Chapter 9

Question 1

Earned Premium

Answer 1

Portion of a premium for which protection has already been given.

Question 2

Unearned Premium

Answer 2

Portion of premium for which policy protection has not been given.

Question 3

Service Area

Answer 3

The primary geographical area of coverage and service provided by a Health Maintenance Organization HMO.

Question 4

Subscriber

Answer 4

A person applying for coverage through a service provider.

Question 5

Insured

Answer 5

A person applying for coverage through an indemnity provider.

Question 6

Classification of Health Insurance Providers

Answer 6

Indemnity
Service Providers
Self Funding

Question 7

Commercial Insurers

Answer 7

Over 800 insurers market health insurance.
They traditionally market a reimbursement type contract that pays directly to the insured.
Offer both individual and group plans.
Some insurers have formed HMOs, PPOs, as well as POS to provide more competitive method of delivering health care. The insurer acts as a third payor who establishes the contractual agreement with the physicians and hospitals.

Question 8

Blue Cross & Blue Shield

Answer 8

Blue Cross and Blue Shield are prepaid plans since plan subscribers pay a set fee, usually monthly, for the services of doctors and hospitals at a predetermined price (negotiated fee).
Blue Cross is a hospital service plan with a contractual agreement with the hospital.
Blue shield is a physician service plan with a contractual agreement with the physicians.
Each local Blue Cross & Blue Shield is an entity operated by a governing board that establishes specific practices for the plan. Individual and group plans are offered.
In most states, the Blues are considered nonprofit and are regulated under special legislature.
Blues traditionally offer benefits in the form of services, not indemnity/reimbursement plans. Payments are made directly to the providers under a contractual agreement, fee for service. Prepaid Service Provider

Question 9

Health Maintenance Organizations

Answer 9

Service Provider
Flat monthly amount on a prepaid basis.
Must use HMO Healthcare providers
No benefits for out of network healthcare providers.
Usually use separate physical healthcare facilities.
Designated Primary Care physician. Exercises more control, and less administrative costs. Encourage routine check ups. Enrollment period is 30 days, not allowed to exclude or eliminate, but they will pay higher premium. Gatekeeper.

Question 10

HMOs

Answer 10

HMOs must operate under both federal and state requirements. Heavily market the employee/employer groups. Any of these groups may be a nonprofit organization.

Question 11

HMO Description

Answer 11

An HMO is regarded as a managed health care system providing a comprehensive array of medical services on a prepaid basis (normally in its own health care facility) to voluntarily enrolled persons (subscribers) living within a specific geographical area (service area) limiting the choice of care providers.
HMOs are sponsored by government, medical schools, hospitals, employers, labor unions, consumer groups, commercial insurers, and hospital-medical service plans.
HMOs emphasize preventative medicine and early treatment with prepaid routine medical exams, stress management and diagnostic screening techniques. This reduces unnecessary hospitalizations (hospital coverage includes inpatient laboratory work and x-rays).

Question 12

HMO Description

Answer 12

Most are structured as profit, but some may be classified as not for profit.
HMO members may be required to pay a small copayment for basic health care services and a larger copayment for alcohol and drug rehabilitation.
HMOs are deemed to be both a health care financing and servicing mechanism.
Principal objective is to reduce medical expenses by: Preventative routine checkups
Reduce unnecessary hospital admissions.
Reduce the average number of days per hospital visit.
Reduce duplication of benefits
Save on administrative costs.

Question 13

HMO Description

Answer 13

Open or Closed Panel
Open panel means the doctor can work with anyone, including HMO members.
Closed panel means doctor can only work with HMO members.
HMOs are required to provide basic health care services including the usual physician, hospitalization, laboratory, x-ray, emergency and preventative services and out of area coverage. Other supplemental benefits such as medical equipment, dental care, psychological, optical, physical therapy, chiropractic services, and pharmaceuticals are optional. Charges for convenience items (private rooms, televisions) are at the expense of the insured.
After an HMO has been in operation for 24 months, it may have an annual open enrollment period of at least 1 month during which it accepts enrollees up to the limits of its capacity.
HMOs provide payments to member hospitals on a predetermined basis.
Excluding high risk subscribers is not allowed, they may be charged a higher premium.
For emergency care, the HMO pays for the necessary services at the nearest emergency room.

Question 14

Three types of HMO Models

Answer 14

Group Model
Staff Model
Independent Practice Association Model

Question 15

Group Model

Answer 15

Under this arrangement, the HMO contracts with an independent medical group that specializes in a variety of medical services to provide those services to HMO subscribers.
HMO pays the medical group entity, not the individual service providers. The medical group itself chooses how to pay its individual physicians, all of whom remain independent of the HMO rather than becoming salaried employees.

Question 16

Staff Model

Answer 16

Contracting Physicians are paid employees working on the staff of the HMO. They generally operate in a clinic setting at the HMO’s physical facilities. As hospital services are required, staff doctors and HMO administrators arrange for these services. Unlike the group model, practitioners in the staff model are under no financial risk. They are employed by the HMO, and the HMO corporation takes the risk.

Question 17

Independent Practice Association Model

Answer 17

This model gives HMO members maximum freedom of choice of physicans and locations because the HMO is allowed to contract separately with any combination of individual physicians, medical groups or associations.
In this model, there is no separate HMO facility. Physicians operate out of their own private offices and their HMO patients may be individuals the physician was already attending.
Payment to the physicians is fee for service. Fees are negotiated in advance.
Gatekeeper, not doing so will cause claim to be denied.
Fee for Service system, a gatekeeper is paid a fixed per head fee per month no matter how many patients are seen. The Primary Care Physician in consultation with the specialist and the covered person, standing referral for up to one year or longer, when the consultation between the time period necessary for proper health care.

Question 18

HMO Cont.

Answer 18

Agreement does not prohibit collection of copayments, supplemental charges, or fees for non covered services delivered on a fee for service basis.
Each subscriber is entitled to receiving an individual contract and/or evidence of coverage.
Name and Address of HMO
Telephone Number of HMO
A toll free or collect phone number within the service area, for a calls to the HMO without charge.
Coverages, co-payments, and effective date of coverage of the HMO.
When a subscriber utilizes medical services outside the HMO, the HMO will not pay for any of the expense unless prior approval or referral is on file with the health care manager.

Question 19

Preferred Provider Organizations PPOs

Answer 19

Fee for Service Basis
Anyone can establish a PPO, including HMOs. Predetermined rate. Perform services on their own fees. Fees for services rendered compensate doctors.

Question 20

PPOs

Answer 20

PPOs are an arrangement under which a selected group of independent hospitals and medical practitioners, in a certain area, agree to provide services to subscribers at a prearranged cost.
The contracting agency or organizer of PPO might be a traditional insurance company, Blue C/BS, local group of hospitals, local group of physicians, an existing HMO, large employers, trade unions, Even Medicare part C can operate. Always fee for service.
As a general rule, members have more choices with a PPO than and HMO. No claim forms necessary to be completed, only an ID card is necessary for services.
If a participant opts to utilize a provider other than a preferred provider, the PPO usually pays a reduced amount and the individual must pay the balance. Differ from HMOs in that they don’t have separate physical facilities like HMOs do. PPOs don’t have federal and state regulations like HMOs do.

Question 21

Self Funded Plans

Answer 21

Insurance Company
Administrative Services Only - ASO
Minimum Premium Plan - MPP
Third Party Administrator

Question 22

Modified Fully - Insured Plans

Answer 22

Premium Delay Arrangements
Reserve Reduction Arrangements
Retrospective Rating Arrangements

Question 23

Premium Delay Arrangements

Answer 23

Allow employers to defer payment of monthly premiums by lengthening the grace period to enable themselves to have continuous use of a portion of the premium for other purposes. The portion of the premium that is available for other purposes is approximately equal to the claim reserve for medical expense coverage. In other words, the employer can potentially earn a greater return by investing delayed premiums than accruing interest on the reserve claim. If a premium delay arrangement is terminated, the employer is responsible for paying the delayed premium; however the insurer is legally responsible for paying all claims incurred prior to termination even if the employer fails to pay the delayed premium.

Question 24

Reserve-Reduction Arrangements

Answer 24

Under this arrangement the employer is allowed to retain other purposes on amount of the annual premium that is equal to the claim reserve. This arrangement is generally allowed only after th efirst year of issue to establish a more accurate pattern of what claims and reserves are likely to be. Any amounts retained by the employer are payable to the insurer if the plan is terminated.

Question 25

Retrospective Rating Arrangements

Answer 25

With this arrangement the insurer charges the employer an initial premium that is less (up to 10% less) than would be justified by the expected claims for the year. If claims exceed the expectation, the employer would have to pay any additional premium at the end of the year. Since the employer would have to pay any additional premium, the advantage of the arrangement is the employer’s use of the funds during the year.

Question 26

Partially/Fully Self-Funded Plans

Answer 26

The employer provides the funds to make claim payments in part or in total for their employees.  
Variants to employer self-funding are:
Administrative Services Only (ASO)
Minimum Premium Plan (MPP)
Third Party Administrator (TPA)

Question 27

Administrative Services Only (ASO)

Answer 27

An insurer provides claims forms, administers claims, and makes payments to providers, but the employer provides the funds.

Question 28

Minimum Premium Plan (MPP)

Answer 28

The insurer administers the plan while the employer is self-insured to a specified amount. The employer has a stop-loss policy with the insurer; after the limit has been reached, the insurer pays the claim over and above the stop-loss up to policy limits.

Question 29

Third Party Administrator

Answer 29

A TPA provides administrative services for employers. It acts as liasion between the insurer and employer in certifying eligibility, processing claims, etc.
Know that labor unions, fraternals, and co-ops may opt for a self-insured medical and disability Plan.

Question 30

Other Types of Health Care Providers or Plans

Answer 30

Point of Service - Medical Expense Policy and HMO. Up to limits by going outside network. Higher copayment, and deductible. And coinsurance.

Question 31

Point of Service

Answer 31

Plans combine medical expense and HMO benefits. If the insured goes outside the network for medical services, the benefit is paid from the medical expense portion of the plan with very high deductibles and copayments due. If the insured stays in network, benefits are paid as an HMO. POS plans were developed to enlarge the number of providers over the HMO Plans.

Question 32

Other Types of Health Care Providers or Plans

Answer 32

POS
Surgicenter
Urgent Care Center
Skilled Nursing Facility
Home Health Care
Tri-Care
Consumer Driven Health Plans (CDHP)
Exclusive Provider Organization
Dual Choice

Question 33

Surgicenter

Answer 33

A facility where outpatient surgery is performed for those patients that require general anesthesia but are not required to stay overnight.

Question 34

Urgent Care Center

Answer 34

A facility, usually staffed 24 hours a day and 7 days a week, where a patient can receive acute, but non-life threatening, medical treatment without an appointment.

Question 35

Skilled Nursing Facility

Answer 35

A facility for patients that no longer require hospitalizations but are not yet able to care for themselves at home.

Question 36

Home Health Care

Answer 36

For patients that are at home but cannot fully provide for all their needs. Often this care is provided by a visiting nurse or person other than a physician.

Question 37

Tri-Care

Answer 37

Tri-Care is primarily for non-active duty military members. There are numerous plans now available, depending on the member’s service status, such as active duty, National Guard, Reserves, retired, etc. The three main plans are Standard, Prime and TriCare for Life. As long as the person is on active duty, he/she has no out of pocket expenses for treatment at a military medical facility.

Question 38

Standard Tri-Care

Answer 38

Requires no premium, but does require a $12 co-pay for office visits and a 25% co-pay for procedures.

Question 39

Prime Tri-Care

Answer 39

Requires a premium, but has no out of pocket expenses for tests, operations, etc. as long as a primary care manager or a Tri-Care approved referral is used. There is an $11 per day charge for hospitalization.

Question 40

Tri-Care for Life

Answer 40

Serves as second insurer for those on Medicare Parts A or B. Medicare will be the primary payor and TFL will be secondary. There are no enrollment fees but member must pay Medicare Part B Premiums.

Question 41

Consumer Driven Health Plans

Answer 41

CDHP - Plans that establish health spending accounts into which employers contribute pretax dollars to be used for health care expenses. These include, Medical Savings Accounts, Health Savings Accounts, Health Reimbursement Arrangements, High Deductible Health Plans, CDHPs allow consumers to customize their benefits and provider networks.

Question 42

Exclusive Provider Organization (EPO)

Answer 42

A type of PPO where subscribers use particular preferred providers as opposed to a choice of a variety of providers as under a PPO> Subscribers see a primary care physician who monitors their care and makes referrals to a network of providers.

Question 43

Dual Choice

Answer 43

This term has more than one application. Primarily, it allows an employer to offer two health plans and the employee may select the plan best suited for him/her. This is usually a choice between HMO and PPO, or an HMO and a POS. The employer will typically pay a portion of the premium in these plans, and the employee will pay the balance.

Question 44

Dual Choice

Answer 44

HMO/PPO, HMO/POS
An employer may pay for the lower cost plan and employees may buy up to the more expensive plan.
An employer may pay a set amount per month per each employee.
An employer may charge all employees the same amount and pay the balance, regardless of the plan regardless of the plan each employee selects.
Dual Choice is also for alternative medicine in the first stage. Should the alternative treatment turn out to be less effective, patients have the option to switch to conventional treatment in the second stage.