Individual Chap 2: The Products Flashcards
ACA Restrictions on Plan Design
- Important for ACA to set limits on what counts as satisfying the mandate of everyone having health insurance
- Also important to make it easier for consumers to compare insurance plans
1. Essential Health Benefits (same as in group plans)
- Ambulatory patient services
- Emergency services
- Hospitalization
- Maternity and newborn care
- Mental health and substance use disorder services
- Prescription drugs
- Rehab and habilitative services
- Lab services
- Preventive and wellness services and chronic disease management
- Pediatric services
a. Each state must choose a benchmark plan and this plan determined the EHB for each state, so there could be slight variance
b. Habilitative services and pediatric vision and oral care created challenges for insurers to cover
2. Actuarial Value, Metal Levels, and Cost Sharing Limits
a. Actuarial Value - percentage of total claim costs expected to be paid by insurer
- Government created a standardized Actuarial Value Calculator to determine this
b. Major provisions of ACA
- Eliminated cost sharing on preventive services and prohibited lifetime and annual limits on EHBs
- All plans must have metal level (platinum, gold, silver or bronze) classification
- Overall OOP limit for members to pay can’t exceed certain levels ($6350for individuals in 2014, $12,700 for families)
3. Other Requirements
a. Meaningful difference test - plans must prove they are truly different, so they don’t take up “shelf space” with many similar plans and confuse consumers
b. Network adequacy tests
c. Test for discriminatory service areas
d. Tests for discriminatory cost sharing
e. Tests by government for “outlier” premium rates
Networks
- Provider network - collection of doctors, hospitals and other providers who provide services for insured
- Many Blue Cross/ Blue Shield plans and HMOs build and maintain their own networks
- Many commercial major medical carriers don’t have the geographic concentration to justify development of their own network - Contract with “network for hire”
1. PPO Products
- PPO - networks that have a dual set of benefit provisions
- Better/preferred provisions when using the main network
- Lesser provisions when using services outside of this network
- Common to have in-network cost sharing as a copay benefit, and out-of-network benefits as a deductible cost sharing
2. Measuring and Choosing Providers
- Insurers who build their networks must choose which providers to include
- Insurer considerations when choosing providers for a network
(1) How restrictive the network will be
(2) Practice patterns (quality measures, efficiency of care, adherence of treatment standards)
(3) Cost - important to adjust costs for the relative morbidity of the patients in the group
3. Measuring and Choosing Networks
- Insurers who rent networks primarily evaluate baed on cost savings through provider discoutns
Limited Benefits Medical Coverages
Medical Coverages that don’t meet the comprehensive definition of major medical are called limited benefit coverages
1. Hospital Indemnity Plan (HIP)
a. Pays a flat amount per day of inpatient hospitalization
b. Sometimes have benefit riders such as an additional benefit for ICU stays
c. Policies are intended to supplement major medical, not replace it
d. Payment can start after a period of a few days
e. Often mass marketed
f. Typically involves no underwriting aside from pre-existing condition exclusions
**2. Other Scheduled Benefits **
a. Policies constructed of one or more (usually multiple) indemnity benefits
- AD&D, days in hospital/ICU/ER, days not able to work, are common benefits
- May only. cover in case of accident
3. Dread Disease and Critical Illness
a. Provide coverage only for a specified list of medical conditions
b. Cancer policies may pay a flat amount for hospital confinement, ambulance to hospital, ICU confinement, surgery, loss of time, therapies and death benefit
c. New version is called critical illness coverage, which pays a lump sum in the event of a heart attack, stroke, heart surgery, cancer, or diagnosis of specified conditions
d. Drug treatment innovations and evolving market dynamics
Group Conversion Coverage
- Provisions which guarantee that when someone leaves group, they will be able to purchase health insurance from the same insurer
- Highly regulated, and less important since the implementation of COBRA
- COBRA requires groups offer insurance to terminating employees at a rate much cheaper than conversion premiums - After COBRA terminates, individuals are then eligible for conversion coverage
Medicare Supplement Coverage
1. Covers the gaps in Medicare coverage, including coinsurance and deductible
a. Part A covers hospital expenses
b. Part B covers outpatient and physician expenses
c. Coverage is subject to deductibles and copays
d. MedSupp policies fill these gaps in coverage
2. 1980 - Baucus Amendment - states must adopt insurance laws and regulations to meet Congressional minimums for Medicare Supplement plans
a. NAIC Medicare Supplement Insurance Minimum Standard Models Act
- Referred to Plans A - J
b. Balanced Budget Act - 1997 - added high deductible plans
c. Medicare Modernization Act (MMA) - 2003 - introduced medicare Part D and other standardized plans
d. Medicare Improvements for Patient and Providers Act (MIPPA) - 2008 - introduced new plans (Plans M and N) and eliminated Plans E, H, I and J
3. Standardized plans based on building block approach with certain “core” benefits
4. Some plans offered drug benefits
a. After Medicare Part D, policyholders with this benefit were given choice of keeping current drug benefit or enrolling in D and having drug benefit removed and premium reduced
b. No new medSupp plans can include a prescription benefit
5. Medicare Select Program - preferred network of providers to reduce cost of MedSupp policy
6. When plans were standardized federally, 3 states already had their own standards, so they were exempt from federal requirements
Medicare Advantage Plans
- Balanced Budget Act (BBA) - 1997 - Introduce managed care plans in the private market for Medicare beneficiaries - Called Medicare +Choice plans, then renamed Medicare Advantage plans
- Health plans may contract with the government to provide benefits to Medicare beneficiaries under Medicare Advantage plans
- Medicare Advantage Organizations (MAO) provide MA plans
- Medicare Cost plans - managed care plasn that cover Part A and B services or Part B only
1. Benefits
a. Full coverage for traditional Part A and Part B services
- May also offer supplemental benefits in addition to this
b. Referred to as Part C
c. Benefit designs are not standardized and vary by insurer
d. Cost sharing must be at least as generous as under traditional Medicare (often is more generous)
e. Part D plans must meet minimum requirements
2. Enrollment
a. Designated Enrollment Periods for Medicare Advantage or Part D
- Initial Enrollment - when beneficiaries become eligible due to age or disability
- Annual Open Enrollment - Oct 15 - Dec 7 - can enroll or change coverage
- Special Enrollment - certain reasons such as change in residence, loss of coverage, or change in existing plan’s contract with Medicare
b. Medicar Advantage Plans are guaranteed issue (can’t deny coverage) if they meet certain conditions:
- Enrolled in Part A and Part B
- Do not have ESRD
- Applied for coverage during valid enrollment period
- Resides in plan’s service area
- Abides by terms of insurance contract
- Similar Provisions for Part D except:
(1) Enrolled in Part A, Part B or Part C
(2) Those with ESRD are eligible
c. Part D beneficiaries may be charged a penalty if they don’t have coverage for any period over 63 days in which they dont have coverage (or alternate coverage) after initial enrollment period
d. Part B may also charge large enrollment penalty if not enrolled during initial period and sign up later (to prevent antiselection)
3. Funding for Medicare Advantage and Part D
a. Capitated payments are made by CMS to MAOs and Part D providers
- Rates are published every year
b. MAOs must submit bid to compare population to benchmark (on risk-adjusted basis) and plan can receive a portion of the savings, if any, as a rebate when less than expected benchmark of costs
- If cost is above benchmark, plan must charge members a monthly premium to cover the shortfall
c. CMS gives five-star quality ratings to plans each year (1is low and 5 is high)
- Benchmark payment and rebate depends on star rating
- Star rating also visible to customers and have significant impact on attracting them
d. Capitation payments are adjusted to reflect demographics and health status
e. Part D providers paid through direct subsidy, reinsurance and risk corridor program
4. Bid Process
a. Each spring, providers submit a beneift package summary and bid to CMS
- Covers expected per member per month cost and helps determine capitation payment
b. Bid Submission Process for Medicare Advantage and Part D plans
- CMS publishes “Advance notice” - any changes and initial information
- CMS publishes “announcement” - benchmark capitation rates and any finalized changes
- Plan sponsor submits initial bid by first Monday in June
- CMS performs “desk review” - examine bids and request clarifications, usually by late July
- Rebate reallocation - early August - Part D bids are adjusted and Part C may have minor changes
- Second actuarial certification is required
- Bids are approved, and plan sponsor may have additional scrutiny if audited
5. Regulatory Environment
a. Initial plans were intended to be lower cost than traditional Medicare FFS
b. ACA - 2010 - series of changes
- Focuses on controlling the increase in spending and improving quality of care
- Minimum loss ratio requirement of 5% as of 2014
- Coverage gap in Part D to be closed by 2020
Disability Income (DI) Coverage
Intended to cover lost income due to injury or illness
1. Renewability
2. Lost Income vs. Indemnity
3. Elimination Period
4. Benefit Period
5. Definition of Occupation
6. Total vs. Partial vs. Residual
7. Recurring Disabilities
8. COLA
9. Social Insurance Supplements
10. Group Wraparound Policies
11. Waiver of Premium Provisions
1. Renewability
a. Categories of Renewability for Disability Coverage
(1) Non-cancelable
- Renewability and premium rate guaranteed in advance
(2) Guaranteed renewable
- Policy is guaranteed to renew, but premium rates can be changed
(3) Conditionally renewable
- There are circumstances under which insurer can refuse to renew policies
- Referred to as non-renewable for stated reasons only or optionally renewable
b. DI coverage is not as inflation-sensitive as major medical, so focus is on initial premiums since these will be in force for a long time
2. Lost Income vs. Indemnity
a. Some DI coverage pays a flat amount per week or month
b. A weakness in this approach is that the insured’s situation might change and they need a higher or lower amount of coverage
c. Lost income coverage provides reduced DI payment when insured earns income while disabled
3. Eliminated Period
a. Period of disablement that must occur before disability payments start
b. This helps reduce claim costs and expenses because it eliminates frequent, small claims
4. Benefit Period
a. Maximum period of time for which benefits are payable
b. Common benefit periods are 2 years, 5 years, 10 years, and “to age 65”
5. Definition of Occupation
a. Any Occ Definition
- Benefits are typically payable if an insured is unable to perform duties of any occupation for which they are suited
b. Insurers who market to higher income professional may also offer “own occ” products
- beneifts are payable if insured is unable to perform duties of their specific occupation
6. Total vs Partial vs. Residual
a. Partial disability
- Benefits were developed to recognize that sometimes disability and loss of income are not black and white
- Those who suffer partial disability can still receive some benefits
b. Residual benefits
- After a person had been totally disabled for some qualification period they could be eligible for partial benefits for some period of time
- This encourages claimants to begin the rehab process
7. Recurring Disabilities
a. If a claimnant recovers but becomes disabled again in a short time, there can be differences in benefits depending on whether disablement is a continuation of the first or a new one
b. Disability is considered a separate if full, partial or residual benefits were payable for an earlier disability, are no longer payable, and either
(1) Cause of later disability is not related to earlier one and insured returned full-time duties for at least 30 consecutive days OR
(2) Cause of later disability is related to earlier one and later disability starts at least 12 months after any benefits cease being payable
8. Cost of Living Adjustments
a. Inability of disability policies of the 1970s to adjust to rising incomes and inflation was a problem
b. In response cost of living provisions were added
c. Three methods of cost of living adjustment
(1) Automatically offer increased coverage to insured which they accept or reject
(2) Benefit automatically adjusts over time without action by insured - often done through making benefit tied to salary
(3)Offer benefit that is automatically indexed to inflation
9. Social Insurance Supplements
a. Old age, survivor, and disability insurance program (OASDI also known as social security) provides disability benefits to insured who meet the law’s provisions
b. When these benefits are combined with a disability policy, overinsurance may occur
- This means insured receives a benefit that gives them little or no incentives to return to work
c. Most carriers integrate payments so as to maintain a targeted replacement ratio
10. Group Wraparound Policies
a. Some carriers have designed policies to supplement group disability with additional benefits
11. Waiver of Premium Provisions
a. Allow the policy to remain in force without premium payments when the policyholder is disabled
Long Term Care Coverage
Offers financial pre-funding for expenses associated with care and services, skilled, custodial, or personal in nature that an individual may need in order to perform basic activities of daily living (ADLs)
1. Benefit Triggers
a. To be eligible to receive benefits, individual must satisfy benefit trigger
b. Newer policies include triggers based on the inability to perform ADLs or presence of significant cognitive impairment
2. Activities of Daily Living
a. Bathing
b. Continence
c. Dressing
d. Eating
e. Toileting
f. Transferring (in and out of bed, chair or wheelchair)
3. Cognitive Impairment
a. Federally tax-qualified LTC plans must trigger benefits if there is a severe cognitive impairment
b. Could include wandering and getting lost, combativeness, inability to dress for weather, etc
4. Elimination/ Waiting Period
a. Once benefit eligibility has been triggered, most LTC plans have an elimination or waiting period
b. 30,60,90 or 100 day waiting periods are most common
c. Ensures that only long-term chronic disabillities are covered
5. Types of LTC Plans
a. Service Reimbursement Model
- Reimburses insured for cost of LTC services, subject to fixed limits
b. Service Indemnity Model
- Fixed benefit payment is made for any day or week that formal LTC services are receieved, regardless of actual costs
c. Disability Model
- Predetermined benefit is paid for each day an insured is eligible for benefits
6. Covered Services
a. Can be narrow or comprehensice, depending on poplicy
b. Commonly Covered services Under LTC:
- Nursing Home Care - Skilled, Intermediate, or Custodial Care by approved person
- Assisted living facility care
- Home and community-based care - Includes assistance with ADLs, homemaker services, and respite care services
- Hospice Care - Designed to provide care to terminally ill
- Home Modification and Equipment - Services to allow individual to remain at home rather than be hospitalized
- Care Management Services - services provided by case manager to coordinate care
7. Alternate Plan of Care
- Provides mechanism through which contract continues to provide benefitds even as new ways to provide LTC emerge over time
8. Benefit Limit
a. Daily, weekly, monthly, annual, and lifetime benefit limits may apply
b. If administered as a portion of dollar, 5 year benefit may last longer than 5 years if care not needed 365 days a year
9. Inflation Protection
a. Automatic Inflation Protection
- All benefit limits increase automatically each year by a preset %
b. Periodic increase offers
- Insured is periodically given the opportunity to purchase additional amounts of coverage on a guaranteed issue basis
10. Nonforfeiture Benefits
a. Allows an insured who terminates to receive reduced, paid-up benefit withtout having to continue to pay premiums
11. Ancillary Plan Features
a. Examples of additional benefits available include:
- Bed reservation benefit
- Caregiver training
- Death benefit
- Spousal riders and discounts
12. Rate Increases
a. LTC plans are usually allowed to increase premiums, but regulation limits this ability
13. Combination Products
a. LTC written as a rider to life insurance or annuity policies
b. Gaining popularity in recent years
c. Most policies first pay out the LTC benefits
- Acceleration benefit - pays out part of life benefit prior to death
- Face amount of life benefit is reduced by the amount paid out as LTC
d. Extension of Benefits - some policies may extend coverage for LTC even after cash value of life policy is depleted
- Riders for this are funded by a separate premium
Dental Coverage
- Usually a group coverage, but some carriers have developed individual plans
- Dental benefits are usually categorized into four types
- Diagnostic and preventive
- Basic services
- Prosthetic coverage (crowns and inlays)
- Orthodonia - Dental is highly susceptible to antiselection
1. Multiple Treatment Options
a. In dental, there are often may treatment options and waiting before beginning treatment is sometimes an option
b. Results in “induced utilization” where additional utilization occurs because insurance is present
c. Can control through benefit design and by requiring approval for treatment
2. Accumulated Untreated Conditions
a. It is hard to administer pre-existing conditions to prevent postponing treatment for dental procedures
b. One option that is possible to reduce initial benefits and phase them in over a few years
3. Eternal Antiselection
a. Most individuals have good self-perception of their dental health
b. Increased claim costs should be expected and aggressive management of antiselection is needed
4. Pediatric Dental Coverage Under ACA
a. One of the EHB as of 2014
b. Significant challenge for many insurers who didn’t have experience in administering this type of coverage
c. Regulators recognize this challenge and usually allow carriers to offer plans without dental, provided there is a standalone plan another insurer that’s available to applicants
