Health Insurance and Health Care Cost Management

Question 1

Coinsurance

Answer 1

the split payment for covered expenses after a deductible is first paid by the insured. The most common is 80/20 which means that covered expenses are paid 80% by the insurance company and 20% by the insured.

Question 2

Stop Loss Limit

Answer 2

-represents the maximum out of pocket expense before the policy pays 100% of covered expenses.
Example: a company that has a $5,000 stop loss limit, the insured pays the deductible and 20% of the next $5,000 for a total out of pocket expense of the deductible plus $1,000.

Question 3

Deductibles

Answer 3

• When there is a loss, the insured pays the deductible.
• The amount you pay for covered health care services before your insurance plan starts to pay.
• deductibles apply only to covered expenses

Question 4

Co-pay or co-payment

Answer 4

Often $15 to $25 dollar charges for each office visit under most managed care plans.

Question 5

Internal Limits

Answer 5

• many policies limit what will be paid for in certain treatments.
• often imposed on chiropractic care, physical therapy, acupuncture, and mental health care as well as others

Question 6

Major Medical Insurance

Answer 6

• generally referred to as comprehensive major medical or traditional indemnity health insurance.
• generally provide $1 Million or more in lifetime coverage and exclude very little that is related to illness or injury.
• these plans usually have a deductible, co pay and stop-loss limit.
• unlike managed care plans they do not typically provide benefits for preventative care

Question 7

Managed Care Plans

Answer 7

• technically it is not insurance, but are prepaid care plans.
• PPO’s, HMO’s and POS’s
• the underlying concept behind all managed care plans is that of covering preventative care. As a result almost all managed care plans cover physicals and baby’s visits to the doctor.

Question 8

PPO Plans

Answer 8

• Generally have a primary care physician (PCP) who is chosen from among a list of practitioners by the patient.
• the PCP must recommend and refer the patient for treatment to any specialist.
• the PPO contracts with physicians and other providers who agree to take reduced fees (as part of a network) in exchange for prompt payment and referrals.

Question 9

HMO Plans

Answer 9

• different from PPO’s because they also manage the plan and provide the benefits.
• providers are employees of the HMO rather than having only contracts as with PPO’s

Question 10

POS Plan

Answer 10

-includes a network of participating medical providers and other provisions common to a managed care plan, but also includes indemnity -type benefits for patients receiving benefits from non-participating providers.

Question 11

Medicare

Answer 11

• a federal government health insurance program that covers individuals:
  
  • age 65 or older
  • who have been receiving Social Security disability benefits for at least 24 months and/or who are on kidney dialysis and are currently in end-stage renal failure.

Question 12

Medicare Part A Covers

Answer 12

• hospital care but limited to 90 days
• a skilled nursing care facility benefit, assuming certain requirements are met
• home health service benefits as a result of a hospital stay
• care in hospice for the “terminally ill” (life expectancy of 6 months or less)

Question 13

Medicare Part A Skilled Nursing Benefit Qualifications

Answer 13

• the patients condition must require skilled nursing. This is different than home nursing care which medicare does not provide for (but a long-term care policy would)
• The patient must have been in the hospital for 3 or more consecutive days for the same medical condition
• the patient must be admitted to the skilled nursing facility within 30 days after leaving the hospital
• the patients condition must be expected to improve
• a medical professional must certify that the patient requires skilled nursing care.

Question 14

Medicare Part B Covers

Answer 14

• physicians services
• home health services not requiring hospital stay
• Diagnostic Tests
• the cost of any medical equipment needed
• all hospital outpatient services required
• does NOT cover routine physical exams, exams for eye glasses, routine foot care exams

Question 15

Medicare Part D

Answer 15

• provides some coverage for prescription drugs.
• individuals who elect coverage pay a monthly premium as well as a yearly deductible.
• government pays about 75% of the prescription costs

Question 16

Medicare Supplement (medigap) Policies

Answer 16

• additional coverage purchased to cover deductibles, co-payments, and other expenses that medicare wont cover.
• NAIC has designed 10 plans for the federal government

Question 17

Medigap Plan A Coverage

Answer 17

-Basic care package

Question 18

Medigap Plan B Coverage

Answer 18

• Basic care package

- Part A Deductible

Question 19

Medigap Plan C Coverage

Answer 19

• Basic Care package
• skilled nursing care
• part A deductible
• part B deductible
• foreign travel

Question 20

Medigap Plan D Coverage

Answer 20

• Basic care package
• skilled nursing care
• part A deductible
• foreign travel
• at home recovery

Question 21

Medigap Plan E Coverage

Answer 21

• basic care package
• skilled nursing care
• part A deductible
• foreign travel
• preventative screening

Question 22

Medigap Plan F Coverage

Answer 22

• basic care package
• skilled nursing care
• part A deductible
• part B deductible
• 100% excess doctor charge
• Foreign travel

Question 23

Medigap Plan G Coverage

Answer 23

• Basic care package
• skilled nursing care
• part A deductible
• 80% excess Dr charges
• Foreign Travel
• at home recovery

Question 24

Medigap Plan H Coverage

Answer 24

• Basic care package
• skilled nursing care
• part A deductible
• foreign travel
• prescription drug

Question 25

Medigap Plan I Coverage

Answer 25

• basic care package
• skilled nursing care
• part A deductible
• 100% of excess Dr’s charges
• foreign travel
• at home recovery
• prescription drug

Question 26

Medigap Plan J Coverage

Answer 26

• Basic care package
• skilled nursing care
• part A deductible
• part B deductible
• 100% of excess Dr’s Charges
• foreign travel
• at home recovery
• prescription drug
• preventative screening

Question 27

Taxation of Premiums and Benefits

Answer 27

• premiums paid are potentially deductible, although they must exceed, along with other expenses, a total of 7.5% of a taxpayers adjusted gross income.
• for self employed individuals, a taxpayer is allowed to deduct 100% of of insurance premiums as an “above the line” deduction to reach AGI.

Question 28

Traditional Indemnity Plans

Answer 28

• offered by insurance companies
• coverage includes diagnostic, medical, hospital, surgical services
• Insured individual pays a deductible amount per person or per family
• plan usually pays 80% after deductible and then 100% after “stop loss limit” is reached
• benefits for medical expenses are paid on a reimbursement basis, with the reimbursement amount “capped” at a large lifetime amount (usually $1 MM)

Question 29

Preferred Provider Organization (PPO)

Answer 29

• Fee for service plan
• patients see providers within a network (or sometime outside a network)
• May have a small co-payment cost per visit (could be large if employee/patient receives care outside the network)

Question 30

Health Maintenance Organization (HMO)

Answer 30

• Pre-paid plan
• patients choose salaried doctors within the HMO
• Patients primary care physician acts as the gatekeeper before referring employee/patient to specialist
• may have small or no co-payment

Question 31

Point-of-Service Plans (POS)

Answer 31

• hybrid of PPO & HMO Plans
• Like an HMO, participants designate an in-network physician to be their primary care provider
• Like a PPO, patients may go outside of the provider network for health care services, but with increased costs
• typically more expensive than an HMO, but cheaper than PPO

Question 32

COBRA

Answer 32

• requires some employers to offer terminated EE’s who have had a qualifying event the right to purchase medical coverage at group rates
• The terminated employee then assumes the cost of paying the employer’s share of insurance premiums, but this total cost may not exceed more than 102% of the overall cost of providing coverage to all employees.

Question 33

Qualifying events for COBRA

Answer 33

• voluntary or involuntary termination of an employee
• switch from full time to part time of an employee
• Spouse’s and other dependents qualify if there is a death, divorce, legal separation, or eligibility for medicare
• Children of covered employee qualify if there is a loss of dependent status due to plan age limitations or marriage.
• Qualified beneficiary has a 60 day window after the qualifying event to elect coverage and 45 days to pay the premium

Question 34

Continuation of COBRA benefits continues until the earliest of:

Answer 34

• 18 months
• 29 months if disabled during the first 60 days of COBRA benefits
• 36 months if a second qualifying event (death or divorce of terminated employee) occurs during the coverage period
• the date the plan terminates for all employees
• the date the premium for coverage is not paid on time
• the qualified beneficiary becomes covered under another employer-sponsored health plan
• the qualified beneficiary becomes eligible for medicare
• the widowed or divorced spouse remarries and becomes covered under the new spouse’s employer-sponsored health plan.

Question 35

COBRA notification requirements

Answer 35

• employer must notify the plan administrator 30 days after the qualifying event of termination, death, eligibility of medicare, or change in work status
• employer must notify the plan administrator 60 days after the qualifying event of divorce or loss of child’s dependent status
• Plan Administrator notifies the qualified beneficiary of the right to elect continuation of coverage within 14 days.

Question 36

Employers Exempt from COBRA

Answer 36

• employers with less than 20 employees for at least half of the prior year
• government employees
• church employees

Question 37

HIPPA

Answer 37

• mandates that there cannot be enforcement of a pre-existing medical condition clause if:
  
  • an employee was covered by the prior employer’s health insurance plan for at least 12 months, and
  • less than 63 days has elapsed since the employee lost coverage under the prior employer’s plan
• Allows states to set up a mechanism for providing individuals with a choice of health policies; if a state fails to do so, the federal regulations require insurers, HMOs, and health providers in the state to offer coverage.

Question 38

Health Savings Account (HSA)

Answer 38

• high deductible health plan - premiums are therefore less expensive
• individuals/families make tax deductible contributions to an HSA of $6,750 for a family and $3,400 for an individual
• Deductible must be at least $2,600 for a family and $1,300 for an individual plan
• Age 55 or older are allowed a $1,000 catch up contribution
• individuals eligible for medicare are not allowed to deduct their contributions
• earnings inside the HSA are not taxed
• distributions are tax free if used to pay for qualifying medical expenses, 10% penalty and income tax paid if not
• penalty is waived if individual is 65 or older, disabled, or deceased.

Question 39

Archer Medical Savings Account (MSA)

Answer 39

• pilot program that preceded HSA’s
• no new MSA’s are permitted, however current MSA’s are permitted to continue to operate
• participation was primarily limited only to self-employed individuals to accompany a high deductible plan.

Question 40

Health Reimbursement Account (HRA)

Answer 40

• reimburses employee for medical expenses as claims are submitted
• can help to cover expenses that are not covered by medical insurance
• it is typically set aside by the employer to cover the initial expenses up to a plan-specified amount, after which time co-insurance provisions apply
• Any medical expenses paid are tax deductible by the employer as long as the plan is not discriminatory in favor of highly compensated employees.