We know that understanding benefits and insurance coverage can be a bit tricky, for administrators and employees alike. One key thing to understand is the Non-Evidence Maximum (NEM). So, let's unpack it together!
This guide will help you understand what an NEM is, how it affects your coverage, and what administrators need to do to manage it.
What is a Non-Evidence Maximum (NEM)?
When it comes to salary-based benefits, you'll often encounter two types of maximums: an Overall Maximum and a Non-Evidence Maximum (NEM).
The Overall Maximum is the highest coverage amount an employee can be granted. Meanwhile, the Non-Evidence Maximum is the largest coverage an employee can get without providing evidence of insurability.
For example, let's say a life insurance benefit is 1x the annual salary with an overall cap of $100,000 and an NEM of $50,000. If a plan member is earning more than $100,000, their coverage would be limited to the $50,000 NEM, unless they can provide proof of insurability. This proof typically comes in the form of a medical statement, similar to what late applicants would use to apply.
How to apply for coverage above the NEM
Every insurance carrier will have an Evidence of Insurability (EOI) form, completed by the plan member and submitted for approval. Depending on the responses, the medical underwriters may request additional information.
If all goes well and it's approved, the plan member will be covered up to the full amount they're eligible for. But just keep in mind, if their benefit calculation based on their salary goes over the overall maximum, the coverage will be capped at this maximum.
And don't worry, if the application doesn't make it through the medical review, the plan member will still have coverage equal to the Non-Evidence Maximum (NEM).
Do employees need to apply to increase coverage above the NEM?
If a plan member doesn't apply, their coverage will match their salary calculation up to the NEM. We think it's super important for everyone to understand how much coverage they actually have versus what they could potentially get.
From there, each individual can make decisions based on their personal situation and needs.
As an administrator managing NEMs in your group benefits plan, you have two important tasks to keep everything running smoothly:
- Make sure to keep all salaries updated with your insurance carrier. A salary change might affect an employee's eligible coverage.
- Keep your employees in the loop! Let them know about their eligibility for coverage above the NEM at the time they enroll and when their salary gets a boost (if applicable). If you need a report on which employees might be eligible for extra coverage, or if you need the application form for plan members, don't hesitate to contact us - we're here to help!