Chapter 9: Medical Expense Plans and Concepts Flashcards
Earned Premium
Portion of a premium for which protection has already been given.
Unearned Premium
Portion of a premium for which policy protection has not yet been given.
Service Area
The primary geographical area of coverage and service provided by a Health Maintenance Organization (HMO).
Subscriber
A person applying for coverage through a service provider.
**HMOs and PPOs serve subscribers
Insured
A person applying for coverage through an indemnity provider.
**Mainline insurance companies serve insureds
Major classifications of plans include:
- Indemnity (Reimbursement) Plan
- Service Plan
- Self-Insured (Self-Funded) Plan
Indemnity (Reimbursement) Plan
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.
Service Plan
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.
Self-Insured (Self-Funded) Plan
A plan offered through employers, associations, or unions who pay claims out of their own funds instead of funding claims through an insurer.
Blanket Payment
Payment Structure Comparison
Maximum dollar limit set, with no itemizing of costs, used for groups covered under a blanket policy for a specified period or event.
Scheduled Payment
Payment Structure Comparison
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.
Cash or Indemnity Payment (Hospital Income)
Payment Structure Comparison
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.
Fee-for-Service
Payment Structure Comparison
Provides a separate payment to a healthcare provider for each medical service received by a patient.
Prepaid
Payment Structure Comparison
Medical benefits are provided to a subscriber in exchange for predetermined monthly premiums that are paid in advance (designated fee/capitation fee).
Usual, Customary, Reasonable (UCR)
Payment Structure Comparison
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.
Annual Limit
Payment Structure Comparison
The maximum a policy will pay for covered losses per year
Per-Cause
Payment Structure Comparison
The maximum a policy will pay for covered losses per claim
Lifetime Limit
Payment Structure Comparison
The maximum a policy will pay for covered losses during the lifetime of an insured
Health Maintenance Organizations (HMOs)
- 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
Primary Care Physician (PCP) (Gatekeeper)
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.
Standard HMO Models
- Group Model
- Staff Model (Closed-Panel)
- Independent Practice Association (IPA) Model (Open-Panel)
Capitation Fee
A fixed amount paid monthly per subscriber (typically by an HMO)
Group Model
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.
Staff Model (Closed-Panel)
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.
Independent Practice Association (IPA) Model (Open-Panel)
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.
Preferred Provider Organizations (PPOs)
- 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
Exclusive Provider Organization (EPO)
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
Point of Service (POS)
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.
Point of Service (POS)
- 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
Limited Choice
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.
Basic Medical Expense
Pays for office visits, diagnostic x-rays, laboratory charges, ambulance and nursing expenses when not hospitalized. Some plans may include coverage for prescription drugs.
Basic Medical Expense Policy
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.
Basic Hospital Expense Policy
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
Basic Surgical Expense Policy
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.
First Dollar Plan
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.
Basic Insurance Policy Characteristics
- Basic Medical Expense
- Basic Hospital Expense
- Miscellaneous Hospital Expenses
Basic Surgical Expense
– Surgical schedule
– Relative value scale
Deductible
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.
Major Medical Policy Characteristics
- 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
Stop Loss Provision (Stop Loss Limit)
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.
Common Accident Deductible
If several family members are injured in the same accident, only one deductible is applied.
Family Deductible
If a family is insured, a maximum of 2 or 3 deductibles will satisfy the deductible requirement for the entire family per calendar year.
Carryover Provision
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.
Supplemental Major Medical Policy
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.
Comprehensive Major Medical Policy
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.
Corridor Deductible
Between basic and supplemental plan paid by the insured
Applies to Supplemental Major Medical policy
Newborn Infant Coverage
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.
Dependent Child Coverage (Limiting Age Law)
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.
Mental Illness and Substance Abuse
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.
Prescription Drugs
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.
Maternity Benefits
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.
Vision Care
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.
Hearing
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.
Types of Limited Policies
- 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)
Limited Sickness (Dead Disease)
Specific benefit for specific disease, such as cancer
Hospital Income (Indemnity)
Pays directly to insured a set dollar amount per day, cash payment as stated in the policy
Blanket Insurance
Covers a group of individuals for a specific event
Common Exclusions from Coverage
- 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
Choice of Dental Providers
- 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.
Scheduled (Basic) Plan
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.
Nonscheduled (Comprehensive) Plan
Benefits are paid on a usual, customary, and reasonable basis. Dentures are a major dental expense and would be paid using this benefit provision.
Combination Plans
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.
Diagnostic/Preventive (Type of Dental Care)
Routine diagnostic and preventive care services including routine checkups, x-rays, and cleaning
Basic (Type of Dental Care)
Fillings, periodontics and root canals are considered to be basic care
Major (Type of Dental Care)
Major dental care includes any crowns, dentures, bridge work, and orthodontics
Deductibles and Coinsurance (Dental Insurance)
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.
Exclusions (Dental Care)
- 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
Blue Cross and Blue Shield Association (BCBS)
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).
Standard HMO Models
- Group Model
- Staff Model (Closed-Panel)
- Independent Practice Association (IPA) Model (Open Panel)
Endodontics
Services covering tooth decay, dental pulp care and root canals
Orthodontics
Services for teeth alignment and other irregularities of the teeth
Periodontics
Services for the treatment of gum problems and disease
Prosthodontics
Services provide implants, crowns, bridgework and dentures
Restorative Care
Services to restore the functional use of natural teeth (treating caries)
Oral Surgery
Surgical treatment of diseases, injuries and jaw defects
