Advisors, employers and benefits administrators want to provide a benefits package that will attract talent and provide a financial safety net to employees. They also want employees to have the coverage they signed up for when they file a claim. But it can be challenging for an employer self-administering its own benefits plan, particularly enrolling employees and tracking eligibility criteria throughout the year. Has an employee ever filed a claim only to learn they're not covered because of an eligibility issue? Maybe their schedule changed and they didn't work enough hours to qualify for coverage, but premiums kept coming out of their paycheck?
Employers should remember that if the answer is yes, they are not alone. As an insurance provider, we see common administrative pitfalls that employers have faced, causing surprises for their employees at claims time. No one wants this to happen, especially when the employee is already going through life changes due to injury, illness, a new baby, or the death of a loved one.
We mapped out common triggers for problems, such as missing documentation or changes in eligibility, and created tips to help employers avoid these mistakes, which are included below. Many revolve around evidence of insurability (EOI) or staying on top of eligibility criteria. In our poll, we found that 78 percent of employers said it is challenging to stay on top of eligibility requirements throughout the year, and 53 percent have seen an employee experience an unexpected lack of coverage upon filing a claim.
Many of these issues can be addressed by building a periodic check-in schedule for the eligibility of employees and their dependents, as well as managing education and communication throughout the year. You might find that a child dependent is approaching the age of 26 and will lose eligibility for coverage. With this knowledge, the employer can notify the employee to help manage and adjust their benefits.
Premiums are another important item that require close attention. If premiums are being collected without adjusting for a change due to age-banded rates, for example, it could lead to an unwelcome discovery of reduced coverage for the employee and a premium shortfall for the employer. Employers also should know when employees on disability are approaching their 12-month milestones to offer guidance related to life insurance coverage options both before and after reaching the year mark.
Managing around administrative hiccups becomes an easier task when you invite your broker, TPA and vendors to review your plan details, including eligibility, coverage and EOI requirements. When everyone is on the same page and working together, the result is a better experience that helps ensure a smooth claim process down the line.
|10 tips to avoid surprises at claims time
1. Consult your insurance provider about open enrollments During an annual enrollment, employees can enroll and change benefit elections for the coming year, subject to policy requirements such as evidence of insurability (EOI) rules. During approved open enrollments, on the other hand, policy requirements such as EOI might be waived for certain coverage amounts. To avoid surprises at claims time, make sure open enrollments are preapproved by the insurance provider prior to the event and documented in the group policy.
2. Provide EOI applications to late entrants Employees who elect group life coverage after their initial effective date, called late entrants, usually need an EOI approval from the insurance provider before they are covered. This includes coverage for spouses as well. 3. Before starting payroll deductions, check to see if EOI approval is needed Before deducting premiums from an employee's paycheck, confirm whether the employee is required to apply for EOI. Usually, late entrants and employees who elect coverage amounts over the guaranteed issue limit need to supply EOI and are not covered until the insurer approves the EOI application. Deducting premiums before approval will cause confusion and possible problems at claims time.
4. Track employees' hours to make sure they meet minimum requirements for coverage For employees to be covered under a group insurance policy, they usually must meet minimum hour requirements and be “actively at work.” If an employee's work hours drop below the required minimum for coverage, the employee's insurance coverage will terminate. In these cases, stop payroll deductions and premium payments, and for life Insurance, provide the employee the applicable notices for policy conversion or portability.
5. Track the ongoing eligibility of employees' dependents Most policies include eligibility criteria, including age limits and marital status. For example, policies may define a child dependent as under the age of 26. Once that child is older than 26, the dependent life insurance automatically terminates under the policy. If an employee divorces a spouse, the spouse's life insurance coverage automatically terminates under the policy. It is important to have a process in place so that you know when dependents are no longer eligible and can stop payroll deductions and premium payments and provide applicable notices for policy conversion or portability.
6. Track employees' ages in order to collect the correct premiums If there are age-banded rates, employees' rates will increase as they age. In some cases, coverage may decrease as well. It's important to keep track of this information so you collect the correct premiums.
7. Set a review schedule of employees on disability to prepare for the 12-month milestone If an employee is unable to work due to an accident or sickness, most group life insurance policies allow the employer to continue the employee's group life insurance on a premium-paying basis for up to 12 months. For the employee to continue life coverage beyond the 12-month milestone, the employer ha two options: (1) Before 12 months have passed, help the employee apply for waiver of premium; or (2) After 12 months have passed, help the employee convert to an individual policy. Typically, an employee has 31 days from the date coverage terminates to apply for conversion. And, again, remember to stop payroll deductions and premium payments at the end of the 12-month period.
8. Inform employees affected by job elimination about conversion, portability and/or continuation before group coverage terminates Before employees' group life coverage terminates for reasons other than disability, such as losing their job, it's best to let them know about their options as soon as possible so they don't miss deadlines and lose coverage. These options are time sensitive. For example, in most states, conversion rights expire 31 days from the date coverage terminated. Similarly, portability/continuation rights also expire after 31 days for most policies. In addition, once group life coverage terminates, be sure to stop payroll deductions and premium payments.
9. Make sure forms are signed and up to date Before paying a claim, the insurance provider will ask for proof of enrollment and, for life insurance, a signed beneficiary form. Make sure this information is ready and available.
10. Invite your broker, TPA and other vendors to review provider plan details When everyone on the benefits teams understands the details of the plan, including eligibility, coverage and EOI requirements, then everyone can work together to ensure a smooth claims experience for the employer and employees.
Dianna Duvall is vice president, group and voluntary underwriting, Sun Life Financial U.S.
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