Insurance - ch 3 Flashcards
DEDUCTIBLE
Insured must pay before the insurer will pay benefits.
- Embedded deductible:
A family plan with both an individual deductible and a family deductible. - Non-Embedded deductible:
A family plan in which the entire family
deductible must be met before moving to the coinsurance phase.
Coinsurance
* Typically, a major medical health insurance policy will contain a $500 (or higher) deductible and an 80/20 coinsurance clause.
—Insured is responsible for 20% of expenses above the deductible
Embedded Deductible Example
* The Johnson family has a health care plan with an embedded deductible.
The individual annual deductible amount is $2,300, and the family deductible amount is $4,600.
After the deductible has been satisfied, the
coinsurance is 80/20. The family was in a boating accident where all four family members required varying amounts of medical intervention.
The family incurred the following expenses:
Dad - $3,200; Mom - $1,850;
Daughter - $800; Son - $650. The family’s combined expenses total
$6,500. Here’s how they paid the deductible
maximum Out-Of-Pocket (MOOP)
- MOOPs for family plans may be embedded or non-embedded, similar to deductiblesBeginning in 2016, most policies are required to have an
embedded MOOP - The Affordable Care Act (ACA) limits the maximum out-of-pocket expenses to:
$9,100 (in 2023) for an individual
$18,200 (in 2023) for a family
AFFORDABLE CARE ACT (1 OF 2)
* The Patient Protection and Affordable Care Act of 2010 and the Health
Care and Education Reconciliation Act of 2010, collectively referred to as
the Affordable Care Act (ACA).
* Key Provisions:
Qualified health plans cannot deny coverage based on pre-existing
conditions
Elimination of lifetime benefit limits
Children may remain on parents’ health plan to age 26
AFFORDABLE CARE ACT (2 OF 2)
* Key Provisions continued:
High income taxpayers pay a 3.8% Medicare Tax on investment income and 0.9% Medicare Tax on earned income.
Individuals are required to maintain minimum essential health coverage (penalty for not doing so was repealed by the TCJA 2017 beginning in 2019).
Large employers must provide minimum essential coverage for employees.
Health care FSA contributions limited to $2,500 (to be indexed for
inflation).
Established a health insurance Marketplace on which insurance may be purchased and lower-income individuals or families may receive premium subsidies
AFFORDABLE CARE ACT: ENROLLMENT
(1 OF 2)
* Individuals who are not covered by an employer plan may obtain a qualified health plan (QHP) offered by a health insurer in the individual market or may purchase a policy from a government-sponsored health insurance marketplace.
- Open enrollment period: November 1 – December 15, with coverage effective January 1 of the following year
The affordable care act enrollment offers a special 60 day enrollment period for what situations ?
AFFORDABLE CARE ACT: ENROLLMENT
(2 OF 2)
* Special enrollment period allows enrollment during the 60-day period following:
Loss of other coverage
Addition of a dependent
Divorce or legal separation
Loss of dependent status
Moving to another state or outside the plan’s service area
Exhaustion of COBRA coverage
For a Marketplace plan, income increases or decreases
- To meet the definition of a Qualified Health Plan (QHP), all health insurance plans sold on or off the health care exchange must cover 10 essential benefits ??
AFFORDABLE CARE ACT: ESSENTIAL BENEFITS
- To meet the definition of a Qualified Health Plan (QHP), all health insurance plans sold on or off the health care exchange must cover 10 essential benefits:
- Outpatient services, such as doctor visits or tests done outside a
hospital - Emergency services
- Hospital stays
- Pregnancy and baby care
- Mental health and substance abuse services
- Prescription drugs
- Rehab and habilitative services
- Lab tests
- Preventive and wellness services
- For children only, dental and vision services
AFFORDABLE CARE ACT: COMPARING PLANS
To simplify comparisons of QHPs, plans are categorized by “metal” tiers:
- Bronze Plan: A plan that pays the actuarial equivalent of 60% of the estimated costs of health services.
- Silver Plan: A plan that pays the actuarial equivalent of 70% of the estimated costs of health services.
- Gold Plan: A plan that pays the actuarial equivalent of 80% of the estimated costs of health services.
- Platinum Plan: A plan that pays the actuarial equivalent of 90% of the estimated costs of health services
3 BENEFITS OF GROUP HEALTH INSURANCE ?
BENEFITS OF GROUP HEALTH INSURANCE
* Coverage at a reasonable premium
* Spreads risk among the pool of participants
* Spreads administrative costs
ELIGIBILITY FOR GROUP HEALTH INSURANCE ?
ELIGIBILITY FOR GROUP HEALTH INSURANCE
- An individual has to be affiliated with a group that is covered by a group health insurance policy.
- Typically, all individuals who are employed on a full-time basis (or are a member of a qualifying group) at a company that provides group health coverage are eligible to participate in the group plan
2 types of Group Health Insurance ?
TYPES OF GROUP HEALTH INSURANCE
* There are two primary types of group health insurance:
Group basic medical insurance
Group major medical insurance = MOST POPULAR
GROUP BASIC MEDICAL INSURANCE
* Group basic medical coverage was/is often used in conjunction with
group major medical insurance.
* The ACA now prohibits health plans from putting dollar limits on most
benefits.
GROUP MAJOR MEDICAL INSURANCE
* Offers supplements basic medical coverage
* Often referred to as group supplemental insurance plans
* As a result of the ACA, lifetime maximums are no longer permitted
GROUP COMPREHENSIVE MAJOR MEDICAL
INSURANCE
* Group comprehensive major medical insurance plans combine the
benefits of basic medical coverage and major medical coverage.
* Low deductibles and co-payment for services.
* Co-insurance applies until the maximum out-of-pocket limit is reached
ROUP COMPREHENSIVE MAJOR MEDICAL
INSURANCE: EXAMPLE
* Dylan is a participant in his employer’s Group Comprehensive Major
Medical Insurance Plan. The plan has a $200 deductible, and a $1,500 out of pocket maximum. Dylan is injured and has:
$2,000 medical costs
GROUP COMPREHENSIVE MAJOR MEDICAL
INSURANCE: EXAMPLE
* Dylan is a participant in his employer’s Group Comprehensive Major Medical Insurance Plan. The plan has a $200 deductible, and a $1,500 out of pocket maximum. Dylan is injured and has:
$2,000 medical costs Minus $200 deductible Equals $1,800 still to be paid
- 80% by the insurance company; $1,800 x 80% = $1,440
- 20% by Dylan; $1,800 x 20% = $360
- Dylan pays $200 deductible + $360 coinsurance for a total of $ 560
GROUP HEALTH INSURANCE: MECHANICS
(1 OF 2)
* Employers have some degree of flexibility regarding which employees are covered.
-Full-time employees with a required 30-day probationary period is typical.
-Most large employers offer several variations of policies.
Elect during open enrollment
-New dependents must be added within 30 days.
Employees are provided with a Summary Plan Description (SPD) and Summary of Benefits and Coverage (SBC).
Coordination of Benefits clause applies
GROUP HEALTH INSURANCE: MECHANICS
(2 OF 2)
* Common coordination provisions in the NAIC model act:
A plan covering the employee is primary to a plan that covers that
person as a dependent.
A person covered as a dependent of an active employee, who also
has coverage as a retiree from their previous employer, and who is
also covered under Medicare will have primary coverage as a
dependent of an active employee (if the employer has more than 20
employees); Medicare pays second, and retiree coverage last.
Coverage for dependent children of divorced or separated parents is
typically determined by court decree. In the absence of a decree:
* For a child whose parents are married or living together, the plan
of the parent whose birthday is earlier in the calendar year is
primary.
* If the parents are divorced or separated and there is no decree,
the plan covering the custodial parent is primary.
INDIVIDUAL HEALTH INSURANCE
* Premiums for individual health insurance are typically higher than
premiums on group health insurance.
* Everyone should have, at a minimum, coverage for catastrophic medical
expense needs (such as unforeseen major surgery or hospitalization)
even if they choose to self insure for routine medical expenses, such as
annual physical exams, tests, and office visits.
* The Patient Protection and Affordable Care Act of 2010 and the Health
Care and Education Reconciliation Act of 2010.
Required U.S. citizens and residents to obtain health insurance
coverage
Tax penalties for failing to obtain coverage
* TCJA (2017) repealed individual tax penalties imposed by ACA (2010)
for years after 2018
ELIGIBILITY FOR INDIVIDUAL HEALTH INSURANCE
- Historically, individuals with existing conditions requiring extensive medical treatment had to pay large premiums to offset the risk that the insurer was undertaking, or the pre-existing condition may have been excluded from coverage.
- The 2010 Health Care Legislation prohibits exclusions for pre-existing conditions on any health insurance policy issued after 2013
TYPES OF INDIVIDUAL HEALTH INSURANCE
POLICIES Major Medical Insurance:
- Hospital and physician’s and surgeon’s fees, medications, and durable medical equipment
- Routine eye and dental exams are usually not covered
- Exclusions for self-inflicted injuries and cosmetic medical procedures
- The Affordable Care Act has removed the lifetime cap for all policies issued after September 2010
MAJOR MEDICAL INSURANCE
(STAND ALONE POLICY)
* The annual deductible for the policy can vary from a low of a few hundred dollars to several thousand dollars.
- If the major medical insurance policy covers a family, the deductible typically applies per person, per year (an embedded deductible).
- Typical structures for the policy are 80% / 20% or 60% / 40%, up to an out-of-pocket maximum.
- Once the insured’s share of the expenses, including the deductible and coinsurance amounts, equals the out-of-pocket maximum, the insurance company pays 100 percent of any additional health care costs for that
year.
MAJOR MEDICAL INSURANCE: EXAMPLE
* Randy and Kelly are married and have three children. They are covered by a major medical insurance policy with an individual $250 deductible, 80% / 20% coinsurance provision, and an individual out-of-pocket maximum of $2,500. In a softball game this year, Randy slid into second
base and dislocated his knee to the point that he needed knee replacement surgery.
The surgery cost $25,000. There were no other
health care costs incurred by the family this year.
* Randy’s knee replacement surgery will result in him paying
BASIC MEDICAL EXPENSE INSURANCE
* Basic medical expense insurance is similar to group basic medical expense coverage.
* Unlike major medical insurance policies, basic medical expense insurance policies only cover specified types of medical expenses.
These plans do not meet the ACA requirements for minimum essential coverage.
- Basic medical expense insurance may pay for actual expenses incurred when receiving health care or may pay a lump sum upon the occurrence of some event affecting one’s health.
- Policy limits are likely to be very low compared with major medical
policies.
TYPES OF GROUP AND INDIVIDUAL PLANS:
INDEMNITY PLANS
TYPES OF GROUP AND INDIVIDUAL PLANS:
INDEMNITY PLANS
* Both group and individual health insurance plans can be written on an indemnity basis (reimbursement) or on a managed care basis.
- Indemnity health insurance is also referred to as a traditional health insurance plan.
- Indemnity health insurance plans allow participants the benefit of having a whole range of health care practitioners at their disposal and not be locked into a service network system for medical care.
- Care is provided on a fee-for-service basis
There are 4 main types of managed care approaches to health insurance coverage
TYPES OF GROUP AND INDIVIDUAL PLANS:
MANAGED CARE
* Managed care insurance emerged from a desire to reduce the costs of health care while increasing competition among service providers.
- There are four main types of managed care approaches to health insurance coverage:
- Health Maintenance Organization (HMO)
- Preferred Provider Organization (PPO)
- Point-of-Service Plans (POS)
- Exclusive Provider Organization (EPO)
HEALTH MAINTENANCE ORGANIZATIONS (HMOs)
- HMOs consist of a group of physicians who provide comprehensive care for their patients and are organized in an effort to control the rising cost of healthcare.
- Physicians may be employed by the HMO directly or may be physicians in private practice who have chosen to participate in the HMO network.
- HMOs emphasize preventive medical care so that illnesses and diseases may be detected and treated early, avoiding higher costs later on.
- One major disadvantage of HMOs is that patient choice is limited by establishing a network of approved health care providers.
A primary care physician (PCP) serves as the gatekeeper to specialist service
PREFERRED PROVIDER ORGANIZATIONS (PPOs)
- A Preferred Provider Organization is an arrangement between insurance companies and health care providers that permits members of the PPO to obtain discounted health care services from the preferred providers
within the network
.* A PPO typically has a larger provider pool for participants to choose from.
- Participants are not required to receive services from preferred providers, but higher deductibles and coinsurance payments may apply when services are obtained from providers outside of the network.
POINT OF SERVICE PLAN (POS)
* A point of service plan (POS) is considered a managed care/indemnity plan hybrid, as it mixes aspects of in-network and fee-for-service for greater patient choice.
- Like an HMO and a PPO, a POS plan has a contracted provider network.
- POS plans encourage members to choose a primary care physician from within the health care network.
- This physician becomes the patient’s “point of service.”
- The in-network, primary care physician may make referrals outside of the network,
if the patient prefers an out-of-network provider, but higher deductibles and coinsurance payments may apply if the insured is receiving services on the indemnity side.
EXCLUSIVE PROVIDER ORGANIZATION (EPO)
- A managed care plan under which services are covered only when received from in-network doctors, specialists, or hospitals.
- No coverage is provided outside the network unless due to emergency.
- Similar to an HMO but does not require a PCP to serve as the gatekeeper to specialist care.
A PCP may be selected if coordination of care is desired
CONSUMER-DIRECTED HEALTH PLANS (CDHPs)
* A combination of a high deductible health plan and a Health Savings Account (HSA) which is used to accumulate funds on a tax-advantaged basis to pay health care expenses subject to the deductible and other
cost sharing.
- A popular way for employers to reduce the cost of providing health care benefits to employees.
- A portion of the premium savings from the high deductible may be contributed to the HSA
