13.1 Characteristics of Group Insurance
Group health insurance is similar in structure to group life insurance. Employers are the most common sponsors of these plans. An employer may contract with an insurance company, HMO, or PPO to provide coverage for medical expenses, or may utilize a Third Party Administrator (TPA) to handle claims and administrative functions for a self-funded plan. These plans generally cover nonoccupational injuries or illnesses, meaning those not related to the workplace.
To qualify for group insurance, the group must be a natural group—meaning it is formed for a purpose other than obtaining insurance coverage.
A group insurance contract is established between the group sponsor and the insurer. The sponsor is issued a master policy, while individual members receive a certificate of insurance and a summary of benefits. Coverage is typically uniform for all employees. The group sponsor is responsible for applying for coverage, providing underwriting information, maintaining the policy, and paying premiums.
Quiz
1. Who is the most common sponsor of group health insurance plans?
A. Individual employees
B. Government agencies only
C. Employers
D. Insurance brokers
Correct Answer: C
Rationale: Employers are the primary sponsors of group health insurance plans for their employees.
2. What is the role of a Third Party Administrator (TPA) in a self-funded plan?
A. To sell insurance policies directly to employees
B. To provide medical treatment
C. To manage claims and administrative functions
D. To underwrite individual policies
Correct Answer: C
Rationale: TPAs handle claims processing and administrative duties for self-funded employer plans.
3. What type of conditions are typically covered under group health insurance plans?
A. Occupational injuries only
B. Nonoccupational injuries or illnesses
C. Only pre-existing conditions
D. Cosmetic procedures only
Correct Answer: B
Rationale: Group health plans generally cover non-work-related injuries and illnesses.
4. What defines a “natural group” for group insurance eligibility?
A. A group formed specifically to obtain insurance
B. A group created by an insurance company
C. A group formed for a purpose other than obtaining insurance
D. A group with fewer than 10 members
Correct Answer: C
Rationale: A natural group exists for reasons other than securing insurance coverage.
5. What document is provided to the group sponsor in a group insurance contract?
A. Certificate of Insurance
B. Summary of Benefits
C. Master Policy
D. Claim Form
Correct Answer: C
Rationale: The group sponsor receives the master policy, while individuals receive certificates and summaries of benefits.