Group Insurance and Employee Benefits: Key Concepts and Principles

Group Insurance

Coverage of many individuals under a single master contract, characterized by cost advantages and absence of individual insurability requirements.

Master Contract

The single policy or agreement issued to the employer or group, covering all eligible individuals in the group.

Underwriting Principle: Continuous Member Flow

The group should constantly have new, younger members entering and older members leaving to maintain a favorable mortality or morbidity experience.

Underwriting Principle: Incidental Insurance Purpose

The primary reason for forming the group should be something other than obtaining insurance (e.g., employment).

Group Life Insurance Type

Predominantly yearly *term insurance*, offering low-cost protection often linked to earnings or flat amounts.

Portability (Group Life)

The feature allowing an employee to convert or continue their group term life insurance coverage upon employment termination.

Group Medical Expense Insurance

Coverage for hospital, physician, and related medical costs, typically delivered through managed care organizations or self-insured plans.

Health Maintenance Organization (HMO)

A managed care plan that provides comprehensive healthcare services to members through a *restricted network* of providers for a fixed, prepaid fee.

Preferred Provider Organization (PPO)

A managed care plan that contracts with providers to offer discounted services; offers more flexibility than an HMO in choosing providers.

Point-of-Service (POS) Plan

A managed care plan that allows members to choose between HMO-like services (in-network) or PPO-like services (out-of-network with higher cost-sharing).

ACA Reform: Group Insurance

Prohibitions on denial of coverage based on health status, elimination of preexisting condition exclusions, and retention of coverage until age 26.

Employer-Sponsored Health Trend

Rising premiums, *increased employee cost-sharing* through higher deductibles, and growth in high-deductible health plans.

Group Dental Insurance

Coverage for routine dental care, often featuring deductibles, coinsurance, benefit maximums, and predetermination-of-benefits provisions.

Group Disability-Income Insurance

Provides short-term and long-term income benefits for individuals who become totally disabled.

Cafeteria Plan (Section 125 Plan)

A plan enabling employees to customize benefit selections using employer credits, often allowing *before-tax* premium contributions.

Flexible Spending Account (FSA)

A feature of cafeteria plans allowing employees to contribute pre-tax dollars to cover qualified medical or dependent care expenses (often with a "use-it-or-lose-it" rule).

Underwriting Principle: Minimum Participation

A certain percentage of eligible employees must enroll in the plan for it to be implemented (e.g., 75% for noncontributory plans).