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Merritt Personal Lines Manual: The Group Health Insurance Contract

A group insurance policy or master policy is issued to the policyowner - usually your employer, association, union or trust, etc. And if you are covered under the group policy you are issued a certificate of insurance. The certificate lists what the policy covers and explains such things as how to file a claim, the term of insurance and the right to convert from group coverage to an individual policy.

Many of the group health insurance contracts features are similar to the contract features of group life insurance.

Group health insurance is generally subject to experience rating, under which the premium modification factor is determined by the experience of the group as a whole. In contrast, individual policies may be subject to community rating, under which the insurance company's overall experience is adjusted in different areas to reflect variations in local costs for doctor and hospital services.

An employee group policy may be issued to an employer (or to the trustee of a fund established by an employer) where insurance is secured for the benefit of the employees or for persons other than the employer. The employer is the policyowner and establishes the eligible class of employees to be covered under the group policy.

Usually, this classification will include all full-time employees (including the employer). Further, the classification can also specify full-time, salaried, non-union employees. By classifying the employee group in this manner, the employer is legally able to exclude certain groups of employees (part-time, union, etc.) from the eligible class of covered employees. The eligible class of employees may also include retired employees.

An association, including a labor union, must have the following characteristics to be considered an authorized group:

  • have a constitution and bylaws;
  • be organized and maintained for purposes other than obtaining insurance;
  • have insurance for the purpose of covering members or employees for the benefit of persons other than the association or its officers or trustees (in this context, the term "employee" may include retired employees).

A policy may be issued to the trustees of a "trust group" if the fund has been:

  • established by two or more employers in the same or related field;
  • established by one or more labor unions or associations (this is also known as a "Taft-Hartley Trust").

The trustees are the policyholder of the plan which covers the eligible employees. Such plan must not be for the benefit of the employer, union or association. The individuals who may be considered "employees" as defined by this section are the same as those previously listed under Employee Group.

Group health coverages track closely with benefits available under individual coverages. We will discuss them under the headings of disability income, accidental death and dismemberment and medical expense benefits.

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