Group LTD Mess

[insurehound]

I am going to get an ulcer over this Group. I have a group that has a involuntary Group LTD plan (employer pays 100%) that the employer ended up not adding a large number of employees to for several years...ugh!

The employer went ahead and added these folks with the carrier and then the fun began as the bill was very large. This was due to the fact that there were many employees who were not added for several years.

I tried to negotiate with the carrier to give the Group some kind of help on this. Carrier said to fill out EOIs and then they would consider adding the late employees without charging backpremiums.

We submitted the EOIs and the insurance company said no way, who told you to even do this as we would never consider doing this in the first place. Nice.

We then switched carriers to try to avoid paying any of the backpremiums. The carrier who we switched from said, "no way, the client has to pay backpremiums" even after the fact that the group was switched and had no claim activity. They said that had their been a claim, they (the carrier) would have been expected to pay (not sure I believe this) AND that 100% participation is 100% participation.

Is this correct? Can a carrier demand that backpremiums be paid on a Group that is no longer with them?

 

[stuy119]

I am going to get an ulcer over this Group. I have a group that has a involuntary Group LTD plan (employer pays 100%) that the employer ended up not adding a large number of employees to for several years...ugh!

The employer went ahead and added these folks with the carrier and then the fun began as the bill was very large. This was due to the fact that there were many employees who were not added for several years.

I tried to negotiate with the carrier to give the Group some kind of help on this. Carrier said to fill out EOIs and then they would consider adding the late employees without charging backpremiums.

We submitted the EOIs and the insurance company said no way, who told you to even do this as we would never consider doing this in the first place. Nice.

We then switched carriers to try to avoid paying any of the backpremiums. The carrier who we switched from said, "no way, the client has to pay backpremiums" even after the fact that the group was switched and had no claim activity. They said that had their been a claim, they (the carrier) would have been expected to pay (not sure I believe this) AND that 100% participation is 100% participation.

Is this correct? Can a carrier demand that backpremiums be paid on a Group that is no longer with them?

It's not unheard of, but unique in this situation as they weren't aware of the employees even being with the company. Either way, it's a mess and I wish you luck in getting it resolved.

My guess is that the carrier will send your client to collections.

 

[TristanTLC]

I would THINK the best they can do is to send the group to collection. If the group breeched the contract, then the contract is cancelled. If the insurance company decides to continue the coverage without enforcing their own agreement of 100% participation, then that's their fault not your client's. I would advise you to speak with an attorney, but I really don't think the insurance company has much of a case. If the group is gone, what are they going to do? Cancel the policy? Oh wait...... the group is already gone.

 

[insurehound]

Yes, collections was mentioned...

Another question, now that the group has moved to a new company, if those late adds were NOT added to the old plan, wouldn't we be facing possible pre-ex issues if a claim were to happen?

 

[Tri-State]

I would THINK the best they can do is to send the group to collection. If the group breeched the contract, then the contract is cancelled. If the insurance company decides to continue the coverage without enforcing their own agreement of 100% participation, then that's their fault not your client's. I would advise you to speak with an attorney, but I really don't think the insurance company has much of a case. If the group is gone, what are they going to do? Cancel the policy? Oh wait...... the group is already gone.

Collections is the most likely case, with a lawsuit (if premiums are significant enough, though not likely) being the big stick.

As for who breached the contract, it would be the policyholder. Insurance companies are generally understanding about this, and just bill back premiums because they would have been liable, and would have paid any claims for any persons eligible for benefits had the opportunity arisen.

You would expect them to pay the claims, you should advise your client to pay their premiums. Nobody forced your client to buy LTD insurance, they chose to buy it and pay the premium. All the insurance company is doing is billing what the company should have been paying in the first place.

Additionally, now that you've moved companies, you've opened up those employees who were never enrolled to a new pre-existing limitations period. Had you advised the client to pay the premiums, those who were eligible long enough to have satisfied the requirement would be done. Now, with this move, they won't be on the final bill (well, you may have a bill that shows it, but that's a material misrepresentation), and won't be given transfer treatment. You have now exposed someone who should have satisfied their pre-ex to the possibility of their claim getting denied due to being a pre-existing condition. Are you or the employer going to explain that to them should they become disabled and have their claim denied?

 

[insurehound]

Yes, I did advise the client to pay the premium which he will do for that very reason.

 

[leevena]

A couple of things come to mind about this.

Check the carrier contract with respect to participation. I would bet a large pepperoni pizza it does say that everyone needs to participate. Once you provided them with the information that not everyone was participating, and it seems like quite a few were not, they got concerned about truthfullness.

Yes, they could very well be on the hook for coverage if someone presented a claim to them. So to ask for past premium is prudent on their part.

Finally, how could this have gone on for so long? You mention that the new bill was "very large." What was the group thinking? Also, what about you (I assume you are broker) and commissions. Did you not anticipate a certain level of commission and then not notice that it was much less? What about renewal letters, or copies of billing?

If it has not be considered, you may have some liability issues.

Hope you get through this ok.

 

[ABC]

I have had this happen in the past on a life case.

These kind of things occur when the client does not admin a case correctly. This also a sign of a broker not discussing renewals with their clients or having some type of face time to discuss benefits.

If you are going to sell employee benefits you also have to service them.

When it happen to me it really woke me up to what level of service I was providing.