Switching Life or Disability Insurance Carriers? What You Need to Double-Check Right Now!

It is inevitable that in some point in time, schools, cities and counties will have to switch life/disability insurance carriers in order to get better rates, a better plan design or improved customer service. To ensure that no employee falls through the cracks during the transition, here are two important considerations to keep in mind.

Matching Benefits – Is it an exact match to your old plan, to the way you administer benefits and to your contracts?

Ask your agent to carefully review your policy/quote or do it yourself. Determine if there are any differences between the old vs. new plan, no matter how subtle. Is it truly an exact match? A carrier’s standard definition of a benefit may be slightly different than your current policy. Those slight changes can mean a claim will get paid or not get paid. It’s like calling a house blue – is it baby blue or sky blue? Similar definitions are NOT the same definition.  Review the entire policy for discrepancies but pay particular close attention to pre-existing condition exclusions, disability limitations, leave of absence language and life reduction schedules.

•  Pre-Existing Condition Exclusions
  Some carriers add a pre-existing condition limitation to their plan. A pre-existing condition is a medical condition that an employee was treated for before they obtained insurance. Disability due to a pre-existing condition may be excluded for a certain period of time within the policy. A carrier may deny an employee benefits if they become disabled due to a pre-existing condition that they had prior to the new carrier’s coverage. If your previous policy did not have this limitation, it could be a direct conflict of the employment contract.

• Disability Limitations
  Another section you should examine closely is the disability limitations. A disability limitation is a condition or type of injury that is limited in the policy.  The most common types of disabilities that are subject to limitations are for mental/nervous disabilities or drug/alcohol related disabilities.  In some instances there are limitations for self-reported symptoms (for example – fibromyalgia).  Be sure to make sure your old policy matches your new policy in regards to limitations.

• Leave of Absence Language
  Lastly, how do you administer your leave of absence in regards to benefit eligibility?  Do you allow employees on an approved leave of absence to continue benefits; is there a limit on how long an employee can be out on a leave of absence?  Do you have different requirements for different types of leaves (for example:  paid leave of absence, unpaid leave of absence, leave due to sickness/injury, sabbatical leaves, etc.)?  Verifying that your new policy addresses these is important to ensure your employees are covered if they are not actively at work due to a leave of absence.

• Life Reduction Schedule
  The life reduction schedule is an important section to make sure that your new carrier matches your old carrier or more importantly matches what is stated in your employment contracts/agreements.  Life benefits can either have no reductions and terminates when the employee retires or resigns or they will have a reduction in coverage starting at a certain age (for example: benefits will reduce to 65% upon attainment of age 65, will reduce to 50% upon attainment of age 70 and terminates upon retirement).  Having a reduction schedule in your policy helps keep costs down and helps a group’s overall experience.

Reading the fine print is your best way to ensure that your new policy exactly matches the required benefits of your prior plan, the way you administer benefits and your employment contracts/agreements. Any deviation could mean the difference between your employee being covered or denied. Avoid the liability by insuring that your insurance contracts are compliant with your union and employment contracts.

Identify Employees Who Are Not Actively at Work

When transitioning to a new carrier, make sure that you identify all of your employees who are not actively at work and have a complete list handy. Actively at work means an employee that is able to perform all their regular job duties and meet eligibility requirements. Employees that are not actively at work may include those who are out on disability insurance benefit, out on leave/sabbatical or waiver of premium.  Employers should check with the in-force carrier to ensure that these employees are covered and will continue to be covered under this carrier.

Some insurance carriers require employers to complete an actively at work statement, which lists their non-active employees. The statement includes information such as employee’s name, last day worked, return to work expected date and reason for absence. Employers find this statement useful to keep track of which carrier will cover these employees after the transition and to ensure that no one falls through the cracks.

If an employee is omitted on the statement during the transition phase, it could lead to a potential sticky situation where both carriers decline to cover an employee.

For more information on ancillary benefits or changing insurance carriers, contact your NIS Representative.