Part II – a Small Business Looking to Do Better
The story starts with a business who engaged us for our Decoder because they asked the simple question, “we know it’s different than it use to be, and we perceive we could do better but we don’t know how to make the right decision.” In the first post, a couple days ago, you learned about the background a little bit. Feel free to review that post below.
Today, we’ll begin to cover details about who is being covered and who is not. It’s very common to have employers who cover individuals that should not be covered. Would you be surprised to know that employers have been known to cover deceased employees, or family members? When we visit with employers we never expect problems but we’re never surprised to find them either.
Job One, Research
Our first job is to research the details about all those covered and all those who are, or were, working for a company. We ask for lists that would show us this information. For instance, tax statements that provide lists of employees and payroll reports that show hours worked plus HR rosters of employees and former employees and other data. The research starts almost immediately and it usually entails asking questions about documentation that’s available that an insurance company would ask to prove the status of an employee or dependent. Identifying problems can be as easy as doing this research.
Our research immediately draws our attention to questions about a former board president who is still covered. In asking questions, it’s obvious there is no current relationship with the former executive. They had been involved and were made promises by the company. As we discuss this with current ownership, no one wants to address the issue with the board or the former executive. We helped solve the problem by including a proper commentary about the liability to both parties for covering someone who should not be covered.
But the former executive had an agreement?
Insurance companies can audit large claims any time, that’s in the small print. If they audit a claim on a former executive, like in our story, and they discover this person is covered it would be bad for both the employer and former employee. Coverage for groups means employees of the group must be covered and individuals who are not employees can not be covered. This is why it’s called group coverage.
So what actually would happen?
If an audit were to occur by the insurance company they would deny the claim of the former employee stating they’re not an employee of the company and not eligible for “group” coverage. This is bad because the former employee and covered individual could use promises by the government to impose upon the employer the need to pay the claim. To keep the story simple, I’ve eliminated all the details and possibilities for how this could happen. The point is, there’s a chance the employer would be stuck paying the claims of the employee without insurance coverage. This is bad for everyone.
When we arrived the former employee had been on the plan more than 10 years. Why this had been left to linger is anyone’s guess.
What was the outcome?
The employer and former employee understood the risk to both employer and former employee. We introduced an agent who could help with individual coverage. We directed them to seek individual coverage immediately. This was completed within a week. As a note about how this worked, ACA makes transition from group to individual possible because it eliminated pre-existing conditions and medical underwriting. In the old days, these two rules made doing what we did much more difficult.
This small adjustment to the rules gave us the understanding to help the employer. Because the Decoder puts all of these facts in writing, it made it much easier for the employer to make the change with confidence. They just had to see it in writing and be able to show the former employee as well. This is the purpose of the Decoder.
If you enjoyed the story, or learned something from it, please let me know in the comment below. Do you have your own insurance story?