Topic 6 Part 2 Articles and Holman (Enrollment and Eligibility Concerns Evidence of Insurability Concerns Special Enrollment Periods Treatment of Pre-Existing Conditions)

What are the main employer-specific factors that influence health insurance premium rates?

Plan design (e.g., co-pays, deductibles)

Employee demographics (ages, genders, dependents)

Participation rate (ideally at least 75%)

Company growth mode (e.g., rapid hiring increases risk)

Geography (rural areas are higher cost)

Industry (high-turnover industries are penalized)

How does plan design specifically affect health insurance costs?

Lower co-pays (e.g., <$15) and lower deductibles (e.g., <$500) lead to higher premiums.

Unique, high-cost benefits (like fertility services) only offered in one plan can be a concern for insurers.

Why do insurers care about the percentage of employee participation?

They want a good cross-section of risk.

A low participation rate (<75%) suggests only those who need insurance the most are enrolling, which increases risk and cost.

What external factors influence health insurance rates for all employers?

The trend rate (overall yearly increase in healthcare costs)

New medical products, drugs, and technology

Direct-to-consumer advertising by pharmaceutical companies

General economic environment and inflation

Insurer's desired profit margin

Federal and state mandates (e.g., mental-health parity laws)

What is the underwriting cycle?

It is the cyclical pattern in the insurance industry where costs and profitability "go up and down, a little bit like a roller coaster."

What is the purpose of pooling for very small employers?

It makes risk-sharing more equitable and stable.

It prevents small groups from bearing the full brunt of their own volatile claims experience and provides rate stability.

According to the article, what is the peril of not sharing information with the insurer?

If insurers have to guess due to missing information, they will guess conservatively.

This results in a higher rate for the employer, as the guess will not be in their favor.

What is the recommended strategy for plan sponsors during the underwriting process?

Share all information you can within privacy guidelines.

Withholding unfavorable information leads to worse outcomes; transparency allows for a better rate.

How does a company being in high-growth mode affect its insurance rates?

It is less predictable for the insurer, which leads to higher rates.

Why do rural locations typically lead to higher health insurance costs?

They are high-cost from a medical standpoint.

Large metropolitan areas have more competition, allowing insurers to negotiate better discounts

What is the main requirement of the Employer Mandate under the ACA?

Large employers must offer compliant group health coverage to their full-time employees and their dependents or face excise tax penalties.

According to the article, what is a critical step for employers to limit legal risk when offering coverage only to full-time employees?

They must clearly define the new eligibility rules in writing and update any old, conflicting rules in plan documents or employee handbooks.

Why is using a vague definition like "employees who regularly work 30 or more hours per week" considered risky?

It invites disputes, as employees (and their attorneys) can make plausible arguments that they meet this vague definition and point to the written documents as evidence they were wrongly denied coverage.

What three specific items should written eligibility documentation outline to strengthen an employer's defense?

Date ranges for measurement periods and stability periods

Waiting periods for newly-eligible employees

How to treat employees in special circumstances (e.g., promotions, leaves of absence, rehires)

What action does the article advise for employers who have not yet documented their eligibility rules?

It is not too late to timely revise their Summary Plan Descriptions (SPDs) or draft stand-alone benefits eligibility documents or other "wrap" documents

What is a furlough and how does it differ from a layoff?

A furlough (leave of absence) is a partial or full reduction in work hours where employees remain employed. A layoff involves terminating employees.

What is a critical misconception employers often have about benefits during a furlough?

They assume that because employees are still employed and premiums are paid, all benefits remain intact. In reality, employees may no longer meet eligibility or actively-at-work provisions.

What are three common characteristics of employees on furlough?

They experience a partial or full reduction in wages.

They are generally not "actively-at-work."

The claim incidence (probability of a death, disability, or large medical claim) significantly increases.

How can a furlough impact eligibility for Income Protection Plans (Life, AD&D, Disability)?

Employees not working or working below a minimum threshold become ineligible.

Returning to work may require satisfying an "actively-at-work" provision, waiting periods, or providing evidence of insurability.

What are two key considerations for Health Plans during a furlough?

Eligibility provisions: Fully-insured plans require carrier approval to continue coverage;

self-insured plans can be amended but need stop-loss carrier agreement.

The Affordable Care Act's measurement method (e.g., lookback) impacts eligibility, and employees losing coverage are eligible for COBRA.

What are three primary effects of a furlough on a 401(k) Plan?

Suspension of hours of service accumulation for vesting credits.

Inability to make employee contributions or receive employer matching contributions.

Potential default on outstanding loans, triggering a taxable distribution.

What is a critical next step for employers to ensure benefit plans meet coverage objectives during a furlough?

Identify any gaps in coverage that may exist for furloughed employees and address them immediately to ensure the plans and policies are appropriately changed.

Why is communication with employees critically important during a furlough?

Employees may assume they have coverage and later find out it has ended, leading to denied claims. They need to understand the implications and any actions they must take to continue benefits

What is the main danger for employers who fail to document their health plan eligibility conditions?

They risk facing expensive problems, including disputes over liability for large medical claims and non-compliance with ERISA and ACA regulations.

What are the two methods for determining a full-time employee under the ACA's Employer Mandate?

The monthly measurement method (default)

The look-back measurement method (requires a formal, documented policy)

What specific ERISA requirement makes documenting eligibility conditions in the Summary Plan Description (SPD) critical?

The SPD must include "a statement of the conditions pertaining to eligibility to receive benefits."

What major financial risk arises from a lack of synchronization between the look-back measurement method and the health plan's eligibility rules?

An employer could be held responsible for hundreds of thousands of dollars in an employee's medical expenses if a coverage dispute arises with the insurer.

According to the article, what is a common flaw with many SPDs from "reputable" providers?

They often fail to include the detailed eligibility conditions, such as the specific dates and time frames for the look-back measurement method, required by law.

What is the author's final recommendation for all employers?

They should review their SPD to ensure the plan's eligibility conditions are discussed in detail and are synchronized with any look-back measurement method policy

To avoid costly problems, employers must:

Ensure SPDs clearly define eligibility conditions, including any look-back measurement method with specific dates and timeframes

Synchronize those conditions with the insurance carrier’s rules, so both documents agree on who qualifies for coverage

What was the key legal issue in the case Sequeira v. Lincoln National Life Ins. Co.?

The interpretation of the phrase "actively at work" in a supplemental life insurance policy. The insurer claimed it meant the employee had to be physically performing job duties on the effective date, while the employee's estate argued it referred to his employment status.

Why did Lincoln National Life Insurance Co. deny the $275,000 supplemental life insurance claim?

Because the employee, Donald Sequeira, was not physically at work on the policy's effective date (January 1, a holiday) due to being off for the holiday and then subsequently hospitalized.

What was the final ruling of the California state appeals court?

The court reversed the lower court's ruling, found the policy language to be ambiguous, and ruled in favor of the employee. It stated that "actively at work" should be interpreted as being in full-time employment status, not physically performing work on a specific day.

What legal principle did the court use to interpret the ambiguous policy language?

It interpreted the policy in favor of the employee's reasonable expectations, stating he should not have to work on a holiday or while sick to receive coverage he paid for.

How did the court's interpretation avoid creating an illogical outcome for the policy's waiting period?

The court reasoned that the insurer's interpretation would mean an employee must be physically working "for 30 days continuously" to be eligible, which would be impossible if they took a weekend off or called in sick. The court's interpretation of "active work" as full-time status provided a more sensible result

What is a common misconception managers have about keeping employees on benefits during a long-term leave?

They believe they are doing the employee a favor, but they may actually be putting both the company and the employee at risk for denied claims.

What standard eligibility clause in group benefit plans limits coverage for employees not working?

The "actively at work" clause, which typically allows an employee to remain on the plan for a limited time (e.g., up to three months to coincide with FMLA).

What is the primary financial risk of violating the "actively at work" provision?

The stop-loss carrier may deny large claims, leaving the employer financially responsible.

What are the two recommended actions to ensure compliance with "actively at work" provisions?

Have a clear policy defining how long someone not actively at work can remain on the benefits plan.

Check your plan documents to determine the specific time limit allowed by the carrier.

What should be offered to an employee after their eligibility ends due to not being actively at work?

COBRA for medical, dental, and vision coverage.

A conversion form for life insurance.

What two life and disability insurance provisions can protect employees on long-term leave?

Waiver of premium for life insurance if the employee is totally disabled after a certain period (typically 6-9 months).

Disability plans that provide income replacement up to normal retirement age, even if not employed.

Why is direct communication with the employee going on leave critical?

So the employee knows when their benefits will end and what to expect, allowing them to plan for alternatives like COBRA

What is the critical administrative step an employer must take before withholding premiums for supplemental life insurance?

The employer must first verify with the insurer that any required Evidence of Insurability (EOI) has been submitted and approved.

According to the DOL settlement, who may be held financially liable for a denied death claim if this step is not followed?

The employer (the group policyholder) who collected the premiums without confirmed EOI approval may be liable to the beneficiaries for the denied claim.

What key protection for employees did the settlement impose on Prudential regarding claim denials?

Prudential is prohibited from denying a claim based on a lack of EOI if it has accepted at least three months of premiums for that coverage.

What specific action is Prudential required to take regarding employer notifications?

Prudential must notify all ERISA group life insurance policyholders that they must not collect premiums for EOI-required coverage without first confirming Prudential has approved the EOI.

If Prudential denies a claim where it has received less than three months of premiums, what must it do?

It must refund all premiums for the supplemental coverage that were forwarded to it to the appropriate payee (beneficiary or employer)

When is Evidence of Insurability (EOI) typically required for group life insurance?

When an employee forgoes initial enrollment and wants to enroll later.

When an employee seeks to enroll a dependent or spouse.

When an employee seeks to increase the amount of their insurance.

Who bears the primary responsibility for obtaining EOI from an employee?

The employer. Group insurance policies typically impose this duty on the employer, not the insurer.

What is the potential legal consequence for an employer that fails to obtain required EOI?

The employer may be held liable for breach of fiduciary duty under ERISA and ordered to pay the denied life insurance benefit to the beneficiary.

What is the principle of contestability in insurance law?

It allows insurers to contest coverage within two years of a policy's issuance due to omissions or misstatements made during enrollment. After two years, if premiums have been paid, the insurer may be barred from denying the claim.

What key position has the U.S. Department of Labor (DOL) taken regarding insurers and EOI?

The DOL has stated that insurers cannot collect premiums for extended periods (e.g., 90 days) and then deny a claim based on a lack of EOI. Insurers must make timely eligibility determinations.

What are two best practices for employers to avoid EOI issues?

Implement strict procedures to ensure EOI is obtained before processing late enrollments or coverage increases.

Have clear processes to prevent situations where employees mistakenly believe they have coverage.

What should an employee or beneficiary do if they face a life insurance denial due to an EOI issue?

They should consult with an experienced attorney to challenge the determination, as there may be a legal basis to overturn the denial and collect the benefits

What event triggers a special enrollment right under HIPAA for an employee who previously dropped coverage?

The loss of other health coverage (e.g., due to termination of employment from the spouse's employer, end of employer contributions, or exhaustion of COBRA).

What are the three main categories of events that trigger special enrollment rights under HIPAA?

Loss of eligibility for other group health coverage or health insurance.

Loss of eligibility for Medicaid or CHIP, or becoming eligible for a state premium assistance subsidy.

Acquisition of a new spouse or dependent by marriage, birth, adoption, or placement for adoption.

For the "loss of other coverage" trigger to apply, what two conditions must be met regarding the employee's prior actions?

The employee must have been eligible for your plan's coverage but not enrolled.

The employee must have had other health coverage at the time they declined your plan's enrollment.

Does an employee lose their special enrollment right if they do not elect COBRA for their prior coverage?

No. Employees are not required to elect COBRA to retain their special enrollment right under the plan.

In the scenario, the employee dropped the company's plan after enrolling. Does this action prevent them from using the special enrollment right?

No. The special enrollment right should still apply. The key reason for not being enrolled was the existence of other coverage, regardless of whether they dropped the plan after initially enrolling or never enrolled at all

What life event triggers a HIPAA special enrollment right, allowing an employee to change medical coverage outside of open enrollment?

The acquisition of a new dependent through marriage, birth, adoption, or placement for adoption.

What coverage options must be available to a special enrollee under HIPAA rules?

The employee may select any available benefit package under the plan. For example, they can add the new dependent to existing coverage or switch to a different plan option entirely.

Besides enrolling a new dependent, what other enrollment rights does an employee have when a child is born or adopted?

The employee has the right to:

Enroll themselves if they are eligible but not currently enrolled.

Enroll an existing spouse who is not already on the plan.

They are not required to enroll the new child to exercise these rights for themselves or their spouse.

What is the deadline for an employee to request special enrollment following the birth or adoption of a child?

They must be given at least 30 days from the date of the birth, adoption, or placement for adoption to request enrollment.

When does coverage become effective for a new dependent acquired by birth, adoption, or placement for adoption?

Coverage must be effective retroactively to the date of the birth, adoption, or placement.

How do HIPAA special enrollment rules differ from Section 125 cafeteria plan rules?

HIPAA rules: Apply only to group health plans, set minimum requirements, and can require retroactive coverage for new dependents.

Section 125 rules: Govern pre-tax election changes in a cafeteria plan, are generally permissive, and elections must usually be prospective. Compliance with one set of rules does not guarantee compliance with the other

What are the primary tax code sections that create complications for allowing late health plan enrollments?

Section 105 (tax-free medical expense reimbursements)

Section 125 (cafeteria plans for pre-tax benefit elections)
Allowing late enrollments outside of permitted exceptions can jeopardize the tax-advantaged status of the entire plan.

What is the "doctrine of mistake" and when can it be applied?

It is an informal exception that allows correction of a cafeteria plan election when there is clear and convincing evidence of a mistake.

Employer errors (e.g., data entry) can often be corrected.

Employee errors are harder to correct and may require meeting an "impossibility standard" (e.g., electing a dependent care FSA with no eligible dependents).

What ERISA issue arises when considering a late enrollment request?

The employer must administer the plan in accordance with the plan documents. If the document explicitly forbids the correction, it cannot be allowed. If the document is unclear, the plan sponsor may use its discretionary authority to interpret the terms.

Why is it critical to consult with insurers before approving a late enrollment without a qualifying event?

Because doing so may violate the insurance contract and could lead to adverse selection. Without insurer authorization, the employer may be liable to self-insure the participant's claims.

What are two best practices for employers handling late enrollment requests?

Develop detailed guidelines for processing requests.

Ensure consistent application of decisions by carefully documenting the internal analysis and correspondence with the employee

What is the primary purpose of GINA (Genetic Information Nondiscrimination Act) and what major gap exists in its coverage?

Purpose: To prohibit discrimination based on genetic makeup by health insurers and employers.

Major Gap: It does not prevent discrimination by life, disability, or long-term care insurance companies.

Which three groups/contexts are not protected by GINA?

Employees of businesses with 15 or fewer employees.

Federal employees and members of the military (they have separate policies).

Individuals who are not asymptomatic (e.g., showing early symptoms of a condition).

How could the repeal of the Affordable Care Act (ACA) interact with GINA's limitations to create a risk for patients?

Without the ACA's protections for pre-existing conditions, a genetically-inherited disease (like Huntington's) could be classified as a pre-existing condition, potentially leading to denial of health coverage. GINA does not protect against this in the health insurance context if the condition is deemed symptomatic.

What specific problem with long-term care insurance is highlighted due to GINA's loopholes?

Long-term care insurers can demand genetic test results and refuse coverage to individuals with genetic markers for conditions like Alzheimer's, making assisted living care prohibitively difficult to obtain for those who may need it most.

How do advancements in technology (e.g., electronic records, wearables) challenge the existing framework of GINA?

They create a massive influx of biometric data, blurring the line between asymptomatic and symptomatic. This ambiguity can be exploited, as early-stage conditions revealed by genetic data may not be clearly protected

What is the most popular provision of the Affordable Care Act (ACA) and why is it a political flashpoint?

The guarantee of health insurance coverage for people with preexisting conditions. It is a flashpoint due to Republican efforts to repeal the ACA and a federal lawsuit seeking to overturn the law, potentially eliminating these protections.

How did the 1996 HIPAA law protect people with preexisting conditions in employer-based coverage?

It banned waiting periods for coverage of preexisting conditions for those with continuous coverage (a break of no more than 63 days).

It limited waiting periods to one year for those previously uninsured.

It prohibited insurers from denying coverage or raising premiums based on health status.

What was the key limitation of HIPAA for people buying individual health insurance?

While it guaranteed the availability of individual coverage, it did not limit the price. Insurers could charge such high premiums for "HIPAA conversion" policies that they were often unaffordable.

What three key protections did the ACA add for people with preexisting conditions?

Barred insurers from denying coverage due to preexisting conditions.

Prohibited charging higher premiums based on health status.

Banned waiting periods for coverage of the preexisting condition.

What is the central argument of the Texas lawsuit against the ACA, and what is the Trump administration's position?

Lawsuit Argument: Because Congress eliminated the tax penalty for not having insurance, the entire ACA is now unconstitutional.

Trump Administration's Position: It argues that the preexisting conditions protections are so tied to the penalty that they should be struck down, but not necessarily the entire law.

Why might the HIPAA protections for preexisting conditions also be at risk if the ACA is overturned?

Because the HIPAA protections were rewritten and incorporated into the ACA. If the ACA is struck down, those updated HIPAA provisions could be eliminated as well

What is the central policy proposal of this Heritage Foundation report regarding pre-existing conditions?

To link the ban on pre-existing condition exclusions to a requirement of continuous coverage, using the 1996 HIPAA rules for the employer group market as a model.

What does the report identify as the key flaw in the Affordable Care Act (Obamacare) regarding pre-existing conditions?

It removed the incentive for continuous coverage by allowing people to buy insurance only when they are sick, which destabilizes the insurance market by causing an imbalance between premiums and claims costs.

How did the 1996 HIPAA rules handle pre-existing conditions in the employer group market?

They prohibited pre-existing condition exclusions for individuals with at least 12 months of prior coverage and no gap longer than 63 days.

For those without sufficient prior coverage, exclusions were limited to a maximum of 12 months and were reduced by any prior periods of coverage.

What is the report's main criticism of the American Health Care Act (AHCA)?

Its one-year 30% premium surcharge for those without continuous coverage is likely too weak to motivate healthy people to stay insured, unlike the direct HIPAA model.

What is the two-fold purpose of linking pre-existing condition protections to continuous coverage?

To stabilize insurance markets by ensuring a balanced risk pool.

To encourage people to get and maintain coverage when healthy, which makes coverage more accessible and affordable for those with pre-existing conditions