Chapter 12: Medical Expense Insurance as an Employee Benefit

Question 1

Health Insurance

Answer 1

Protection against the financial consequences of poor health

Question 2

Medical expense insurance

Answer 2

Protection against financial losses that result from medical bills because of an accident or illness.

Question 3

Major medical insurance

Answer 3

Major medical insurance plan designed to provide substantial protection against catastrophic medical expenses. There are a few exclusions and limitations, but deductibles and coinsurance are common.

Question 4

Pre-existing-conditions provision

Answer 4

A provision that excludes coverage for a limited period of time for a physical or mental condition for which a covered person in a benefit plan received treatment or medical advice within a specified time period before becoming eligible for coverage.

Question 5

Deductible

Answer 5

The initial amount or portion of covered losses that is borne by the insured, rather than by the insurance company.

Question 6

Common Accident Provision

Answer 6

A provision in a major medical expense contract whereby if two or more members of the same family are injured in the same accident, the covered medical expenses for all family members will, at most, be subject to a single deductible, usually equal to the individual deductible amount.
Carry over provision - Many plans with a calendar-year deductible also have a carryover provision that allows any expenses (1) applied to the deductible and (2) incurred during the last 3 months of the year to also be applied to the deductible for the following year.

Question 7

Coinsurance (medical expense insurance)

Answer 7

The percentage of covered expenses under a medical insurance plan that is paid by the insurance company once a deductible is satisfied. Eighty percent is common.

Question 8

Stop-loss limit

Answer 8

The maximum amount of out of pocket medical expenses that a covered person must pay in a given period (usually 1 year0. After this limit is reached, future copayments and deductibles are waived for the remainder of that period.

Question 9

preadmission certification

Answer 9

A requirement under many medical expense plans that a covered person or his or her physician obtain prior authorization for any nonemergency hospitalization.

Question 10

Second surgical opinion

Answer 10

A cost-containment strategy under which covered persons are encouraged or required to obtain the opinion of another physician after certain categories of surgery have been recommended. if a second opinion is mandatory, benefits are reduced if the second opinion is not obtained. benefits are usually provided for the cost of a third opinion if the opinions of the first two physicians are in disagreement.

Question 11

Extended care facility

Answer 11

A health care facility for a person who no longer requires the full level of medical care provided by a hospital but does need a period of convalescence under supervised medical care. Also known as a skilled-nursing facility.

Question 12

Major Medical Plans “Internal Limits”

Answer 12

Major medical plans contain “internal limits” for certain types of medical expenses.
Although the expenses are covered, the amounts paid under the contract are limited. For example, benefits are rarely paid for charges that exceed what are reasonable-and-customary charges, room-and-board benefits are generally limited to the charge for semiprivate accommodations.

Question 13

Hospice Benefits

Answer 13

Hospices for the treatment of terminally ill persons are a recent development in the area of medical care. Hospice care does not attempt to cure medical conditions but is devoted to easing the physical and psychological pain associated with dying.

Question 14

Basic Characteristics of Managed Care Plans

Answer 14

Basic Characteristics of Managed Care Plans
• Controlled access to specialists and hospitals
• Emphasis on case management, including utilization review
• Encouragement of preventive care and healthy lifestyles
• Sharing by medical care providers in the financial consequences of medical decisions
• Careful selection and monitoring of medical providers

Question 15

HMO’s (Health Maintenance Organization)

Answer 15

Health maintenance organizations (HMOs) are generally regarded as organized systems of health care that provide a comprehensive array of medical services on a prepaid basis to voluntarily enrolled persons or members who live within a specified geographic region. Mainly in network services.

HMOs can be either profit or not-for-profit organizations.

Question 16

Closed-Panel HMOs

Answer 16

In closed-panel plans, members must use physicians employed by the plan or by an organization with which it contracts. Because most closed-panel plans have several general practitioners, members can usually select their physician from among those accepting new patients and make medical appointments just as if the physician was
in private practice.

Question 17

Individual Practice Associations

Answer 17

Many HMOs are formed as individual practice associations (IPAs). This type of plan has more flexibility with respect to members’ ability to choose physicians and physicians’ ability to participate in the plan.

An independent practice association (IPA) is an association of independent physicians, or other organization that contracts with independent physicians, and provides services to managed care organizations on a negotiated per capita rate, flat retainer fee, or negotiated fee-for-service basis.

Question 18

Mixed-Model HMOs

Answer 18

Some HMOs operate as mixed-model plans, a combination of closed panel HMO’s and individual practice associations.

Question 19

Types of HMOs

Answer 19

• Closed-panel HMOs
• Individual practice associations
• Mixed-model HMOs

Question 20

P.O.S (point-of-service-plan)

Answer 20

With a point-of-service plan, participants in the plan elect, at the time medical treatment is needed, whether to receive treatment within the plan’s tightly managed network, usually an HMO, or outside the network. Expenses received outside the network are reimbursed in the same manner as described earlier for non-network services under PPO plans.

POS plans combine elements of both HMO and PPO plans. Like an HMO plan, you may be required to designate a primary care physician who will then make referrals to network specialists when needed.Like a PPO plan, you may receive care from non-network providers but with greater out-of-pocket costs.

Question 21

Benefit Carve-outs

Answer 21

A carve-out is just what the phrase implies: health care programs focused on a specific disease (like diabetes) or service (like prescription coverage) that are “carved-out” of a benefit design. A vendor is paid to provide them, usually for a flat fee.

Question 22

PPO

Answer 22

A preferred provider organization (PPO) is a medical care arrangement in which medical professionals and facilities provide services to subscribed clients at reduced rates. PPO medical and healthcare providers are called preferred providers.
- usually more options (more doctors) than in HMO.