Group Insurance, Social Insurance & Senior Products

Approx. 5 percent of the general portion

This final chapter covers coverage for groups (mostly employees), the government safety-net programs, and the products for older Americans. These pieces stack together: government programs set a floor, employer group plans build on it, and senior products fill the remaining gaps.

Group Insurance Principles

Group insurance covers many people under a single master contract issued to an employer, association, union, or other sponsor. Individuals receive certificates of coverage, not individual policies.

• Group underwriting evaluates the group as a whole, not each member, so individual evidence of insurability is often NOT required — which lowers cost and broadens access. The group must be a real group formed for a purpose other than buying insurance (to avoid adverse selection).
• Contributory vs. noncontributory:
• Noncontributory — the employer pays the entire premium. Because no employee opts out, insurers typically require 100 percent participation of eligible employees.
• Contributory — employees share the premium cost. Insurers usually require a high participation percentage (commonly 75 percent — verify current) to guard against adverse selection.
• Conversion privilege. When employment ends, group life coverage can usually be converted to an individual policy (typically whole life, at the insured's attained age, without evidence of insurability) within a short window (often 31 days).
• COBRA continuation (federal): an eligible employee (and dependents) who lose group health coverage due to a qualifying event (job loss, reduced hours, divorce, etc.) can continue the group health coverage for a limited time (commonly 18 months, longer in some cases) by paying the full premium plus a small administrative charge. COBRA generally applies to employers with 20 or more employees — verify current. (Some states have "mini-COBRA" for smaller employers — state chapter.)

Social Insurance: Social Security, Medicare, and Medicaid

Government programs provide a base of protection:

• Social Security (OASDI). Funded by payroll (FICA) taxes, it provides retirement, survivor, and disability benefits. Workers earn quarters of coverage to become fully insured. Survivor benefits can pay a deceased worker's dependents; disability benefits use a strict definition with a waiting period.
• Medicare — a federal health program primarily for people age 65 and older (and certain younger people with disabilities or end-stage renal disease):
• Part A — Hospital insurance. Covers inpatient hospital, skilled nursing (short-term), hospice, and some home health. Premium-free for most (funded by payroll taxes).
• Part B — Medical insurance. Covers physician services, outpatient care, and medical equipment. Requires a monthly premium.
• Part C — Medicare Advantage. Delivers Parts A and B (and often D) through private insurers, often with extra benefits and network rules.
• Part D — Prescription drug coverage, offered through private plans.
• Medicaid — a joint federal-state, needs-based program for low-income individuals. Eligibility depends on limited income and assets. Unlike Medicare (age/disability-based, not income-based), Medicaid is means-tested and is the largest payer for long-term custodial care for those who qualify. (Administered by states — many specifics are in the state chapter — verify current.)

Medicare vs. Medicaid, the one-line distinction: Medicare = age/disability-based federal health coverage; Medicaid = income/asset-based (needs-based) federal-state program.

Senior Products: Medigap and Medicare Advantage

Because Medicare leaves gaps (deductibles, coinsurance, and services it doesn't cover), private products fill in:

• Medicare Supplement (Medigap). Standardized plans (labeled by letters) that pay some of Medicare's out-of-pocket costs. Key consumer protections:
• A guaranteed-issue open enrollment period (commonly a 6-month window beginning when the person is 65 AND enrolled in Part B) during which they cannot be turned down or rated for health — verify current.
• Standardization means the same lettered plan has the same benefits across insurers, so seniors compare on price and service.
• Medigap works alongside Original Medicare — you cannot have both a Medigap policy and a Medicare Advantage plan at the same time.
• Medicare Advantage (Part C). Bundles coverage through private insurers, often adding extras (dental, vision, drug coverage), usually with network rules.
• Long-term care insurance (Chapter 8) addresses the custodial care Medicare largely does not cover.

Selling to seniors carries heightened duties: suitability, full disclosure, no high-pressure or misleading tactics, and often special replacement and disclosure rules given the market's vulnerability (state chapter — verify current).

ACA Basics (Federal)

The Affordable Care Act (ACA) made federal reforms to individual and small-group health coverage. Commonly tested general points (verify current — federal rules evolve):

• Guaranteed issue — insurers generally cannot deny coverage for health status, and pre-existing-condition exclusions are prohibited on ACA-compliant major medical plans.
• Dependent coverage to age 26 — adult children may stay on a parent's plan until age 26.
• Essential health benefits — ACA-compliant plans must cover a defined set of benefits, and preventive services are covered without cost-sharing.
• No lifetime or annual dollar limits on essential health benefits.
• Metal tiers (Bronze/Silver/Gold/Platinum) describe cost-sharing levels on the marketplace/exchange.

KEY CONCEPT — Chapter 9 - Group = one master contract, members get certificates, group underwriting → often no individual evidence of insurability. - Noncontributory (employer pays all) → 100% participation; contributory (shared) → ~75% participation (verify current). - COBRA: continue group health ~18 months, pay full premium; employers with 20+ employees (verify current). - Medicare: A = hospital (usually premium-free), B = doctor/outpatient (premium), C = Advantage (private), D = drugs. - Medicaid = needs-based (income/assets); Medicare = age 65+/disability. - Medigap = standardized supplements with a 6-month open-enrollment guaranteed-issue window (verify current); can't pair with Medicare Advantage. - ACA: guaranteed issue, no pre-existing exclusions, dependents to age 26, essential benefits.

Common Traps — Chapter 9

• Medicare vs. Medicaid. Medicare = age/disability; Medicaid = income/assets (needs-based). The single most common senior-products trap.
• Part A vs. Part B. A = hospital (premium-free for most); B = doctor/outpatient (monthly premium).
• Noncontributory → 100% participation; contributory → ~75%. Don't reverse them.
• COBRA continues HEALTH coverage (not life) and the individual pays the full premium.
• Certificates, not policies, are what group members receive; the sponsor holds the master contract.
• Medigap open enrollment is guaranteed-issue and standardized — memorize the 6-month/age-65 + Part B framing (verify current).
• ACA dependent age is 26.

Check Yourself — Chapter 9

1. Which statement correctly distinguishes Medicare from Medicaid? a) Both are strictly income-based b) Medicare is needs-based; Medicaid is age-based c) Medicare is primarily age/disability-based; Medicaid is needs-based (income/assets) d) They are identical federal programs
2. In group insurance, individual members typically receive: a) A master contract b) An individual policy c) A certificate of coverage d) A prospectus
3. Federal COBRA generally allows an eligible employee who loses group health coverage to continue it for up to: a) 6 months b) 12 months c) 18 months d) Indefinitely
4. Medicare Part A primarily covers: a) Physician office visits b) Inpatient hospital care c) Prescription drugs d) Vision and dental
5. Under the Affordable Care Act, adult children may generally remain on a parent's health plan until age: a) 18 b) 21 c) 26 d) 30

Answers: 1‑c (Medicare = age/disability; Medicaid = needs-based). 2‑c (certificate of coverage). 3‑c (18 months). 4‑b (inpatient hospital). 5‑c (age 26).