Regulation of Group Health Insurance

By providing a schedule of benefits that does not allow individual selection of coverage and benefits, a group health plan:

• reduces claims

• increases profits

• limits coverage

• avoids adverse selection

Answer explanation

All group plans provide a schedule of benefits that preclude individual selection. If individual selection were allowed, it would result in adverse selection against the insurer because those who need coverage the most would choose the most coverage.

Stephen enrolled in a group health plan last year with a pre-existing condition. Which statement is correct about coverage for this condition?

• It can be excluded from coverage indefinitely.

• It can be excluded from coverage for up to 24 months.

• It can be excluded from coverage for up to 12 months.

• It must be covered like any other medical condition.

Answer explanation

The Patient Protection and Affordable Care Act (PPACA) prohibits pre-existing condition exclusions from group and individual medical plans issued on and after January 1, 2014.

To be eligible for standard group health insurance, a group must qualify on the basis of its:

• sponsor's wealth

• members' health

• members' average age

• number of members

Answer explanation

To qualify for group health insurance, a group must be the required minimum size. Most states, insurers, and the IRS require that a group have at least ten members to qualify for standard group coverage.

Jim incurred $6,000 in medical expenses. He submits a claim for benefits to his primary plan, which covered $4,000 of these costs. Which statement is correct?

• Jim can submit claims to both the primary and secondary plans at the same time.

• He can receive no more than $6,000 in benefits from both the primary and secondary plans.

• Once the primary plan has paid, he cannot seek additional benefits from the secondary plan.

• The primary plan will pay benefits only to the extent that the secondary plan did not cover the loss.

Answer explanation

If the primary plan only covers $4,000 of his medical expenses, Jim can submit a claim for up to $2,000 to the secondary plan. However, he can submit a claim only to the extent that costs incurred were not covered by the primary plan. (He cannot submit the entire amount of the claim to the secondary provider.)