Lesson 8

Question 1

1.1 Explain why a schedule of benefits for a group EHC plan differs from a schedule of benefits for a life insurance and disability benefits

Answer 1

A schedule of benefits for a group EHC plan differs from a schedule of benefits for life insurance and disability benefits because health care is composed of many benefits each with it’s own provisions.

The schedule of benefits may include deductibles, coinsurance and maximums per covered individual.

Claims are adjudicated in accordance with the schedule and eligible claims expenses are limited to reasonable and customary charges.

In contrast life and disability plan schedules, the range of benefits payable is narrower benefit amounts are predetermined.

Question 2

1.2 Contrast the calendar year deductible and a per prescription deductible

Answer 2

Calendar year deductible can be based on actual calendar year or plan year.

A per prescription deductible is applied each time a prescription as well.

Question 3

1.3 Explain split coinsurance

Answer 3

The coinsurance percentage under group EHC plans typically ranges from 50% to 100%.

With split coinsurance, eligible expenses are subject to a coinsurance below 100% until a certain amount of expense is incurred (out-of-pocket maximum), after which the plan pays 100% of all eligible expenses for the remainder of the contract year.

Out of pocket maximums are added protection to a covered individual who has incurred catastrophic claims due to a serious medical condition.

Question 4

1.4 Describe the types of benefit maximums usually included in group EHC (2)

Answer 4

Internal limits and overall maximums

Internal limits are benefit maximums applied annually or some other frequency. Can be over an individual’s lifetime.

An overall maximum may be applied to the total benefits payable. Such as a lifetime maximum of $1,000,000 for out of county expenses

Question 5

1.5 Explain how reasonable and customary charges are applied in EHC plans (explain & 3 points definition)

Answer 5

The limit is listed in a schedule of fees as determined by each insurance company. Generally a reasonable and customary charge falls within the range of fees normally charged in a geographic location for a given service, treatment or procedure.

Usually the lowest of:

1) A price that is common where the treatment was provided
2) A price published in a fee guide for a given professional association
3) The maximum price established by law

Question 6

2.1 Identify how insurers define hospital in a group EHC plan (3)

Answer 6

A public facility that

1) Is licensed to provide care or treatment for sick or injured patients, primarily while they are acutely ill.
2) Has facilities for diagnostic treatment and major surgery
3) provides 24h nursing care

Question 7

2.3 Describe the conditions that drugs and medicines normally must meet to be covered in an EHC plan (4)

Answer 7

1) Medically required
2) Are prescribed by a physician or dentist (more professions such as nurse practitioners are now allowed to prescribe)

3) has a drug identification number (DIN)
4) Are dispensed by a registered pharmacist

Question 8

2.4 describe a group EHC plan designed on a prescribed drug basis

Answer 8

covers any drugs prescribed by a physician and dispensed by a pharmacist.

Injectable drugs, serums and vaccines used to prevent diseases and administered by a qualified individual may be eligible if prescribed by a physician.

Other types of eligible drugs include oral contraceptives and life sustaining drugs prescribed by a physician for the treatment of specified ailments such as colostomy, ileostomy and diabetes

Question 9

2.4 describe a group EHC plan designed on a prescription drug basis

Answer 9

A group EHC plan designed on a prescription drugs basis generally only covers drugs that legally require a prescription

Question 10

2.5 Implementing a generic equivalent drug plan can help manage the cost of drugs in a group EHC plan. Explain how a generic equivalent drug plan usually workd

Answer 10

Where brand name drugs are purchased and a generic substitute is available this provision allows insurers to reimburse only up to the cost of the generic drug.

This may allow for payment of the brand name when the physician indicates that the generic isn’t suitable

Question 11

2.5.b What are the two types of generic equivalent plans available

Answer 11

1) Voluntary generic substitution. Payment is based on the generic equivalent unless the physician indicates no substitution
2) Mandatory generic substitution. Payment is based on the generic even if the physician indicates no substitution. Usually has an exemption for members that require the brand name for medical reasons such as adverse reaction to the generic.

Question 12

2.6 Describe three methods of drug claim payment

Answer 12

1) Reimbursement
2) Pay direct
3) deferred drug card (like pay direct except the member pays the entire cost and then is reimbursed. It just simplifies the claims making process since no form is required)

Question 13

2.7 Explain the purpose of a Drug Utilization Review (DUR)

Answer 13

Insurers can use a DRU to monitor prescription drugs used by plan members.

Prescription drug information is entered at the point of purchase and reviewed against history and other data to identify potential drug therapy problems and pharmacies’ dispensing practices.

This includes drug interactions, duplicate therapy, duplicate drugs, premature refills and potential adverse reactions.

If a DUR reveals that filling a prescription may pose a health hazard the pharmacist is advised with an online message and contacts the member or their
physician.

Question 14

2.8.a What is a retrospective DUR?

Answer 14

Analyzes past drug purchases to determine whether a drug should not have been dispensed.

Can be used in both reimbursement and drug card plans. Statistical reports summarize each covered individual’s files and each pharmacies’ dispensing practices to provide data to control drug use and misuse problems.

Question 15

2.8.b What is a concurrent DUR?

Answer 15

Analyzes cost control and potential health related issues while drugs are being purchased. Only available to drug card plans with real time online adjudication.

Question 16

2.8.c What is a prospective DUR?

Answer 16

Analyzes historical claims for the purposes of using past practices to project future practices.

Can identify individuals who are good candidates for purchasing medication in bulk with favourable reduced dispensing fees. The downside is that the person’s condition and prescription may change

Question 17

2.9.a Describe the coverage usually provided in a group EHC plan for private duty nursing care (3 points)

Answer 17

Usually only for care recommended by a physician and performed by an RN.

May allow for less expensive care by practical nurses, registered nursing assistants or members of the Victorian Order of Nurses.

Usually an annual max (5K-25K) subject to plan deductible and coinsurance

Question 18

2.9.b Describe the coverage usually provided in a group EHC plan for paramedical practitioners (3 points)

Answer 18

May vary by province as the CRA limits eligible expenses to practitioners who are licensed/regulated by a body in the province or territory where they work.

Generally subject to deductible and coinsurance. Maximums vary by type of practitioner but can also be subject to combined maximums.

In most cases a physician’s referral isn’t required.

Question 19

2.10 Describe the conditions that must be met when coverage is provided in a group EHC plan for emergency medical services rendered outside the covered individual’s province or territory of residence (2)

Answer 19

Both:
a) The service is required due to a medical emergency while on a trip lasting a maximum of 60-180 days (or no max in some plans) and a fixed dollar maximum

b) the covered individual is covered under provincial/territorial health insurance plan or equivalent

Question 20

2.11 Identify types of coverage provided in a group EHC plan for out of country/province/territory expenses (5)

Answer 20

1) Treatment by a physician
2) Diagnostic x-rays and laboratory services
3) Hospital accommodations usually in a standard or semi private room or intensive care as required
4) Medical and paramedical supplies and services provided during hospitalization
5) Hospital and nursing services and medical supplies provided on an outpatient basis

Question 21

2.12 Identify coverage usually provided in a group EHC plan for vision care (3)

Answer 21

Vision care usually excludes safety glasses, sunglasses and antireflective coatings. Laser eye may be included.

Usually a max of $100-$300 every 24 months. (sometimes 12 months for children)

Not usually subject to deductible or coinsurance.

Question 22

2.12 Identify coverage usually provided in a group EHC plan for hearing aids (3)

Answer 22

Usually covered if recommended by a physician or otolaryngologist. Some plans offer replacement of hearing aids but exclude batteries.

Max dollar benefit usually applied every 3-5 years.

Normally subject to deductible and coinsurance

Question 23

2.13 Identify coverage typically provided in a group EHC plan for plan members who become totally disabled

Answer 23

May contain a provision to continue coverage with payment of premium or with premium waived.

If the plan sponsor terminates the plan while the insured person is totally disabled benefits usually continue for health care expenditures related to disability for a maximum period after the date of termination. Usually 90 days to 1 year. While the person remains totally disabled

Question 24

2.14 Describe the types of exclusions and limitations typically included in group EHC plans (7)

Answer 24

1) Any such payment that is prohibited by law
2) Any services or supplies that a covered individual may obtain as a benefit under a provincial/territorial plan
3) Any services or supplies for which there would have been no charge levied in the absence of coverage
4) Any services and supplies associated with a covered item but not specifically listed as eligible
5) Services and supplies received outside Canada except for those covered and provided for in the out of country provision
6) Expenses resulting from an intentional self inflicted injury, in the commission of a criminal act or as a result of war
7) Experimental drugs and medical procedures or treatments

Question 25

3.1 Contrast the use of plan member premium contributions to the use of deductibles as a cost containment approach

Answer 25

Premiums have all members contribute through payroll deductions. The drawback is that members may see their contribution as an investment and use the plan more to get back more in reimbursed claims.

Deductibles are connected to actual expenses and may discourage plan use. Shifts some of the cost burden to the member. Equitable in the sense that individuals cost is related to use.

Deductibles effect can be eroded by inflation though

Question 26

3.2 Explain why the plan sponsor may choose coinsurance as a cost containment strategy

Answer 26

Has both inflation and cost sharing built in.

Question 27

4.1 Outline main methods for funding EHC plans (3)

Answer 27

1) Insured non refund, either pooled or prospectively rated
2) Insured Refund
3) Self insured with or without a pooling arrangement to limit financial exposure to higher than expected claims

Question 28

4.2 Compare the usual funding arrangements for small, midsized and larger groups

Answer 28

Small: Usually insured nonrefund accounting, either pooled or prospectively rated.

Midsized: nonrefund accounting either pooled or prospectively rated but employers are more likely to accept some form of risk sharing.

Larger: refund accounting or self insured (usually self insured use administrative services only (ASO) arrangements)

Question 29

5.1 Outline the general definition of a HCSA

Answer 29

An individual plan member account used to reimburse the member for certain expenses not covered by other benefits.

Generally expenses paid from the HCSA include deductibles and coinsurance which would otherwise be out of pocket

Question 30

5.2 Identify reasons a pan sponsor may choose to introduce a HCSA (8)

Answer 30

1) Can broaden the scope of benefits eligible for reimbursement
2) Allows the sponsor to offer a health related benefit without being locked in to a benefit that may become expensive
3) Delivers benefits tax efficiently
4) Provides relief to employees if plan member cost sharing is increased through deductibles and coinsurance
5) Allows members to claim expenses that would otherwise not have bee deductible
6) Allows plan sponsors to test the concept of flexibility on a limited scale without commitment to a full choice plan
7) Reduces the potential for adverse selection by eliminating coverage for predictable benefits such as vision care from the benefits plan
8) Applies a defined contribution approach vs a defined benefit approach and therefore limits the plan sponsor’s exposure to health care inflation

Question 31

5.3 Describe the three design features that must be included in a HCSA to introduce the element of risk required by the CRA (3 + 2 sub points)

Answer 31

1) members must make elections for the account only once annually. At the start of the year they determine how many flex credits will be contributed to the account. This doesn’t change unless additional dependents are added

2) There must be a use it or lose it feature structured either as
a) credit carry forward - unused credits at then end of the second year are forfeited
b) Debit - Expenses can be carried forward to the next year

3) There must be a use it or lose it feature where credits are forfeited when a member terminates, retires or dies

Question 32

5.4 Explain why some plans require a member to submit their claims to all group and individual benefit plans they are under before submitting it to a plan administrator for reimbursement through the HCSA

Answer 32

This ensures that the item isn’t covered under other plans.

May be required to submit an explanation of benefits if partially covered under another plan

Question 33

5.5 Lou Fielding is currently covered under his employer’s benefits plan, which includes an HCSA of $300 per year. All HCSA credits are allocated at the beginning of the year. Lou has not used any of his HCSA credits to date. Lou is also covered as a dependent under his spouse’s group benefits plan. Lou’s plan does not cover eye exams; however, his spouse’s plan provides coverage for eye exams to a maximum of $50 every two years with no deductible. Assuming this is his first eye exam claim in over two years, if Lou incurs an expense for eye exams of $130, calculate how much he will be out of pocket.

Answer 33

$50 from spouse’s plan

$80 from HCSA

Question 34

5.6 Describe the plan design and administrative issues a plan sponsor should consider when deciding whether to introduce a HCSA (3)

Answer 34

1) Administrative effort vs mbr gain
2) Funding - will money be new money, money freed up form benefit trade offs or a combination? Will carry forward be debit or credit
3) Impact of plan member choice. Can affect other benefit choices in flex plans and should be communicated to the member.

Question 35

5.7 Outline the special recordkeeping functions required for HCSA (5)

Answer 35

1) Recording deposits of balances to each plan member’s accounts
2) Processing claims for reimbursement
3) Handling the unused balance of HCSA of plan members that have been terminated
4) Processing year-end claims
5) Reporting activities to each plan member

Question 36

6.1 Describe the criteria that must be met for an expense to be eligible for reimbursement under an HCSA (2)

Answer 36

1) The plan must qualify as a PHSP under the ITA
2) The expense must be eligible for the medical expense tax credit on the plan member’s income tax return as outlined in ITA regulations and CRA guidance

Question 37

6.2 Provide examples of expenses that are not eligible for reimbursement in an HCSA that qualifies as a PHSP under ITA (5)

Answer 37

1) Premiums paid to provincial/territorial medical or hospital plans
2) Athletic or fitness club fees
3) Blood pressure monitors
4) Nonprescription birth control devices
5) Diaper services

Question 38

6.3 Identify the basic elements an HCSA must have in order to qualify as a PHSP under IT-339R2

Answer 38

It must be an undertaking by one person to indemnify another person for an agreed consideration, from a loss or liability in respect of an event the happening of which is uncertain.

Question 39

7.1 Explain why taxable spending accounts are not effective vehicles to reimburse health care expenses that could qualify as eligible expenses under an HCSA

Answer 39

There aren’t tax advantages

Question 40

7.2 Provide examples of benefits that can be provided under taxable spending accounts that can contribute to plan member health care needs and wants

Answer 40

A wide range can be taxable

Wellness, fitness or personal spending accounts.

Financial counselling, fitness clubs and sabbatical leave