the amount charged to that group and spreading the excess across all groups.