Tuesday, March 6, 2012

Targeted for Termination? You be the Judge

In some states insurers are limited by law in their ability to increase rates or cancel group health insurance contracts that are not profitable for them. These laws protect employers with 2 to 50 employees.

Insurers are able to enforce contractual provisions and enforcement could include cancellation of coverage. Is it possible that insurers have begun an effort to become more profitable by cancelling high risk groups that do not abide by all of the agreed upon contractual language? Two popular insurance companies have recently begun performing “eligibility audits” in an effort to determine if contract terms are being honored by employers. It may be a coincidence that the groups chosen for audit were groups known to have high claims and who were unprofitable for the insurer.

One insurance company sent a letter to the employer asking for a great deal of confidential payroll information. Normally the broker would be copied on such a communication; however, this was not the case in this instance. The letter stated that coverage would be cancelled if the requested information wasn’t received by a specific date. The business owner intended to provide the requested information but misplaced the letter by mistake. Several days after the deadline, a cancellation letter was received from the insurer. There was no follow up letter or second request sent. Health insurance coverage was cancelled for 23 employees and families, many of whom have serious medical conditions. While this may be an isolated incident, it may also be the start of a new tactic insurers are using to deal with some of the more difficult regulations they face. Time will tell.

The 51-500 employee market is somewhat different in that there are no rate caps to which carriers must abide. There is no need for a carrier to cancel a contract like in the smaller case market. Carriers simply raise rates to the breaking point for an employer. The employer will change carriers or dramatically modify benefits. Either way, the carriers profitability problem gets resolved.

The lesson to be learned is that informational requests by your insurer must be taken seriously and acted upon promptly in order to protect you and your employees from a similar outcome. Act on the request immediately by bringing your broker/consultant into the loop right away. They'll help you navigate through in the “world of health insurance.”

Does your company provide insured short and long-term disability benefits? Have you updated the insurance company on the earnings of your employees recently? Do you increase the maximum benefits periodically to provide adequate coverage for your higher paid employees?

In the rush to get products out the door and to pay the bills, reporting salary increases to your carrier may not be a very high priority. Reporting salary increases when they occur or at least annually assures that maximum benefits will be paid to a disabled employee. This will also eliminate retroactive premium requests from the carrier.

The value of rigorous and regular eligibility audits has continued to prove itself to TransparentRx throughout the years. An eligibility audit is simply verifying that all employees and dependents associated with your company are enrolled or not enrolled appropriately in your benefit plans.

The audit can save money now and it can reduce liability for an employer. Saving money now refers to premium dollars being spent on dependents that should not be covered on your plan. The dependent may be ineligible according to the terms of your contract or the employee may no longer desire coverage for the dependent. The audit may also uncover situations where an employee is not paying the correct contributions for coverage elected. Insurance carriers are very strict about refunding premiums for employees or dependents that were enrolled in error, yet a mistake can result in thousands of dollars in overpaid premiums.

There is a great deal of risk shifted to an employer when non-eligible individuals are on the health insurance plan. It is a common belief that if an employer is paying the premium for someone, they are covered for medical expenses up to the policy limits. This is not the case. Individuals are covered if they meet the eligibility requirements of the plan. Frequently, small claims never get challenged. Inappropriate enrollment is most often discovered when there is large claims to be paid. In that case, the insurer can retroactively terminate someone and not be held responsible for the claims. If this happens, fingers most often point to the offending employer for payment of the claim.

The solution is a regular enrollment audit that compares an employer’s desired coverage with the actual enrollment with consideration for insurance company eligibility rules. Twice yearly is not too often and the process gets easier each time it is done. Of course the audit should look at payroll records to be certain the correct deductions are being charged.

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