In this article, we will explore the reasons for motivating employers to provide group health insurance for their employees, and look at the strengths and weaknesses from two perspectives.
Group health insurance and personal private medical insurance
The most striking distinguishing feature of group insurance may be the underwriting of a group underwritten by an individual. In group cases, personal insurability evidence is usually not required and the level of benefits may be high with few significant restrictions.
Group writing is usually not concerned with the health or other insurability aspects of any particular individual. Instead, it aims to acquire a set of personal lives, or, even more importantly, a collection of these life groups that will produce predictable mortality or morbidity. If a sufficient number of life groups are obtained, and if these groups are fairly homogeneous in nature, the mortality or morbidity will be predictable. The key is that the composition is written in units, and the insurance principle can be applied to it, just like the individual. To ensure that the groups obtained are reasonably uniform, the underwriting procedures for group insurance are designed to control the adverse selection of individuals within the group.
Therefore, there should be some important features, the nature of the organization itself, or it can be applied in a positive way to avoid serious adverse selection, such as:
The Group is covered by insurance: insurance should be attached to the group; that is, in addition to obtaining insurance, team members should be brought together for some purpose. For example, group insurance provided to employees of a particular employer must not be a feature that promotes the formation and existence of a group.
Flow through the group's people: There should be a steady flow of people in the team; that is, a large number of new young people must enter the group and flow out of the older and injured groups. For active workforce groups, it can be assumed that they are on average health.
Automated Determining Benefits: Collective insurance underwriting usually requires an automatic determination of the amount of benefits for an individual's life, which is beyond the control of the employer or employee. If the amount of benefits you receive is completely optional, you can choose to target an insurance company, because people with poor health tend to be insured, and healthy people may prefer to choose the minimum coverage.
However, with the development of the group mechanism, insurers have responded to the market, especially the requirements of large employers, and have greater flexibility in choosing benefits. This flexibility is often expressed as an optional life and health insurance premium that exceeds the basic coverage provided by the employer and more health care financing options. In addition, the increasingly popular cafeteria program allows participating employees to choose from a range of benefits using pre-approved employer funds. Individuals who choose certain basic insurances choose the benefits that best meet their individual needs.
The Group's minimum participation: Another underwriting control requires that most of the eligible individuals in a particular group are covered by insurance. In the plan for employees to pay part of the premium [contribution], if the insurance coverage is valid, usually at least 75% of the qualified employees must join the plan. In the case of a non-contributory plan, 100% participation is required. By covering a large part of a particular group, insurers can guard against excessively substandard lives. If the employee refuses insurance for reasons of religion or other reasons that do not involve any choice, relax the rule.
Third-party cost sharing: Ideally, part of the cost of a collective plan should be borne by the employer or by certain third parties, such as trade unions or industry associations. It is easy for a non-contributing employer to pay for the entire plan, which gives the employee complete control over the plan. It provides insurance for all eligible employees, eliminating any difficulties involved in obtaining a sufficient number of employees to agree to meet the participation requirements. In addition, in the contribution plan, there is no problem of allocating costs among various employees.
Contribution plans typically reduce the cost of the employer. Here, employees can arrange for more adequate protection for employees through employee donations. It can also be said that if an employee contributes to his or her insurance, his or her value will be more profound and will be more appreciated. On the other hand, the payment plan has many shortcomings. Its operation is more complicated, which sometimes greatly increases management costs.
Each employee must agree to contribute to their insurance, and as stated earlier, the minimum percentage of eligible groups must agree to enter the arrangement. New employees entering the business must be informed of their insurance privileges. If the plan is contributing, employees may not be entitled to insurance until they work in the company for a while. If they do not agree to be covered by the plan within 31 days, they may need to provide satisfactory evidence of insurability to qualify. Some non-contributory plans also have these trial periods.
Effective administrative organization: A single administrative organization should be able and willing to act on behalf of the insured group. Usually this is the employer. In the case of a payment plan, there must be a fairly simple method, such as a salary deduction, which the primary policyholder can use to collect premiums. Both management and underwriting perspectives require automated methods. Some miscellaneous controls of the meaning of underwriting are often used in collective insurance schemes, but previous discussions allowed an understanding of the group's underwriting theory. The discussion applies to groups with a large number of employees.
However, most groups are not large. Group size is an important factor in the underwriting process. In smaller programs, use more rigorous audit practices related to the unfavorable parts. These may include less lenient contract terms, simple health issues, and, in some cases, detailed personal coverage of group members.
Group policy: The second characteristic of group insurance is the use of group policies [contracts] held by group owners as evidence of group insurance policyholders and booklet certificates or other insurance profiles held by plan participants. The certificate provides information about the program requirements and the steps required to file a claim. The use of certificates and main contract components is one of the economic sources under the group approach. The main contract is a detailed document that clarifies the contractual relationship between the group contract owner and the insurance company. The insured under the contract, usually the employee and its beneficiary, is not actually a party to the contract, although they can enforce the rights as a third party beneficiary. The four-party relationship between employers, insurance companies, employees and their families in group insurance plans can create interesting and unusual problems that are common to group insurance.
Reduce costs: The third characteristic of group insurance is that it is usually less expensive than the one offered in personal insurance. The nature of the group approach allows for the use of large-scale distribution and large-scale management methods that provide operational economics that personal insurance does not have. In addition, since group insurance is usually not written separately, premiums are based on an actuarial assessment of the entire group, so a given healthy individual can sometimes purchase insurance at a lower cost. Employer subsidies for costs are a key factor in the design of group insurance plans. The biggest significant savings in marketing group insurance costs may be that the proportion of group liability in total premiums is much lower than the commission for individual contracts.
The marketing system frees agents or brokers from many of the duties, responsibilities, and expenses typically associated with the sale or service of personal insurance. Since many group insurance cases involve high premiums, commission rates are significantly lower than individual contracts and generally decline as premiums increase. Some large group insurance buyers were directly canceled with insurance companies and contracts. However, in these cases, the relevant consultant is usually paid a fee. The nature of administrative procedures allows for the simplification of accounting techniques. The mechanism for advanced collection is less involved, and the experience refund process is greatly simplified because only one party can handle a group policy owner.
Of course, the problem of a large number of individual contracts is avoided, and due to the nature of group selection, the cost of medical examinations and inspection reports is minimized. In addition, minimize regulatory filings and other requirements. In the early stages of group insurance, management is simple. That is no longer true. Even if there is a group term...
Orignal From: Advantages and disadvantages of collective health insurance and personal health insurance
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