Chapter 9: Medical Expense Plans and Concepts

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 a premium for which policy protection has not yet 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.

**HMOs and PPOs serve subscribers

Question 5

Insured

Answer 5

A person applying for coverage through an indemnity provider.
**Mainline insurance companies serve insureds

Question 6

Major classifications of plans include:

Answer 6

• Indemnity (Reimbursement) Plan
• Service Plan
• Self-Insured (Self-Funded) Plan

Question 7

Indemnity (Reimbursement) Plan

Answer 7

The insured can choose any doctor or hospital without referrals or a primary care physician. The plan requires the insured to pay up front for services, and then submit a claim for reimbursement. Insurer will pay benefits directly to the insured as specified in the policy, up to the amount of expenses incurred. Indemnity plans are generally marketed through commercial insurers.

Question 8

Service Plan

Answer 8

The plan pays benefits directly to the providers of health care rather than as a reimbursement to the subscriber. Plan participants are called subscribers and pay a premium or subscription fee. Service plan providers include Blue Cross and Blue Shield. Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPO’s), and Point of Service Plans (POS). The plans can be prepaid or have a contractual agreement with a healthcare provider to accept a negotiated fee for services.

Question 9

Self-Insured (Self-Funded) Plan

Answer 9

A plan offered through employers, associations, or unions who pay claims out of their own funds instead of funding claims through an insurer.

Question 10

Blanket Payment

Payment Structure Comparison

Answer 10

Maximum dollar limit set, with no itemizing of costs, used for groups covered under a blanket policy for a specified period or event.

Question 11

Scheduled Payment

Payment Structure Comparison

Answer 11

A health plan with limits for what will be paid for covered expenses. These plans are most associated with covering day-to-day losses based on a specified or flat dollar amount. Scheduled benefit plans are not designed to cover catastrophic losses and have limited annual benefits.

Question 12

Cash or Indemnity Payment (Hospital Income)

Payment Structure Comparison

Answer 12

Pays a specified daily amount up to the stated maximum number of days, or even lifetime. Benefits often double or triple while an insured is confined in an intensive care unit.

Question 13

Fee-for-Service

Payment Structure Comparison

Answer 13

Provides a separate payment to a healthcare provider for each medical service received by a patient.

Question 14

Prepaid

Payment Structure Comparison

Answer 14

Medical benefits are provided to a subscriber in exchange for predetermined monthly premiums that are paid in advance (designated fee/capitation fee).

Question 15

Usual, Customary, Reasonable (UCR)

Payment Structure Comparison

Answer 15

Benefits are not scheduled, but based on the average fee charged by all providers in a given geographical area. Many insurers pay the (UCR) amount and the balance of any overcharges or costs of any disallowed services are the insured’s responsibility.

Question 16

Annual Limit

Payment Structure Comparison

Answer 16

The maximum a policy will pay for covered losses per year

Question 17

Per-Cause

Payment Structure Comparison

Answer 17

The maximum a policy will pay for covered losses per claim

Question 18

Lifetime Limit

Payment Structure Comparison

Answer 18

The maximum a policy will pay for covered losses during the lifetime of an insured

Question 19

Health Maintenance Organizations (HMOs)

Answer 19

• Managed care system
• • Primary Care Physician or Gatekeeper
• • Referral Physician
• Prepaid basis
• Subscribers
• Open and closed panels
• Service area
• Emergency room
• Copayment per office visit
• Emphasize preventative medicine by:
• • Physical exams and diagnostic procedures
• • Reduce unnecessary hospital stays
• • Reduce number of days per hospital stay

Question 20

Primary Care Physician (PCP) (Gatekeeper)

Answer 20

Monitors health care needs and helps to control costs by not recommending unnecessary services, including referrals to other physicians and specialists. Not utilizing the primary care physician will cause a claim to be denied. The Primary Care Physician will determine if the covered person needs ongoing care from a specialist.

Question 21

Standard HMO Models

Answer 21

• Group Model
• Staff Model (Closed-Panel)
• Independent Practice Association (IPA) Model (Open-Panel)

Question 22

Capitation Fee

Answer 22

A fixed amount paid monthly per subscriber (typically by an HMO)

Question 23

Group Model

Answer 23

HMO contracts with an independent medical group to provide a variety of medical services to subscribers. Under the agreement, the HMO pays a capitation fee to the medical group entity directly. The medical group will then pay the individual physicians who remain independent of the HMO.

Question 24

Staff Model (Closed-Panel)

Answer 24

Contracting physicians are paid employees working on the staff of the HMO. They general operate in a clinic setting at the HMO’s physical facilities. This model is considered a closed panel since the providers do not work outside of the HMO and subscribers must use the providers on staff for treatment, with very few exceptions. Practitioners in this model are under no financial risk, as the HMO, as the employer, takes the risk.

Question 25

Independent Practice Association (IPA) Model (Open-Panel)

Answer 25

HMO members have the maximum freedom of choice of physicians and locations because the HMO is allowed to contract with a network of independent physicians who are part of an independent practice association. Physicians operate out of their own private offices. Payment to physicians is by capitation (per subscriber) or on a fee-for-service basis negotiated in advance. Since the IPA model contracts with physicians in private practice who also treat non HMO patients, this is considered an open panel plan.

Question 26

Preferred Provider Organizations (PPOs)

Answer 26

- An evolution of HMOs - Providers are paid on a fee-for-service basis - Subscribers have more choice among doctors and hospitals - In network - copayment - Out of network - reduced benefits, deductibles, and coinsurance

Question 27

Exclusive Provider Organization (EPO)

Answer 27

A type of PPO that requires a subscriber to seek treatment from a network provider. Unlike an HMO, use of a primary care physician and referral to a specialist are not required, and the provider is paid a negotiated fee-for-service

Question 28

Point of Service (POS)

Answer 28

Combines PPO and HMO benefits. At the point of service, members can choose which part of the plan to use. If the subscriber stays in network (open-panel HMO), benefits are paid as an HMO. A Primary Care Physician, or gatekeeper, will apply and referrals will be necessary if plan is being utilized as an HMO. If the subscriber uses an out-of-network provider, they will have a higher out-of-pocket responsibility. This feature is similar to an indemnity plan and the provider will be paid based on a fee-for-service.

Question 29

Point of Service (POS)

Answer 29

- Combines features of PPO and HMO - At the Point of Service, subscriber chooses in network or out of network coverage - In network has HMO and requires a small copayment Out of network requires a deductible and coinsurance - POS premiums tend to be higher than standard HMO premiums, but lower than PPO premiums

Question 30

Limited Choice

Answer 30

Other plans may only provide benefits to a limited choice of providers who must be pre-approved by the insurer or service provider. These providers have typically agreed to reduce their fees.

Question 31

Basic Medical Expense

Answer 31

Pays for office visits, diagnostic x-rays, laboratory charges, ambulance and nursing expenses when not hospitalized. Some plans may include coverage for prescription drugs.

Question 32

Basic Medical Expense Policy

Answer 32

Nonsurgical physician services. Pays for office visits, diagnostic x-rays, laboratory charges, ambulance and nursing expenses when not hospitalized. Some plans may include coverage for prescription drugs.

Question 33

Basic Hospital Expense Policy

Answer 33

Pays for hospital room and board (semi-private), with a daily limit of coverage. Miscellaneous Hospital Expenses are also provided, up to a specified limit per day, for inpatient x-rays, lab work, operating room expense, medication, and cost of anesthesia

Question 34

Basic Surgical Expense Policy

Answer 34

Pays surgeon and anesthesiologist fees for the cost of a surgical procedure. These policies usually provide benefits based on a surgical schedule to specify benefit limits for each surgical procedure. If a surgery is not listed in the policy, the company will pay based on the coverage of a comparable surgery.

Question 35

First Dollar Plan

Answer 35

Basic health care expense plans are frequently referred to as these because coverage is provided, often at 100%, from the first day of the plan year, up to a stated maximum benefit and without a deductible.

Question 36

Basic Insurance Policy Characteristics

Answer 36

- Basic Medical Expense - Basic Hospital Expense - Miscellaneous Hospital Expenses Basic Surgical Expense -- Surgical schedule -- Relative value scale

Question 37

Deductible

Answer 37

Initial amount the insured must meet per year before benefits are paid. This applies as per person or family. These can vary in cost and are designed to allow the insured to assume a portion of the risk. Changing the deductible will affect the premium cost - higher deductibles result in a lower premium.

Question 38

Major Medical Policy Characteristics

Answer 38

- Lifetime Maximum - Annual deductible and coinsurance apply - Protects against catastrophic losses / stop loss provision - Provisions - - Stop Loss Provision - - Family Deductible Provision - - Common Accident Provision - - Deductible Carry-Over Provision

Question 39

Stop Loss Provision (Stop Loss Limit)

Answer 39

Maximum dollar limit set on the coinsurance to limit the out-of-pocket expense that an insured can incur in a policy year. This may or may not include the deductible. Once the out-of-pocket limit has been reached, the stop loss provision kicks in and the policy will cover 100% of covered losses for the balance of the year.

Question 40

Common Accident Deductible

Answer 40

If several family members are injured in the same accident, only one deductible is applied.

Question 41

Family Deductible

Answer 41

If a family is insured, a maximum of 2 or 3 deductibles will satisfy the deductible requirement for the entire family per calendar year.

Question 42

Carryover Provision

Answer 42

Expenses that did not satisfy the previous year's deductible and were incurred in the last 3 months of that year are used towards satisfying the current year's deductible.

Question 43

Supplemental Major Medical Policy

Answer 43

Provides for Major Medical coverage and is designed to supplement a Basic Plan. It is written to pay benefits once the Basic Plan benefits are exhausted. The Basic Plan provides first dollar coverage. Once the Basic Plan benefits are exhausted, a Corridor Deductible is required to be paid before the start of coverage under the Supplemental Major Medical plan.

Question 44

Comprehensive Major Medical Policy

Answer 44

Combines the features of the Basic and Major Medical policy into a single policy. Benefits provide for reimbursement of covered expenses on a "usual, customary, and reasonable" basis. The insured has the freedom to choose any hospital, physician, surgeon, or other health care provider. This policy requires an initial Flat Deductible that is paid before the Basic plan begins to provide coverage. An additional Integrated Deductible must be met before the Major Medical benefits are payable. This policy provides the most COMPREHENSIVE coverage of all medical expense plans.

Question 45

Corridor Deductible

Answer 45

Between basic and supplemental plan paid by the insured | Applies to Supplemental Major Medical policy

Question 46

Newborn Infant Coverage

Answer 46

All individual and group health insurance policies, written on an expense-incurred basis and providing coverage for dependents of the insured, must provide coverage for the insured's newborn child from the moment of birth. Adopted children are covered from the date of placement for adoption. Coverage must include injury and sickness, including the necessary care and treatment of medically diagnosed congenital defects and birth abnormalities. Notification of birth or adoption and payment of the required premium must be within a month (30-31 days) after the date of birth or adoption, in order to continue coverage; otherwise, the coverage is only for the first month.

Question 47

Dependent Child Coverage (Limiting Age Law)

Answer 47

Every policy providing coverage for a dependent child extends coverage up to age 26 (through age 25). This includes natural children, adopted children, married or unmarried, even if eligible for other insurance. There is no requirement for a dependent child to be enrolled as a full-time student to qualify.

Question 48

Mental Illness and Substance Abuse

Answer 48

Coverage for mental illness and substance abuse will be subject to the same deductibles and coinsurance factors as those that apply to any physical illness. It is provided on an inpatient and outpatient basis and includes the treatment of alcohol abuse and chemical dependency. Many plans will have limitations on the benefits provided on an outpatient basis.

Question 49

Prescription Drugs

Answer 49

Most often found in a group health insurance policy. Some individual policies may integrate benefits with a medical plan or provide benefits for an additional cost. This benefit may be written requiring a small copayment, a flat amount, or an out-of-pocket percentage for each prescription.

Question 50

Maternity Benefits

Answer 50

Medical plans will usually cover the "complications of pregnancy" as an illness, but normal birthing costs may be limited or excluded. Maternity benefits typically provide 96 hours of inpatient care following C-section birth. Normal birth inpatient care is 48 hours. Shorter stay may be allowed if approved by the attending physician.

Question 51

Vision Care

Answer 51

Provides 1 routine annual examination (refraction). May provide payment for cost of lenses, frames, and contact lenses, but not the cost to replace frames or lenses that are lost or broken. Does not pay for sunglasses or safety glasses. This coverage does not pay medical expenses incurred from disease or injuries to the eye.

Question 52

Hearing

Answer 52

Most plans do not cover the cost of hearing aids. Some insurance programs and supplemental programs do provide hearing aid coverage. A few health insurance plans allow you, for an extra premium, to add additional hearing coverage.

Question 53

Types of Limited Policies

Answer 53

- Accidental Death and Dismemberment - Limited Accident - Critical Illness (Cancer/Dread Disease or Limited Sickness Plans) - Hospital Income or Indemnity (Cash Payment) - Short-Term Medical - Blanket - Credit Insurance (Credit Disability Insurance)

Question 54

Limited Sickness (Dead Disease)

Answer 54

Specific benefit for specific disease, such as cancer

Question 55

Hospital Income (Indemnity)

Answer 55

Pays directly to insured a set dollar amount per day, cash payment as stated in the policy

Question 56

Blanket Insurance

Answer 56

Covers a group of individuals for a specific event

Question 57

Common Exclusions from Coverage

Answer 57

- Preexisting conditions may be excluded, or subject to a probationary period - Intentionally self-inflicted injuries (suicide) - War or any act of war - Elective cosmetic surgery - Medical expenses payable under Workers' Compensation or any Occupational Disease Law - Military service and overseas residence - Coverage payable under a government plan - Commission or attempt of a felony - Aviation (other than as a passenger) - Elective cosmetic surgery

Question 58

Choice of Dental Providers

Answer 58

- Conventional plans offered by insurers - Dental service plans - Blue Cross/Blue Shield - Managed care plans or prepaid dental plans **Dental plans must offer the insured a choice of providers regardless of the dental coverage selected.

Question 59

Scheduled (Basic) Plan

Answer 59

Benefits are paid based on a schedule of procedures Benefit maximums are commonly paid on an amount lower than the usual, customary, and reasonable dental charges.

Question 60

Nonscheduled (Comprehensive) Plan

Answer 60

Benefits are paid on a usual, customary, and reasonable basis. Dentures are a major dental expense and would be paid using this benefit provision.

Question 61

Combination Plans

Answer 61

Combines the benefits of both the Basic and Comprehensive plans. Some procedures are paid based on a schedule while others are paid at a usual, customary, and reasonable basis.

Question 62

Diagnostic/Preventive (Type of Dental Care)

Answer 62

Routine diagnostic and preventive care services including routine checkups, x-rays, and cleaning

Question 63

Basic (Type of Dental Care)

Answer 63

Fillings, periodontics and root canals are considered to be basic care

Question 64

Major (Type of Dental Care)

Answer 64

Major dental care includes any crowns, dentures, bridge work, and orthodontics

Question 65

Deductibles and Coinsurance (Dental Insurance)

Answer 65

Deductibles include an annual amount ($50-$100) that must be paid before the plan will cover any losses. Once met, plan will impose a coinsurance feature of 20%-50% for basic and major services. Diagnostic and preventive care is not usually subject to deductible and coinsurance.

Question 66

Exclusions (Dental Care)

Answer 66

- Purely cosmetic services, unless necessitated by an accident - Replacement of prosthetic devices - Duplicate dentures or prosthetic devices - Oral hygiene instruction or training - Occupational injuries covered by Workers' Compensation - Services furnished by or on behalf of government agencies - Certain services that began prior to the date of coverage

Question 67

Blue Cross and Blue Shield Association (BCBS)

Answer 67

Prepaid plans, with plan subscribers paying a set fee, usually monthly, for services of doctors and hospitals at a predetermined price (negotiated fee). Blue Cross - hospital service plan with a contractual agreement with the hospital Blue Shield - physician service plan with a contractual agreement with the physicians In most states, the Blues are considered not-for-profit organizations, are regulated under special legislation and given some special consideration by the IRS. The Blues have traditionally offered benefits in the form of services, not indemnity or reimbursement plans. Payments are made directly to the providers under a contractual agreement (fee for service).

Question 68

Standard HMO Models

Answer 68

- Group Model - Staff Model (Closed-Panel) - Independent Practice Association (IPA) Model (Open Panel)

Question 69

Endodontics

Answer 69

Services covering tooth decay, dental pulp care and root canals

Question 70

Orthodontics

Answer 70

Services for teeth alignment and other irregularities of the teeth

Question 71

Periodontics

Answer 71

Services for the treatment of gum problems and disease

Question 72

Prosthodontics

Answer 72

Services provide implants, crowns, bridgework and dentures

Question 73

Restorative Care

Answer 73

Services to restore the functional use of natural teeth (treating caries)

Question 74

Oral Surgery

Answer 74

Surgical treatment of diseases, injuries and jaw defects