Are you a product manager for an insurance carrier concerned that premium dollars are falling through the cracks instead of staying on the books with your company? Are you worried your systems are not up to the task of coordinating all the moving parts involved when insureds are eligible to continue their group coverage post-employment? Are you staying compliant in the ever-changing regulatory environment of the insurance industry that seems too complex and taxing? If you have ever had these thoughts or asked yourself these questions, then understanding the basics of the portability and conversion business is a must for you and your organization.
Portability and conversion are terms that come up frequently when discussing group insurance plans but are often not fully understood at their basic level. The two terms refer to continuation options that allow an individual to keep his/her insurance even after leaving the group. Sounds simple, right? Not so fast.
In general, “porting” coverage will mean an individual is continuing the same coverage he/she had under a group plan but separate from the group and the individual now pays premium directly. This is most often seen with employer-based group life insurance but can also apply to health or other types of insurance products as well as with non-employer groups such as association membership groups. In contrast, "converting" coverage means a person is leaving behind coverage in a group plan and is converting that group plan into an individually owned plan.
Some of the major hurdles porting and converting coverage present are the following:
- Requirement to meet time-sensitive deadlines at nearly every step in the process
- Adhering with all state and federal regulations as well as service level agreements
- Need for flexible billing and administrative systems
Portability and conversion options often present insurance carriers with a multitude of complex, time sensitive processes that can be difficult to manage effectively and efficiently. However, they can also be critical revenue retention tools for an insurance carrier—if done correctly. If managed poorly, the processes can lead to lost premiums, increased operational costs, and potential legal ramifications. Additionally, offering portable or convertible plans to employees and group members is very attractive because it provides an individual the opportunity to continue their insurance coverage when they may need it most.
GLOSSARY
Conversion Privilege- The right of an individual to convert a group health or life insurance policy to an individual policy should the individual’s coverage terminate or reduce in certain specified circumstances. Under such a provision, a physical exam or other evidence of insurability is usually not required.
Plan Sponsor- An employer, member group, association, etc. that offers an insurance plan to its group members. The plan sponsor is not the insurance company that produces the product or plan, it is the organization that offers the plan or product to its members. Plan sponsors own the policy that is offered to its members. Plan sponsors can administer their own plans, however, they often outsource that work to a designated plan administrator like a TPA.
Portability Right- Allows an eligible member of a group plan, who is losing group coverage due to a qualifying event, to continue the original coverage provided, although separate from the group.
If you, or your organization, are dealing with the port and conversion process and looking for additional information, our white paper provides more details. We cover some of the common issues that can arise as well as solutions to those issues. We believe this can be a streamlined process.
