HLLQP - A&S 04 FC - Insurance to Protect Savings

What types of services are covered under a dental plan that provides routine maintenance (sometimes called "basic dental")?

Routine Maintenance: Checkups, cleanings, extractions, filings, x-rays, and other standard dental services,

Would a tooth filling fall under "routine maintenance" or "major restorative" coverage?

Routine maintenance.

Routine Maintenance: Check-ups, cleaning, extracts, fillings, x-rays, and other standard dental services.

Major Restorative: Crowns, inlays, and other major procedures.

Orthodontics: Includes things like braces.

What are the two biggest factors affecting the premium on a travel insurance policy?

1. The amount of coverage, and

2. The length of a vacation (i.e. the number of days).

Other factors include:

- Travel location, which encompasses risks posed by the location itself as well as the cost of local medical care. For example, traveling to the United States would result in a lower premium than if one were traveling to a third-world country.

- Age of the applicant

- Medical history of the applicant.

In most jurisdictions, what are the tax implications of an employer paying the entire premium on a group extended health insurance plan?

- The employer can deduct the premium for tax purposes because it is a cost of doing business, just like salaries

- The premium that the employer pays is not taxable benefit for the employee.

- The employee receives the end benefit tax-free.

You may be thinking, "But wait a minute...it looks like no one is paying tax on these benefits. I thought CRA always tried to apply tax at least on one end." Employer-paid extended health policies are the exception general rules governing the taxation of insurance. It may help to think that because Canadians take health care very seriously, it would not be very popular political move for the government to start taking health benefit premiums and layouts!

What impact would a co-insurance factor have on a group plan?

Reduce claim: it will reduce the number of claims, because an insured member may think twice about submitting an unnecessary claim if he or she is paying part of the cost.

Reducing frivolous (unnecessary) claims: Under the same rationale as above.

Reduce premiums: if the insurer is not paying the entire cost of certain expenses, it will result in a premium being lower than it otherwise would be.

If an employer is paying the premium on a group plan for its employees, when is the premium tax-deductible for the employer?

Always. Much like when an employer pays a salary (business expense), premiums paid on behalf of an employee are tax-deductible.

It may to help think of it this way: The employer usually offers benefits in order to attract and retain staff. From this perspective, paying a group insurance premium is no different from offering a higher salary to attract employees.

Is dental coverage provided under provincial health plans?

Generally speaking, there is no dental coverage under a provincial health plan. There are a few exceptions, such as emergency dental work performed in a hospital that is required as a result of an accident, but that's about it.

When purchasing travel insurance, does upfront medical underwriting occur?

No, medical underwriting is generally not performed when the policy is purchased. Instead, the insurer takes the applicant at his or her work when answering heath questions. If and when a claim arises, underwriting may take place retroactively.

For example, if the insured claimed he or she was a non-smoker on the application but the autopsy revealed he or she died of cancer that was most likely due to smoking, the insurer would surely investigate

If a group plan has both a deductible and a co-insurance factor, which one is applied first when a claim is submitted?

The deductible is applied first, followed by the co-insurance factor.

If a plan has both a deductible and a co-insurance factor, always remember: "Deduct the deductible first"

What does it mean if a certain drug is not on the insurer's formulary?

The drug is not covered.

the insurer will have a "formulary" (a fancy name for a list) of drugs that are covered by the plan. For each covered drug, there will be a maximum price that the insurer will. Some plans will stipulate that the insurer will cover only the cost of a cheaper generic drug, if one exists.

Covered prescription drugs can be broken down into what two categories?

Brand-name: Produced by the pharmaceutical company that researched and developed the drug. The right to exclusively produce and sell the the drug is normally protected by a patent for a certain number of years, after which other manufacturers can create generic versions.

Generic: Another pharmaceutical company's version of the brand-name drug, developed after the patent on the brand-name drug has expired.

Analogy: The difference between "brand-name" and "generic" may be clearer if we consider the soft drink market. Coca-Cola is a brand name that is more expensive to the consumer than a generic brand like NoName Cola

Given the high premiums associated with dental plans, it is important to control costs. What are some of the ways an insurer can achieve cost control?

Through the use of deductibles, co-insurance, and coverage maximums.

You will likely encounter plans that include both a deductible and a co-insurance factor. Which one is applied first?

If a plan has both a deductible and a co-insurance factor, always remember to "deduct the deductibles first"

What is a generic drug?

A version of the brand name drug, developed after the patent on the brand-name drug has expired and produced by a pharmaceutical company other than the one that originally invented it.

Some plans will stipulate that the insurer will cover only the cost of a cheaper generic drug, if one exists.

To use an analogy, it would be similar to a parent giving his or her child $0.75 for a no-name cola and telling the child that if she wants a Coca-cola, which costs $1.25, she will have to pay the difference herself.

Under an AD&D policy, would paralysis of a limb be considered "loss" and therefore covered?

Yes. Loss of a body part refers not only to actual loss (amputation)but also to loss of use (paralysation).

What is a contributory group plan?

A contributory plan is one where the employee must contribute to the premium.

Contributory plan: when the employee is required to contribute to the premium, it is referred to as a contributory plan. To make it easier for the insurer, the employer will deduct the premium from the employee's pay and submit a lump sum to the insurer to cover all members of the plan.

Non-contributory Plan: Sometimes the employer will pay the entire premium on behalf of the employee as part of their compensation. This is referred to as a non-contributory plan, because the employee does not need to contribute to the premium.

Assume a group dental plan has a $25 single deductible and a $75 family deductible. How would the two deductibles on this plan be treated?

Each covered member could be subject to one single deductible of $25 over year. However, once a total of $75 in deductibles has been paid, there will be no further deductible applied that year even if the individual receiving treatment has not yet paid the $25 single deductible.

What types of services are covered under a dental plan that provides major restorative services?

Major Restorative Services: Crowns, inlays, and so on.

Routine Maintenance: Checkups, cleaning, extractions, filings, x-rays, and the like.

Hoe does a family deductible work?

Each individual would pay the single deductible, and then no further deductible that year. Once the family deductible has been met, there would be no further deductible payable in that calendar year even if the individual submitting the claim has not previously paid the single deductible.

What is deductible?

A deductible is the portion of the cost for which the insured is responsible.

For example, let's assume that a claim is for $1,000 and is subject to a $100 deductible.

In such a case:

- The insured would pay $100 right off the top, and

- The insured would pay $900 (although a coinsurance factor may also apply)

The premium on a travel insurance policy may not be proportionate. What does this mean?

The premium is usually based on the length of the vacation, subject to certain ranges. For example, the cost could be exactly the same for trips ranging from one day to two weeks.

For a death to be considered "accidental," the death must occur within how many days of the accident?

The loss must occur within 365 days of the accident be the direct result of the accident.

For example, assume the individual was involved in a car accident, immediately went into a coma, and died 10 months later. Is the death a result of the accident? Would your answer change if he was in a coma for 25 years before he died? The point is the insurance industry had to implement a guideline, and that guideline is 365 days.

Hoe dopes a co-insurance factor work?

A co-insurance factor is the percentage of each eligible claim that the insurer will pay.

For example. if the co-insurance factor is 80%, or 80/20, in the case of a $1,000 eligible claim, the insurer would pay $800 and expect the insured to cover the remaining $200

What is a formulary?

The insurer will have a formulary - a fancy name for a list - of drugs that are covered by the plan.

Some plans will stipulate that the insurer will cover only the cost of a cheaper generic version of a drug, if one is available.

Which category of plan insures the greatest number of people for extended health care?

Group insurance.

Note: Creditor insurance and credit card insurance are also forms of group coverage.