13.4 Employer Group Health Insurance
Eligibility for Coverage
To be eligible for coverage, an employee must typically meet full-time status requirements (generally at least 30 hours per week) and be actively at work before enrolling in the group plan. The employer retains control over the plan, including determining benefits, managing enrollment, and making premium payments. The employer must apply eligibility and benefits standards uniformly and may not discriminate among employees.
Open Enrollment Period
The primary concern for underwriters when evaluating a group plan is adverse selection. To limit the risk of immediate claims and pre-existing conditions, group plans typically include a probationary (waiting) period established by the group sponsor. This period represents the time an individual must wait after joining the group before becoming eligible to enroll.
Once the waiting period ends, the employee is generally given a 30-day initial enrollment period. If the individual enrolls during this timeframe, coverage is guaranteed and no evidence of insurability is required. Those who do not enroll during this period are considered late enrollees and must provide evidence of insurability unless they wait for the next open enrollment period. Most plans offer an annual open enrollment period, allowing employees another opportunity to enroll at a later date.
An employee may make changes to a group plan outside of the standard enrollment period only if they experience a qualifying life event, such as a change in employment status (e.g., part-time to full-time), marriage, or the addition or removal of dependents.
Dependent Eligibility
Eligible dependents generally include the employee’s spouse and children from birth up to age 26. Coverage may continue beyond age 26 for a child who is incapable of self-support due to a mental or physical disability and who is primarily dependent on the employee for care and support. The insured must provide proof of the child’s disability and dependency to the insurer within 31 days after the child reaches the limiting age.
The employer determines whether dependent coverage will be offered. If provided, it must be made available to all eligible employees, and the cost may be paid by the employer, the employee, or shared between both.
If a state recognizes domestic partnerships or civil unions—regardless of gender—a group health plan that provides coverage for spouses and dependents must also allow eligible domestic partners to enroll.
Nonduplication and Coordination of Benefits
This method is used to determine primary and secondary coverage when an individual is insured under more than one group plan, helping to prevent duplication of benefits (overinsurance), where total payments exceed 100% of a claim. The plan covering an individual as an employee is considered primary, while coverage as a dependent under a spouse’s plan is secondary. When children are covered under more than one plan, the “birthday rule” applies, meaning the plan of the parent whose birthday occurs first in the calendar year is designated as the primary coverage for the children.
Secondary insurers pay only those portions of a claim that are not covered or fully paid by the primary insurer, and only up to the amount they would have paid if they were the primary carrier. This may include expenses such as deductibles, copayments, and coinsurance.
Quiz
1. What is typically required for an employee to be eligible for group health coverage?
A. Part-time status and probation
B. Full-time status and being actively at work
C. Only seniority in the company
D. Approval from other employees
Correct Answer: B
Rationale: Employees must generally work full-time (about 30 hours/week) and be actively at work to qualify for coverage.
2. What happens if an employee enrolls during the initial enrollment period after the waiting period?
A. Coverage is denied
B. Evidence of insurability is required
C. Coverage is guaranteed without evidence of insurability
D. Premiums are waived
Correct Answer: C
Rationale: Enrollment during the initial period guarantees coverage without requiring proof of insurability.
3. Which of the following is considered a qualifying life event that allows plan changes outside open enrollment?
A. Taking a vacation
B. Changing jobs within the company
C. Getting married
D. Receiving a bonus
Correct Answer: C
Rationale: Marriage is a qualifying life event that allows plan changes outside the standard enrollment period.
4. Under the coordination of benefits rules, which plan is considered primary for an individual?
A. The plan where the individual is covered as a dependent
B. The plan with the highest premium
C. The plan where the individual is covered as an employee
D. The oldest policy
Correct Answer: C
Rationale: Coverage as an employee is primary, while dependent coverage is secondary.
5. Under the “birthday rule,” which parent’s plan is primary for children covered under two plans?
A. The parent with the higher income
B. The parent whose birthday comes first in the calendar year
C. The parent with the longer employment history
D. The parent who pays more premium
Correct Answer: B
Rationale: The birthday rule determines primary coverage based on which parent’s birthday occurs first in the year.