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Employer Bulletin

State Agencies and Local Life Insurance Employers
Vol. 21, No. 3
April 5, 2004

Group Insurance Board Approves Changes to Living Benefits Provisions

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 eliminated.

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 For questions regarding Living Benefits, contact Marcia Blumer, (608) 266-2640 or


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