Are Your Group Insurance Rates Attained Age or Issue Age?

Most employees don't realize how the rates work on the group insurance programs they sign up for. How these rates are structured have a big impact on them down the road. There are two types of group insurance rates - attained age rates and issue age rates. In this article I want to walk you through how these rates differ and why it's important.

Let's start first by looking at a sample age band to see how these rates are presented to employees.

A Sample Age Banded Chart

Whether your group insurance rates are attained age or issue age, they will appear as age banded rates. The age bands will be in five or ten year increments. A five year age band will look something like this chart of made up critical illness rates I've listed below:

• Critical Illness Coverage
• $5,000 Benefit
• ------------------
• Weekly Rates
• ------------------
• <25:     $0.99
• 25-29:  $1.05
• 30-34:  $1:75
• 35-39:  $2.35
• 40-44:  $2.80
• 45-49:  $3.87
• 50-54:  $4.93
• 55-59:  $6.25
• 60-64:  $9.65
• 65+:   $13.30

If you are interested in purchasing this $5,000 critical illness insurance benefit, the first step is the same for either type of group insurance rate.

Let's say I am 49 years old and I decide to enroll. Since I haven't turned 50 yet, I'm still in the 45-49 age bracket. My weekly cost according to the bracket would be $3.87 per week.

A lot of employees would simply look at the rate and decide if they could afford it and leave it at that - especially if they don't see a chart that might make them think to ask if the rates increase later or stay the same.

The Difference Between Attained Age Rates And Issue Age Rates

After I've signed up for my critical illness benefit, I'll want to know what my rates might be in the future. In order to find out, I'll need to know whether the rates are attained age or issue age.

Here's a breakdown of the difference in how the rates work for attained and issue ages:

• Attained age rates Attained age rates increase as you get older and move into the next age band. In my example above, next year, my rate would increase from $3.87 per week to $4.93 per week for the same coverage (assuming no changes in rate). When I turn 55, 60 and 65 my rates would continue to increase.
• Issue age rates With issue age rates, I get to always stay at the age of 49 in the chart. That means that my rate that starts at $3.87 per week would be the same next year. Again, that's keeping things simple and assuming the rates would stay the same.

Given a choice between the two, which would you choose? It would make the most sense to be able to choose issue age rates if they are available to you.

Attained Age Rates Price Employees Out Of The Plan

On attained age plans, eventually the rise in rates prices employees out of the plans they got when they were young. While I don't mind this with a product like group term life insurance because you can alway lock in some permanent life insurance that will never change in rate, I'm not as big a fan of critical illness plans that use attained age rate structures.

That's because you'll be tempted to leave the plan as the premium goes up. If employees ask what happens to the rates after the sign up, they might not even participate in the first place.

Promote Issue Age Rates If You Have Them

Employees, especially your younger ones, need to know how great issue age rates are. I recently offered an issue age life insurance plan and encouraged all of the younger employees to take the full guaranteed issue of $100,000 because the rate was so cheap.

Once I explained why it was so important to them, and that they locked in their age, most of the employees I talked with understood the value of it. Had I never explained how the offer worked, many would have likely passed on the offer.

Remember Rates Don't Always Stay The Same And Carriers Can Change 

It's easy to look at the rates above and think they guaranteed. Remember though that group insurance rates can change based on experience. So unless you read otherwise, realize that even if you can lock in your age, your premium might fluctuate some over time.

• REMEMBER: Each group insurance plan works independently of the others. This means you could have issue age rates on a critical illness plan and attained age rates on the life insurance plan. Don't assume just because one plan is one way that they are all the same. You have to check.

Also, keep in mind if you are an employee, that if you have issue age rates this enrollment, there's no guarantee you'll have the same offer next year. Since these are group plans, you don't control what's offered so you have to pay attention at each enrollment.

If you are an employer looking at plans from year to year, you want to think carefully before replacing an issue age plan.

Conclusion

The rate structure on group insurance plans is different from company to company. Whether you are an employee or the person responsible for implementing your employers group benefits, you'll want to ask whether your group rates are attained age or issue age.

This will help you better understand what will happen to your rates down the road.

Let me know what you think about attained age rates vs issue age rates in the comments below.

Why It's Not Always Easy to Buy Life Insurance on Your Own

Many employer groups tell me that if their employees want permanent life insurance they can just go buy it on their own. The problem is that many employees can't qualify for life insurance because of their medical history or for other reasons (like being a pilot or a race car driver for example).

In this article, I wanted to talk about the process you have to go through in order to buy life insurance on your own and why my eliminating these requirements is a big deal to your employees.

When you decide to buy life insurance, your first step is usually to contact an insurance agent. This might be the person that does your auto insurance, a financial advisor or a good friend.

Whoever you contact will ask you a few basic questions like how old you are, whether you use tobacco, how much life insurance you want and what type.

Once those basics are covered, the agent will usually tell you how much you can expect to pay for a policy. This is called the premium.

Your "Estimated" Premium

At this point, whatever premium you are told is an estimate. The actual cost of your policy will be determined by the underwriting process. When it's completed, you'll be told the actual premium if you qualify.

This premium will be based on what the insurance company considers appropriate for your current health status.

So if you have high blood pressure, this will be a rate that people with high blood pressure would get. The important thing to remember here is that you might pay more than others based on your health. It also means you might get turned down if the insurance company doesn't like what it finds out about your health.

This is important to know up front because a lot of agents will give you a premium for people that are in excellent condition. But if you are not in excellent condition, that's not the rate you will get if you do get approved. This means you might get quite a surprise when you find out the actual rate.

So how do they determine the rate you will get?

Eight Underwriting Requirements You Might Need To Do To Buy Life Insurance

After you get a ballpark figure of what your premium might be, it's time to ask the insurance company for a policy and find out exactly what the insurance company needs to make you an offer for life insurance.

Every insurance company has different requirements. The amount of life insurance you want along with how old you are will determine what's required.

In general, here is a list of eight things you might need to do to find out if you can get a life insurance policy from that company.

1. Complete an application The first step is to apply. You apply by filling out an application. One of the life insurance applications I saw recently had 42 pages in it's life insurance kit. Of those, 12 pages were considered part of the application. Most of the time, your agent will help you fill out the application. In this application, there are lots of questions. The basics like who you are, how old as well as where you work are in there but there also questions about your activities, your health and other financial questions. Sometimes an application is all you need to complete for the insurance company to let you know if they can give you a policy.
2. Attending physician statements (APS) As part of the application, the insurance company may request information from your doctors to find out what medical conditions you've been treated for as well as what kind of medications you might be on.
3. Motor vehicle report A motor vehicle report will let the insurance company know how risky a driver you are. Do you have a number of speeding tickets or DUI's? This is information the insurance company will want to know.
4. Para-med exam A para-med exam is when someone comes out and sees you specifically to satisfy certain medical requirements. These will be the detailed questions about your health that you might have answered in the application. You can expect to be weighed, your blood pressure checked along with other medical requirements I've listed below.
5. Blood and urine During your para-med exam, you may be asked to provide blood and urine samples. These samples will provide the insurance company with lab results that can reveal things like high cholesterol, whether you smoke or have drugs in your system.
6. Electrocardiogram (EKG) Depending on your age, you might also have to get an EKG to find out if your heart is working properly. 
7. Inspection reports Insurance companies can also request inspection reports. These reports can detail more information about your lifestyle. If it's determined that you like to race cars or do other hazardous activities that you might not have revealed on the application, the insurance company can find out with reports like these. If you have ever seen the movie "Along Came Polly", you saw this process in action.
8. Any thing else the insurance company might ask for An insurance company can ask for other things as well. The higher the amount of insurance or the older you are, the more requirements you can expect. This might include a cognitive test for example or detailed financial records.

The list above is a what could potentially be requested. Your insurance agent will let you know what is needed to make sure it's completed.

Once these requirements are met, you'll receive an offer from the insurance company either at the premium you were told, at a higher amount or in some cases a lower amount. 

You might also be declined for the life insurance you applied for.

Your Doctor and Your Insurance Company Look At Your Health Differently

I have found that if you ask someone if they have any health issues, many will say no. But when you start asking questions, you find out they've had a heart bypass surgery and a pacemaker put in. 

I think this happens because our doctors minimize our conditions because they know they can be managed with medications. It also makes us feel better. People will tell me, well yeah, I have this condition or that condition but it's under control.

Keep in mind that insurance company looks at you differently than your doctor. They are putting real money on the line that they have to pay contractually. They don't take the responsibility lightly.

Imagine for a moment that you were the insurance company. You'd certainly understand that most people have a hard time taking care of themselves the way the should and if it was your own money on the line, you'd be a lot more conservative too.

Conclusion

Many of the decision makers I talk with are healthy. They haven't experienced being charged more than other people or worse being turned down for life insurance.

But in all of these employer groups, I know that many employees would benefit greatly from getting the above requirements waived so they could get permanent life insurance.

If you are a decision maker at an employer group, step back and think for a moment about employees you know personally who have chronic conditions like asthma, high blood pressure, diabetes, heart problems or a number of other medical conditions.

And if you can't think of anyone specifically, have a look at your health insurance premium and ask yourself why is the premium so high? That's because there are employees in your group using the health insurance to get treatment for those conditions.

Those are the employees that you can help with my assistance.

If you have any questions or comments, let me know in the comments below.

How Do Pre-Existing Condition Limitations and Exclusions Work?

A pre-existing condition limitation period or an exclusion is a clause in an insurance contract that an insurance company uses to avoid paying for conditions you had before you were covered under a new policy. Since employees are often confused by how these clauses affect them, I wanted to talk about what pre-existing condition limitations and exclusions are in insurance policies and how they work.

The passage of the Affordable Care Act, which doesn't allow insurance companies to turn people down because of a pre-existing condition for health insurance, has led people to believe that this also prohibited insurance companies from having any pre-existing condition limitations or exclusions in all policies.

But, that's not the case.

The Affordable Care Act only applies to pre-existing conditions related to being approved for a health insurance policy. It doesn't apply to other forms of insurance such as disability income insurance or critical illness insurance which both routinely contain these clauses in their policies. It also doesn't apply to life insurance policies which might be offered at work that require underwriting.

Pre-existing conditions, or "Pre-Exes" as they are called in the insurance business are alive and well in other types of policies.

What this means is that a pre-existing condition can affect whether you are approved for these other types of policies or if you are approved, whether you will receive payment out of a policy on claim related to a pre-existing condition.

Once you are approved for a policy, insurance companies deal with pre-existing conditions in one of two ways. Those are:

• Pre-Existing Condition Exclusion An exclusion prevents any payment from a policy due to a pre-existing condition. As an example, a critical illness policy I looked at recently listed cancer as one of its covered conditions. However, if you had previously already had cancer, then the policy would never ever pay for cancer if you got cancer again. It would exclude cancer. However, while it might exclude cancer, it might still pay for a heart attack, or any other covered condition, it you never had that condition before (subject to any pre-existing condition limitation).
• Pre-Existing Condition Limitation A pre-existing condition limitation prevents payment from a policy if a claim due to pre-existing condition if it happens during a certain window of time - like 12 months. An example would be if you a history of heart problems and had a critical illness policy that covered heart attacks and you had a heart attack in the first 12 months - then no payment would be made.

So, a pre-existing condition can either be excluded for the life of the policy or only for a certain period of time.

The Pre-Existing Condition Limitation Look Back Period

Some policies have two components to a pre-existing condition limitation clause. The first component is a look back period. The second component is the length of time the limitation lasts.

A look back period is a period of time before you took out a policy that the insurance company will look back in time at to see if you had a pre-existing condition during that time period. If you didn't have the pre-existing condition during the look back period, but some time before that, then the pre-existing condition limitation would not apply.

In the insurance industry, we toss around these terms all the time. So we might say, hey, what's the pre-ex on this policy. The answer might be - it's a 12/12.

A 12/12 pre-existing condition means that if you have a claim in the first twelve months, the insurance company will look back 12 months before you started the policy to see if you had a pre-existing condition that might have caused it.

A pre-ex is written in the form:

Look back period/Limitation period

You'll find the most common pre-exes are 3/12, 6/6, 6/12 and 12/12.

Should I Buy A Policy That Has A Pre-Ex Clause In It?

A lot of employees when you first tell them about the pre-existing condition limitations or exclusions will often end the discussion there, but that is not always wise. In particular when a guaranteed-issue offer is on the table.

A guaranteed issue policy means there are no medical questions and you can just sign up for the policy. While I'm not a fan of a total exclusion of a pre-existing condition, a limitation period is reasonable and preferred to being declined for a policy.

A limitation period often allows insurance companies to expand the offer to a larger group and reduce or eliminate underwriting requirements which is a good thing.

As long as you understand the pre-ex limitation, if you can get a guaranteed issue offer that limits the time period on claims for pre-existing conditions and you get through the time period, the pre-existing condition limitation no longer applies.

As always, you've got to read your contracts to see exactly what the terms are for the policy you are looking at.

5 Types of Insurance Underwriting in the Workplace

When I work with employer groups, one of the things that decision makers often suggest is that if employees want life insurance that they can just go down the street and get it on their own. The problem is that getting life insurance is not like going to a store and buying a television. Anyone with the money can buy a TV, but money alone won't get you life insurance. You have to be approved. That approval process is called underwriting.

The problem with the underwriting process is that not everyone can be approved. Individuals with a history of critical illnesses such as cancer, diabetes, and heart problems or even with less serious conditions like high blood pressure can be turned down or charged an extremely high premium if they want the coverage. Often it's more than they want to pay.

This means that many people can't get the life insurance coverage they want and need on their own.

In this article, I wanted to go over the types of underwriting and how each one works so you can familiarize yourself with what underwriting is all about.

1. Full underwriting Full underwriting is usually a complete medical questionnaire along with a medical exam. This is the kind of offer your employees can typically get "on their own". Again, this kind of underwriting is what all employees have available to them through any insurance agent and if they have any medical problems, they might be out of luck.
2. Simplified Issue Simplified issue means that in order to qualify for coverage, the person would have to answer a medical questionnaire but not undergo a medical exam.
3. Conditional Guaranteed Issue Conditional guaranteed issue means the underwriting offer is conditional to the answers to a small number of medical questions.
4. Contingent Guaranteed Issue Contingent guaranteed issue means that an underwriting offer is contingent on the answers to a small number of medical questions PLUS another action, like also buying a policy on a family member. An example might be that a spouse can get coverage but only if they haven't been hospitalized PLUS the employee has to buy a policy as well.
5. Guaranteed Issue Guaranteed issue means there are no medical questions. This is ideal for a person with a history of medical problems. The reason? They don't have to disclose them and they are guaranteed a policy.

My guess is that you can probably think of employees that have medical problems. After all, there's a reason that health insurance premiums are so high. And, those employees are the ones who NEED and who would benefit the most from guaranteed issue.

An employer group is at an advantage over an individual because it can use the group's "buying power" to negotiate a guaranteed issue life insurance offer for their employees. This would allow an individual who wouldn't qualify on their own for insurance an opportunity to get it though their employer.

And for many employees, this is a true benefit they can't get anywhere else unless you as the employer help them get it.

But while an employer group can negotiate a guaranteed issue offer for their employees, that doesn't mean there are not any underwriting requirements in order to get it because there are. Since the insurance company is taking on people they wouldn't normally insure, that's a big risk. In exchange, they usually have some stipulations in order to make it available.

I'll go over those underwriting requirements in another article, but for now, I just wanted to cover the types of underwriting that an employee can get either on their own with the help of their employer.

How to Get a (Great) Guaranteed Issue Offer for Your Employees

As I discussed in my types of underwriting offers employees can get at work article, employees just can't go to their insurance agent and get life insurance without any medical questions. In order to get a policy, they have to go through what is called the underwriting process. If they have a history of any medical problems, they will either get turned down or have to pay a much higher premium than someone who doesn't have any medical problems.

An employer group is in a great position to negotiate insurance for their employees without any medical questions and to get the same rate for all employees. The ability to get medical questions waived is the real "benefit" of insurance provided through the employer.

So why is it that an employer group can negotiate this kind of offer for their employees and employees just can't walk in and get it on their own?

Why Do Insurance Companies Waive Medical Questions For Insurance Purchased At Work But Not When Purchased Outside Of Work? 

There are two reasons why insurance companies will eliminate medical questions when insurance is purchased at the workplace.

1. Spreading the risk The first reason reason is that the employer group can help the insurance company spread the risk of insuring those with medical problems by also helping those who don't have medical problems.
2. Payroll deduction The second reason is because they know if employee's pay their premiums through payroll deduction, the chances premiums are going to get paid is much higher than if employee's pay it any other way. After all, there is a reason why taxes are also collected this way.

Whenever I work with an employer group, I basically have to negotiate two things with the employer. One is the collection of premiums through payroll deduction and the other is getting the offer heard by the employees. While both are sometimes significant hurdles to cross with an employer, getting the offer is heard is the more challenging of the two.

Employer groups often think that just because they ARE an employer group, that the mere fact they are a group should be enough to get guaranteed issue for their employees. But it's not. A guaranteed issue offer's most important component is insuring that risk is spread across the whole group of employees - not just the unhealthy ones.

Two Ways Insurance Companies Spread Risk Across Employees

In order to insure this happens, insurance companies will provide guaranteed issue using one of two methods. Those are:

1. A participation requirement Insurance companies will waive medical questions if a certain percentage of the eligible employees purchase coverage. A common participation requirement is a 20 percent participation. In that case, if 20 percent of the eligible employees sign up, then all employees get coverage regardless of health. If less than 20 percent of the employees sign up, then either no one gets coverage or only the healthy employees do.
2. A presentation requirement Insurance companies will waive participation requirements and waive medical questions if they know that all employees will at least hear the guarantee issue offer.

Of the two methods, a presentation requirement is the best method for getting guaranteed issue because I can not only get the medical questions waived, but I can also eliminate the requirement that a certain number of employees have to buy the insurance as well.

This is a key point. The reason is because employees need to know any offer presented to them will be backed up and followed up on. Otherwise, if it isn't, everyone looks bad. Nothing is more disappointing to an employee who has health problems than finding out they can't have insurance because enough people didn't buy coverage. You can't let that happen.

Access To Employees In A Face-To-Face Enrollment Secures The Best Underwriting Offer For Your Employees

But the insurance company also can't promise everyone they'll get a policy without any kind of consideration in return. That consideration is making sure that risk is spread across the greatest numbers of employees. When everyone at least hears the offer in a face-to-face enrollment, this facilitates that.

When risk isn't spread, the quality of offers goes down for everyone in all groups. But when risk is spread properly, the best possible offers show up. And the bottom line is that's what you want for your employees, the best possible offers - especially for your employees with medical problems.

So the tricky part is fulfilling requirement number two - spreading the risk - with an underwriting process everyone can live with it. And that's where I come in, because I am very skilled in helping make sure that can happen in the best possible way and therefore getting the best possible offer for your employees.

If you have any questions, let me know in the comments or feel free to contact me.