Lesson 11 Review
Health insurance is available on an individual basis through a group plan or through federal government plans such as Medicare, Medicaid, and the Social Security system.
AD&D is considered the purist form of accident insurance and is typically sold through group insurance plans. Most employer-sponsored health insurance plans also carry an optional AD&D benefit.
Life insurance, AD&D, and disability income insurance are "valued contracts."
Medical Expense insurance is based on a "contract of reimbursement."
Most individual health insurance policies are written on a nonparticipating basis and require an application and usually evidence of insurability. Unlike individual insurance, group policies are written on a participating basis.
Florida law does not limit the number or percentage of employees required to participate in order to qualify for group health insurance.
Under Florida law, all group health insurance contracts must make coverage for alcohol and drug rehabilitation and mental and nervous disorders available for purchase.
In a cancelable policy, the insurer must produce written notification of contract termination 45 days in advance.
Optionally renewable policies give the insurer the option to terminate policies by class; however, only on a specific date as stated in the contract.
A conditionally renewable policy allows that policies can be renewed unless one or more stipulated conditions occur, excluding any condition pertaining to the insured's health.
Guaranteed renewable policies state the policy must be renewed as long as premiums are paid or until a specified age.
Noncancelable policies cannot be canceled, nor can the premiums be changed. Benefits are predetermined as a fixed amount.
The main factors that influence the computation of health insurance premiums are:
- Interest
- Expenses
- Types of benefits
- Morbidity
- Claims experience
- Insured's age, sex, and occupation
Group health insurance issued by mutual companies pay dividends; stock companies issue experience-rated refunds. There are two major factors used that determine whether dividends or refunds will be issued:
- Expenses and
- Claims costs.
Premium reserve funds represent the insurer's liability for losses that have not occurred but for which premiums have been paid. Loss reserve funds represent the insurer's liability for losses that have occurred but for which settlement is not yet complete.
Cafeteria plans are also called Section 125 plans.
Business overhead expense insurance premiums are tax deductible - Benefits are taxable as income. B.O.E. insurance provides payments for such things as:
- employee salaries;
- mortgage or rent;
- company-owned autos and auto insurance;
- utilities;
- property and liability insurance premiums; and
- leased equipment, etc.
Disability buy-outs can be paid in a lump sum or can be designed for periodic payments. There is a lengthy elimination period (often as long as two years) to establish the fact that the disabled person will not be returning to the company.
A fictitious group is a group of persons who have gathered together strictly for the purpose of obtaining insurance.
If the employee must contribute to the premium payments, it is considered a contributory plan. Under Florida law there is no specific minimum percentage participation for employees covered by employee group health insurance.
Conversion privileges typically allow a 30-31 day period in which the participant must make the conversion.
COBRA requires employers with 20 or more employees to permit employees or family members to continue their group health coverage at their own expense, but at group rates for up to 18 months.
Group basic medical insurance provides for hospital, surgical and physicians' expenses. Group major medical plans differ from individual major medical plans with respect to the benefits. Groups can provide a much broader base of coverage and provide a lower deductible.
Florida law requires group medical expense plans to provide maternity benefits.
Group premium payments made by an employer are tax deductible to the employer and do not count as income to the employee. However, if the insured's out-of-pocket expenses exceed 7.5% of the individual's adjusted gross income, a tax deduction can be taken for expenses over and above the 7.5% mark.
The information contained in Units 15, 24, and 25 of the Florida study manual has been presented in Lesson 11 of the online course.
