Transcript Presentation: Health Insurance 101

NAHU
Health Insurance 101
The Basics About How Health Insurance Markets
Work and What You Need to Know To Get Started in
the Group Insurance Sales Business
Introduction
•
Everyone needs medical care sometime, and the
most common way to pay for it in this country is
through private health insurance.
•While most Americans have some type of private
health insurance coverage, the different types of
health insurance coverage and how they work can be
confusing and difficult to understand.
•This presentation is designed to explain health
insurance basics in layman's terms, and also provide
you with contact information for resources that can
provide you with additional information and help as
you begin your sales career.
Role of NAHU
• The National Association of Health
Underwriters represents over 20,000 health
insurance agents, brokers and employee
benefit specialists nationally.
• Our members sell health insurance and
employee benefit products. Annually we assist
millions of Americans with their insurance
needs.
• Our members help both individuals and also
employers purchase health insurance products.
Our employer clients range from Fortune 500
companies to sole proprietors.
Role of the Health Insurance
Producer
• Agents and brokers in most states are legally called
producers, and you will hear us interchange the
terms agent, broker, and producer throughout this
presentation.
• In addition to selling insurance products, producers
often help their clients, particularly the small
employers, with all sorts of employee benefit issues,
including assistance with claims processing,
COBRA administration, privacy issues, and more.
• Many of our members are independent health
insurance agents, brokers or consultants, and many
are small-business owners themselves.
Role of NAHU
• As an association, our two top public
policy goals are:
– Reducing the number of uninsured
Americans through private-market
solutions; and
– Making sure that state-level private
health insurance markets are as vibrant
and competitive as possible.
Health Insurance Coverage in
the United States
• To begin, it is important to understand how people
obtain their health insurance coverage in the United
States:
– 54% through their employer or the employer of a
family member
– 5% purchase individual insurance coverage
– 13% receive Medicaid
– 12% receive Medicare
– 16% are uninsured
» Source: Kaiser Family Foundation
Part I
Employer Group Health Insurance
Coverage
• The majority of Americans have group health
insurance coverage through either their employer or
the employer of a family member.
• Many people don’t realize that health insurance is
issued differently for different types of employers,
and that since insurance is regulated at the state level,
health insurance requirements for the different types
of employers can vary significantly from state to
state.
Employer Group Health Insurance
Coverage
• Millions of Americans work for small employers,
which for health plan purposes, are generally those
with 2-50 employees.
– A few states have expanded this definition to 1-50
employees. These states are sometimes referred
to as “allowing business groups of one.”
• Millions of other Americans get their health
insurance coverage through large employers.
Generally, for health plan purposes, those are
business with more than 50 employees.
• The requirements for the issuance of coverage to
large groups are different than for small groups, and
the way that rates are determined is also different.
Employer-Sponsored Group
Health Insurance
• People who lose their group health insurance
coverage, due to a job change, a divorce, job loss or
other reason are often able to keep their group
coverage, at least temporarily.
• Most people who are able to continue their group
health insurance benefits are eligible to do so
according to federal Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA) legislation if
their employer has 20 or more employees.
• However COBRA does not apply to all employers,
and many states have mandated continuation of
coverage options for people who are not covered by
COBRA.
HIPPA Portability
• The federal Health Insurance Portability and Accountability
Act of 1996 (HIPAA) requires that all small-group health
plans:
– Be issued on a guaranteed basis, no matter what health
conditions members of the group have.
– Be guarantee-renewable, unless there is non-payment of
premium, the employer has committed fraud or intentional
misrepresentation or the employer has not complied with
the terms of the health insurance contract.
– To impose no more than a 6-month look-back/12-month
exclusionary period for preexisting conditions on enrollees
that do not have prior creditable coverage. (States can
reduce)
– To give employees credit for prior coverage regarding
preexisting conditions, as long as there is no more than a
63-day break in coverage.
• Also, many people leaving group insurance for the individual
market have federally mandated group-to-individual health
insurance portability benefits.
Small Employer Health Plans
• In most states, small employer plans are defined as 250 eligible employees.
• It’s very important for agents to understand how
small group insurance is rated in the various states.
In most states, the rating factors and variances are
similar, but no two states are identical.
• In 40 states, the law allows small group health
insurance carriers to determine their rates using a
process known as medical underwriting.
• The other states all allow for either modified
community rating or community rating in their group
markets.
Small Employer Health Plans
• When small-group plans are medically underwritten, the
underwriting is usually done after the initial quote or
prescreen, based on a “rating model” that varies from
state to state
• Employees are usually asked to provide health information
about themselves and their covered family members.
• When determining rates, insurance carriers use the
medical information on these applications. Sometimes
they will request additional information from an
applicant’s physician or ask the applicants for
clarification.
Small Employer Health Plans
• If an underwriter is unable to obtain information
necessary to accurately determine the risk of a
particular applicant, he or she will underwrite more
conservatively, meaning that the assumption relative
to the missing information will be negative rather
than positive.
– Example: A person has a history of high blood pressure,
but it is controlled with medication and they are not
overweight. If the underwriter is unable to determine if
that individual smokes or if he or she has normal
cholesterol, the carrier will assume that the missing
information is negative and rate accordingly.
Small Employer Health Plans
• Most state laws concerning small group medical underwriting
are based on a National Association of Insurance
Commissioners Model and allow groups to be rated “X”
percent above or below the indexed rate.
• The indexed rate is determined by averaging the lowest
possible rate and the highest possible rate. Most states that
have this type of rating system also have a limit on rate
increases due to the health status of the group, which is helpful
in stabilizing rates over time.
• Even with initial rate fluctuations for a new group, small
employer rates in these states tend to be much lower than in
states where health status rating is not allowed.
• A group that is rated correctly up front is much less likely to
have a very large increase at renewal.
• In order to rate the group correctly, the correct information on
the initial application is essential.
Differences in Underwriting
• In every state, each carrier has different
underwriting requirements.
• What is “Guarantee Issue”?
• Medical Rate ups: Max Load/ “RAF”
• Employer questionnaire vs. individual health
statements
• Contribution & Participation are key!
• What is an eligible employee?
Trouble Spots in Underwriting
• 2-5 life cases can be a problem, particularly if one or more
employees have serious health conditions.
• Supporting documentation is important
– Always show employer/employee relationship
• (Something official that shows that each person is getting paid at
least min. wage).
– Creditable coverage (to waive pre-ex). Credit will be given
as long as their isn’t a break in coverage more than 63
days. (get prior carrier bill when turning in group).
• Always get an application or a waiver from every eligible
employee!
• Husband and wife enroll separately if they are both
working there.
• Rates are NEVER final until approved in writing and a policy
number is issued.
What are “Rate Sensitive” Things
• Any changes from the original census to the actual
enrollment
• Zip codes
• SIC codes
• Effective date
• Medical information
• Prescriptions (one person having 3 or more)
• One person having multiple conditions
• Medicare is primary under 20 lives/ Group is primary over
20 lives
• TEFRA
• COBRA
Small Employer Health Plans
• The alternative to medical underwriting is known as
community rating.
• Community rating requires insurers to charge all
individuals who live in the same geographical area the
same exact premium regardless of their age or health
status.
• Example: An employer’s cost to insure a healthy 27-year
old non-smoking male with no health conditions would
be the same as it would be to insure a 55-year old male
smoker who is suffering from prostate cancer and a heart
condition.
Small Employer Health Plans
• A variation on community rating used by some states is
called modified community rating (MCR).
• With MCR, health plans may vary the community rate based
on limited factors, such as age, gender and/or smoker status.
• Example: In a state that allows MCR variations for age, the
employer would pay more to insure the 55-year old male
smoker with cancer and a heart condition. However, the
insurer would have to use the same rate when calculating
premiums for the healthy 27-year old male as it would for a
male co-worker who is the same age but suffers from juvenile
diabetes.
Small Employer Health Plans
• State-level MCR laws vary greatly. Some allow for many
adjustment factors, but many allow for just a limited few.
• If age is an allowed factor, it may or not be limited. For
example, there may be a restriction on how much the rates can
vary based on age, such as the rate for the oldest eligible
individual can be no more than twice the rate for the youngest
eligible individual.
• Community rating and modified community rating have a
severely negative impact on health insurance rates in all states
that employ the mechanism, but the more limited the rate
adjustment factors, the more severe the problem.
Large Employer Groups
• Large group health insurance contracts, unlike small group health
insurance contracts, do not have to be offered on a guaranteeissue basis, although it is unusual for a group to be declined.
• Large group health insurance is not medically underwritten but
the rates may be based on the overall claims experience of the
entire group.
• HIPAA mandates all group insurance contracts, including large
group contracts, must be guaranteed renewable, unless there is
non-payment of premium, the employer has committed fraud or
intentional misrepresentation or the employer has not complied
with the terms of the health insurance contract.
• HIPAA also requires large employers to give employees credit for
prior coverage for preexisting condition exclusions, as long as
there is no more than a 63-day break in coverage.
• With large groups, a minimum of 3 years of claims information,
renewal and current rates are needed for a quote.
Large Employer Groups
• The quoting process can take longer than small group and the
underwriter may come back to the broker for more information
in order to get a better rate.
• Many employer-based health insurance plans are fully insured
by a health insurance carrier. The individual states regulate
these plans.
• Larger group health plans (usually several hundred employees
or larger) may choose to either fully or partially self-insure
their group benefit plans.
• Companies that self-insure generally buy stop-loss coverage to
protect themselves against losses above a certain threshold.
This coverage can be purchased to protect against losses by a
single individual, the whole group, or both.
• Self-funded employers also generally contract with either a
third-party administrator or a health plan to administer their
plans and handle claims.
Large Employer Groups
• Many employees of companies that self-fund their coverage do
not even realize that their plan is self-funded by their
employer.
• Self-funded plans are regulated federally by the Department of
Labor under the Employee Retirement Income Security Act of
1974 (ERISA). That is why they are sometimes known as
ERISA plans.
• Self-funded plans are not subject to state-level rating laws, nor
are they subject to state-level health insurance mandates (i.e.,
requirement that all group health plan contracts in the state
cover diabetic treatment supplies).
• Self-funded ERISA plans are required to abide by federal
requirements and mandates (I.e., HIPAA, federal mental health
parity requirements, etc.)
• Stop-loss plans purchased by self-funded employers are still
regulated by the state department of insurance.
Leaving Employer Health Plan Coverage
• Most Americans with employer-sponsored health
plan coverage have the option of continuing that
coverage for 18-36 months at their own cost if they
lose their group coverage.
• Federal COBRA legislation applies to companies that
employed 20 or more full-time workers in the past
year.
• COBRA applies to both private employers and state
and local health plans, but it does not apply to Federal
government plans and those sponsored by certain
church organizations.
• COBRA also does not apply if the company goes out
of business, or ceases to offer group health insurance.
Leaving Employer Health Plan Coverage
• Many states have enacted legislation requiring
smaller employers or those not bound by
COBRA to offer some type of continuation of
coverage benefits to their employees.
• In addition, many states have requirements that
allow individuals who are transitioning out of
group coverage to convert their group health
coverage into an individual health insurance
plan that they pay for privately.
• Some states allow for both of these options,
and a few states have no continuation of
coverage options for individuals who do not
have COBRA rights.
Leaving Employer Health Plan Coverage
• People who leave group health insurance coverage also have
rights under HIPAA.
• HIPAA mandated that every state develop at least one option
for people who are transitioning from group coverage and
meet certain criteria, so that they can purchase an individual
health insurance policy on a guarantee-issue basis.
• The people who are eligible to purchase these health insurance
policies are known as having group-to-individual portability
rights under HIPAA and are often called HIPAA-eligibles.
• The various states have developed a wide range of
mechanisms to provide guarantee-issue coverage to their
HIPAA-eligible populations, the most common of which is
allowing them to purchase coverage thorough a state
individual market high-risk health insurance pool.
.
Part II
Individual Health Insurance
Coverage
• Approximately 5 percent of Americans do not
get their health insurance coverage through an
employer or through a government program.
• Instead, they purchase private coverage on an
individual basis.
• Individual coverage is regulated at the state
level of government.
Individual Health Insurance
Coverage
• Individual health insurance is very different than
group insurance in a number of ways.
• Individual market carriers are much more limited in
their ability to spread risk.
• Benefit packages are generally less extensive than
what is available to most groups.
• Deductibles and cost-sharing are generally higher in
order to produce a lower premium.
• This lower premium is important because individual
market purchasers do not have an employer paying
part of their premium.
Individual Health Insurance
Coverage
• Individual health insurance is also regulated
differently than group policies in most states.
• A key reason why individual policies need to be
regulated differently, is that in most cases, individuals
do not purchase them unless they in some way
anticipate that they will using their benefits.
• This is particularly true in states where individual
market premium rates are very high.
• This occurrence is known as “adverse selection.”
Individual Health Insurance
Coverage
• To help prevent against adverse selection, 43 states
allow for medical underwriting in the individual
market.
• The vast majority of these states allow for
unrestricted medical underwriting without the rating
bands that are so common in the small group market.
• Most federal HIPAA provisions do not apply to the
individual market, and in the majority of states,
traditional individual health insurance is not required
to be issued on a guaranteed issue basis, so people
can be turned down for coverage due to a preexisting
medical condition.
Individual Health Insurance
Coverage
• In many states, individual market carriers can issue a
policy with an elimination riders.
• Elimination riders allow for carriers to offer coverage
to an individual with a preexisting condition, but
exclude coverage of that condition.
– Example: An individual has severe seasonal
allergies, but can control them with medication. A
carrier may offer a policy at a more expensive rate
with full allergy coverage or offer a less expensive
policy that excludes allergy coverage. The
individual may find that it is more affordable to
take the less expensive policy and pay for his/her
allergy medication out-of-pocket.
Individual Health Insurance Coverage
• Individual policies are also generally different than
group policies concerning the amount of time prior
to the application for coverage the carrier can look
back for preexisting conditions, and also how long
carriers can exclude coverage for those preexisting
conditions.
• On the group level, according to HIPAA, a preexisting condition is a condition that a person was
treated for in the 6 months prior to the effective
date of their policy. This 6 month period is called
the “look-back” period.
• A condition considered to be pre-existing can be
excluded from coverage for a maximum period of
12 months for group policies.
Individual Health Insurance Coverage
• Federal law does not prescribe the pre-existing
condition limitation period on individual health
insurance policies.
• Also, unlike group coverage, there is no federal
requirement that carriers give credit for prior
creditable coverage under another plan in the
individual market.
• It should be noted that some state laws do limit the
pre-existing condition provisions of policies in the
individual market as well as require that they give
credit against the limitation for time served under
another creditable health insurance plan.
Medically Uninsurable Coverage
• Since in most states, individual health insurance is not
offered on a guarantee issue basis, people can be turned
down for coverage if they have a very serious medical
condition (i.e, HIV, cancer).
• States are not required to have an alternative option for
medically uninsurable individuals, but most states do.
• Thirty-four states provide coverage to medically
uninsurables through state high-risk health insurance
pools.
• Ten states use other means of providing uninsurable
people with access to individual market coverage, and
four states have no such means (i.e., guarantee issue,
carrier of last resort). In Florida, the state high risk pool
is closed to new applicants.
High-Risk Health Insurance
Pools
• People who purchase coverage through state high risk pools are
often self-employed individuals, early retirees or employees of small
businesses that do not offer benefits.
• The average amount of time an individual spends in a risk-pool is 30
months.
• Consumers that need to purchase coverage in the high-risk-pool
have access to comprehensive private-market coverage options that
might not otherwise be available to them.
• These individuals pay higher rates than other individual market
consumers, but these rates are capped, generally at about 125-200
percent of the average individual market rate.
• Consumers are provided with a very important safety net, and
insurers are provided with a predictable means of accounting for
uninsurable risks.
Plan/Product Types
POS
• It is crucial for every producer to be well
informed about all of the Plan/Product types
and differences in your market.
HRA
• That is the only way you can decide what
is right for your client.
PP
• Dual Options????
O
HSA
ASO
• Fully Insured
• Self-Funded
Indemnity
GAP
FSA
SDHP
HMO
Sec 125
CDH
P
Managed Care Options—HMOS
and POS Plans
• HMO=Health Maintenance Organization
• POS=Point of Service (an HMO with an Out
of Network benefit)
– Both requires a Primary Care Physician (PCP)
– Both requires a service area (no care, except
emergency, outside of service area)
• These plans can be “open access” which
means that members can self refer themselves
to specialists.
PPO, Indemnity & Major Medical
• PPO= Preferred Provider Organization
– Has a deductible, coinsurance and often times an office
visit copay
– Providers are reimbursed at a contracted amount if they
are “in-network.” “Out of network” benefits are paid at
a lesser benefit (ex: U&C or Fee Schedule)
– No primary care physician required
– No referrals necessary
– No service area requirement
• Indemnity
• Major Medical
• Gap Plans
– Sold with high deducible plans to fill in the gaps
CDHP/ Mandate Lite
• CDHP- Consumer Directed Health Plans
–
–
–
–
HSAs
HRAs
FSAs
Hybrid
• Mandate Lite- Some states have passed legislation
requiring that a plan be made available that does not
include state mandated benefits. These are
sometimes referred to as “bare bones” or “stripped
down” plans.
HSA or HRA
• HSA Plans- “Health Savings Account”- Must be
sold with a High Deductible Health Plan (HDHP).
Not everyone qualifies. Allows people to set aside $$
for qualified medical expenses (no use it or lose it
rule). Unused funds can be saved for later medical
expenses or used in retirement. Employee owned
accounts.
• HRA Plans- “Health Reimbursement Account”Employers can set aside an account for employees to
be reimbursed for out of pocket medical expenses.
Employer owns accounts.
Section 125/ FSA/ Cafeteria Plans
• IRS Code Section 125- Cafeteria Plans
– Sec. 125 “POP Plan”- Premium Only Plan. Enables
employers to offer employee benefits on a pretax basis.
– Sec. 125 FSA- Flexible Spending Account. Employers
offer benefits on a pretax basis AND employees can set
$$$ aside into a medical and/or dependent care account. *
– Use it or lose it applies!
*Putting pretax dollars away to spend on Sec. 213d IRS
approved items or dependent day care costs.
“Out to bid”/ RFQ’s/ RFP’s
• Once you have discussed product options with
your client and gathered the necessary
information, you will use a request for quote
(RFQ) or request for proposal (RFP) for “going
out to bid” for an employer.
• Sample of what information is normally required:
– Employee Census Information
• DOB, sex, dependent status, zip code,
medical info
– In states that allow for medical underwriting, it
is important to get medical information up front!
“Out to bid”/ RFQ’s/ RFP’s
– Group Information Needed
• Address, ER contact, multiple or single
locations, prior coverage, anniversary
date & renewal vs. current rate
information or if it is a new group
• In some states, you may be able to vary the
rating structures: age rated vs. composite rates
• You also have some options for dependent
rates
Enrollment Meetings
• It is common that employees are allowed to make
changes to their coverage during an annual
enrollment period.
– The exception is a qualifying event. Marriage, Divorce,
Birth, change in status, etc.
– Be careful of Section 125’s (people can’t just drop)
• Lead times are important!
• Always check enrollment forms during the actual
enrollment to ensure accuracy and completion
• Issues with installation (ex: someone goes to the
pharmacy and has no ID card yet)
• MANAGE EXPECTATIONS PROPERLY
UPFRONT!
Privacy Requirements
• Health insurance producers have to abide by financial and
health information privacy requirements specified by federal
law.
• HIPAA- Health Insurance Portability and Accountability Act
of 1996 led to the adoption of privacy regulations concerning
health information.
• GLBA-Gramm-Leach-Bliley Act specified that states had to
adopt privacy requirements to protect financial information.
• Privacy- Protecting “personally identifiable financial and
medical information”
– Who can have what????
– Anything that’s not in a phone book
– Privacy notices and authorizations
– Business Associate—For health information purposes, an
agent is a business associate of each carrier for whom they
sell products. For self-funded plans, you are a business
associate of the plan.
Continuing Education: License
Requirements
• In every state, health insurance producers are
required to complete continuing education to
maintain their licenses.
• CE requirements can be annual or biannual,
depending on the state.
• The amount of CE needed and the way in which
CE is provided varies by state.
• Local NAHU chapter meetings are a great source
for CE classes.
• NAHU also has CE options – get more
information at www.nahu.org
Licensing & Appointments
• E&O Insurance is a must. Most carriers require at
least $1,000,000 of E&O coverage.
• Some states also require producers to be “appointed”
to work with each carrier for whom they sell
products.
• If appointments are required in your state, make sure
you have begun the process of getting appointed with
each carrier before you start selling.
• Don’t wait until something sells or you may forfeit
commissions.
• Some carriers have appointment fees.
• Some carriers require that you are appointed before a
quote can be given.
• Be prepared so you can get an “AOR” (Agent of
Record).
Commissions and Bonuses
• The name on the appointment paperwork is
who gets the commissions and bonuses (agent
or agency).
• Each carrier has their own commission
structure (flat or graded percentage or per
head)
• Commissions are paid as groups pay
premiums.
• First year vs. renewal commissions.
• What is a charge back?
• This is the business of deferred rewards! You
get out of it what you put into it!
Where to Get More Information
• www.nahu.org
• www.naic.org
– Links to each state’s Department of
Insurance
• www.siccode.com
– Lookup and cross reference SIC codes and
NAICS codes