Lecture 14 Other Group Insurance Benefits Dental Insurance Long-Term Care Insurance Legal Expense Insurance Property-Liability Insurance Voluntary Benefits

Group Dental Insurance Taxation –Same as other medical benefits Employer gets tax deduction for premiums Employee is not taxed on coverage or benefits Restricted coverage –$ /year or $ /lifetime Predictable expenses –Exams, cleanings, fillings Why is it so popular? –60% of all employees –90% of large employers

Group Dental Insurance Examples Cost of plan: $200/year Expected benefits: $150/year (range ) Employee 1: $60,000 salary34% tax rate (F+S) Employee 2: $15,000 salary 18% tax rate (F+S)

Group Long-Term Care Insurance Taxation (starting in 1997) –Employer gets tax deduction for premiums –Employee is not taxed on coverage or benefits (except if per diem exceeds $175 if excess of costs) –Cannot be offered through tax favored cafeteria plan –Cap on deductible long term care premiums (by age) Need for Long-term care –Aging population –Cost of care ($30,000-50,000/year) –Lack of family care –Other policies exclude custodial care Sources of Long-term care –Savings –Medicaid (encourages dissipation of assets) –Life care facilities

Group Long-Term Care Policies Eligibility for favorable tax treatment Eligibility for coverage –Worker –Spouse –Other family members Cost –Age based (starting age) Levels of care –Skilled nursing care –Intermediate care –Custodial care –Home health care –Adult day care

Group Long-Term Care Policies - (cont.) Benefits –Specified dollar amount per day –Increasing benefit levels (if indexed, capped) –Duration Eligibility for benefits –Previously - prior hospitalization –Currently - Activities of Daily Living (ADL) Preexisting conditions Exclusions Renewability –Guaranteed renewable

Group Legal Expense Plans Taxation –Premiums up to $70/year not taxable to employee Authorizing legislation periodically expires Types of plans –Closed panel –Open panel Benefit schedules –Consultation –Preparation of documents –Adoption –Bankruptcy –Defense of civil suits –Juvenile delinquency –Domestic problems –Criminal defense

Group Property-Liability Insurance Taxation –No favorable tax treatment –Employer can deduct premiums, but they represent taxable income to employees –Employee cannot deduct premiums Types of coverages –Auto –Homeowners –Umbrella liability

Voluntary Benefits Employee pays 100% of premiums Reasons for growth –Cost control –Supplementary coverage –Changing demographics –Increased availability Types of products –LifeDisability –Dread disease policiesDental –Prescription drug Vision –Long-term careProperty-liability Underwriting Cost