State Agencies and Local Life Insurance Employers
Vol. 21, No. 3
April 5, 2004
Group Insurance Board Approves Changes to Living Benefits
The Group Insurance Board (GIB) recently approved changes to the
Living Benefit provisions of the Wisconsin Public Employers (WPE)
Group Life Insurance program to ensure that they comply with the
Health Insurance Portability and Accountability Act (HIPAA).
The provision of living benefits to the terminally ill under the
WPE group life insurance policy currently meets the HIPAA requirements
for exclusion from income tax and will not change. However, the
benefits that are payable to the chronically ill under the confinement
or hospice options do not meet the HIPAA requirements and will be
HIPAA generally classifies individuals receiving services under
this type of arrangement into two groups: those who are terminally
ill and those who are chronically ill. Terminally ill individuals
are those who have been certified by a physician as having an illness
or physical condition which can reasonably be expected to result
in death within a specified period of time.
Chronically ill individuals are those who are unable to perform
at least two activities of daily living and are receiving qualified
long-term-care services but who are not certified as terminally
ill. Payments made to chronically ill must be to reimburse qualified
living expenses. Because there is no program in place to monitor
appropriate payment of such qualified expenses, the WPE life insurance
program is not in compliance with HIPAA.
By having the non-compliant payment option for the chronically
ill included in the policy with the terminally ill benefit, there
is a risk that all living benefit provisions may be denied exclusion
from income tax. To avoid the risk of non-compliance, the payment
option for the chronically ill has been removed from the Living
Benefits provisions. Please note that this change does not preclude
someone who is terminally ill and using hospice care from taking
advantage of this living benefit.
Attached is a revised Living
Benefits brochure (ET-2327). If you need more brochures, please
contact the forms request line of the Supply and Mail Services Section
at (608) 266-3302. You may also download the brochure from the Publications
page of our Internet site at http://etf.wi.gov. For questions regarding
Living Benefits, contact Marcia Blumer, (608) 266-2640 or firstname.lastname@example.org.