Group Disability and Health Insurance
Disability income basics
Short-term disability (STD) and long-term disability (LTD) replace a portion of income, typically 50–70%. Key terms: elimination period (waiting period before benefits), benefit period, definition of disability (own occupation vs. any occupation), and integration with Social Security and workers' compensation to prevent overinsurance.
Health plan structures
Candidates should distinguish indemnity plans, HMOs, PPOs, POS plans, and consumer-directed plans such as HSAs and HRAs. Know network types, referrals, primary care gatekeeping, and coordination of benefits (COB). COB rules determine which plan pays first when a person is covered by two plans.
Concepts to master
- Own occupation vs. any occupation: Own-occupation definitions are more favorable to claimants and often apply only for an initial period.
- Elimination periods: Longer elimination periods reduce premiums.
- Coordination of benefits: The primary plan pays first; the secondary plan pays the remainder up to allowable limits.
- COBRA: Qualified beneficiaries may continue group health coverage for limited periods after a qualifying event, generally at their own expense.
- HIPAA: Portability and privacy (privacy rules) and limits on preexisting condition exclusions.
- Mental health parity: Group health plans generally must apply comparable limits to mental health and medical benefits.
Traps
Questions confuse elimination periods with benefit periods, or own-occupation with any-occupation. Another trap: assuming COBRA coverage is employer-paid. Watch for COB questions involving dependent children and the birthday rule.
Worked example
An employee with a 90-day elimination period and a 24-month benefit period becomes disabled January 1. Benefits begin around April 1 and can run up to 24 months, subject to the plan's definition of disability. If the plan integrates with Social Security, the insurer may reduce its payment by the Social Security benefit received.
Rule of thumb
Shorter elimination periods and own-occupation definitions cost more. For COB, identify the primary plan first, then apply the secondary plan's limits.