13.6 Change in Insurance Companies or Loss of Coverage
Coinsurance and Deductible Carryover
If a group health plan changes insurers during the policy year, employees must receive full credit for any amounts already applied toward their annual deductible and out-of-pocket maximum. This includes copayments made for prescription drugs under either companion or stand-alone prescription drug plans.
Reinstatement for Military Personnel
If an employer suspends health coverage during a period of military deployment, federal law requires that the individual be permitted to reinstate coverage without any waiting period, provided timely notice is given to the insurer upon return from deployment.
No Loss-No Gain for Existing Claims and Pre-existing Conditions
The No Loss–No Gain provision ensures that when one group health policy replaces another, claims that began under the prior policy continue to be covered by the new policy. This requirement overrides pre-existing condition exclusions and mandates the transfer of risk to the new insurer.
Events that Terminate Coverage
Group coverage for an employee may be terminated if employment ends, if the employee no longer meets eligibility requirements (such as a change to part-time status), or if the group policy itself is terminated.
Extension of Benefits
When a group health insurance policy is terminated or replaced, individuals who are actively receiving treatment for a medical condition must continue to have their claims covered. If new group coverage is established within 60 days of the prior policy’s termination, either the former insurer will continue paying the claim until it is resolved, or the new insurer will assume responsibility for payment. Employees and their dependents who are on claim at the time of policy or employment termination remain covered under the prior group plan until the claim is completed.
Conversion Privilege
A conversion privilege allows an employee to convert group coverage to an individual policy without providing evidence of insurability when eligibility ends or the group plan terminates, provided the request is submitted to the insurer within 31 days of the qualifying event.
Not all insurers offer this option; however, when available, the converted policy typically has higher premiums and less comprehensive coverage compared to the original group plan.
Quiz
1. What happens to an employee’s deductible and out-of-pocket amounts when a group plan changes insurers mid-year?
A. They are reset to zero
B. They are transferred to a savings account
C. They are fully credited toward the new plan
D. They are refunded to the employee
Correct Answer: C
Rationale: Deductibles and out-of-pocket amounts must carry over and be credited under the new plan.
2. What must occur for military personnel to reinstate group health coverage after deployment?
A. Submit a new application with medical exam
B. Wait for the next open enrollment period
C. Provide timely notice to the insurer after returning
D. Pay double premiums
Correct Answer: C
Rationale: Coverage must be reinstated without a waiting period if timely notice is given after deployment.
3. What is the purpose of the No Loss–No Gain provision?
A. To reduce premiums for new policies
B. To eliminate all pre-existing conditions
C. To ensure ongoing claims continue when coverage is replaced
D. To increase insurer profits
Correct Answer: C
Rationale: It ensures continuity of coverage for claims in progress when one group policy replaces another.
4. Which of the following is a valid reason for termination of group coverage?
A. Employee takes a vacation
B. Employee changes residence
C. Employee no longer meets eligibility requirements
D. Employee files a claim
Correct Answer: C
Rationale: Coverage may end if the employee no longer meets eligibility criteria, such as becoming part-time.
5. What is a key feature of a conversion privilege?
A. Requires evidence of insurability
B. Provides identical group coverage
C. Allows conversion to an individual policy within 31 days
D. Eliminates premium payments
Correct Answer: C
Rationale: Conversion privilege allows switching to an individual policy without evidence of insurability if done within 31 days.