Accident & Health Insurance Policies

Total disability is defined differently under some disability income policies. The two are

"any occupation" and "own occupation"

In a PPO, all network providers are considered

"preferred," and you can visit any of them, even specialists, without first seeing a primary care physician. Certain services may require plan pre-certification, an evaluation of the medical necessity of inpatient admissions and the number of days required to treat your condition

Total Claim - Deductible - Insured's Share of Coinsurance =

$ paid by the Company

The three basic coverages

(hospital, surgical and medical) may be purchased separately or together as a package

Recurrent Disability is generally expressed in a policy provision that specifies the period of time

(usually 3-6) months), during which the recurrence of an injury or illness will be considered as a continuation of a prior period of disability. The significance of this feature is that recurrence of a disabling condition will not be considered to be a new period of disability so that the insured is not subject to another eliminati0n period

Generally, Major Medical Expense Policies provide the following coverage

- Comprehensive coverage for hospital expenses (room and board and miscellaneous expenses, nursing services, physicians' services, etc.) - Catastrophic medical expense protection - Benefits for prolonged injury or illness

Group plans differ from individual plans in a variety of ways

- Group plans usually specify the benefits based on a percentage of the worker's income, while individual policies usually specify a flat amount - Short-term group plans usually provide maximum benefit periods of 13 to 26 weeks, with weekly benefits of 50% to 100% of the individual's income. Individual short-term plans have maximum benefit periods of 6 months to 2 years - Group long-term plans provide maximum benefit periods of more than 2 years, with monthly benefits usually limited to 60% of the individual's income - Group disability plans also have minimum participation requirements. Usually, the employee must have worked 30 to 90 days before becoming eligible for coverage - Group plans usually make benefits supplemental to any benefits received under workers compensation - Some group disability plans limit coverage to only nonoccupational disabilities

Social Insurance Supplement (SIS) or Social Security Riders provide for the payment of income benefits generally in three different situations

- When the insured is eligible for Social Security benefits but before the benefits begin (usually there is a 5 month waiting period for Social Security benefits) - If the insured has been denied coverage under Social Security (roughly 75% of the people who apply for Social Security benefits are denied coverage because of their rigid definition of total disability) - When the amount payable under Social Security is less than the amount payable under the rider (in this case only the difference will be paid)

Most policies offer benefit periods of

1 year, 2 years, 5 years, and to age 65. Some plans offer lifetime benefits. The longer the benefit period, the higher the premium will be.

A true managed care plan should have 5 characteristics

1. Controlled access of providers 2. Comprehensive case management 3. Preventive care 4. Risk sharing 5. High quality care

PPOs differ from the HMOs in two ways

1. They do not provide care on a prepaid basis, but physicians are paid a fee for service 2. Subscribers are not required to use physicians or facilities that have contract with the PPO

The probationary period is a waiting period, often

10 to 30 days, from the policy issue date during which benefits will not be paid for illness-related disabilities.

Elimination periods found in most policies range from

30 days to 180 days. The longer the elimination period, the lower the premiums

Sickness or illness is defined as either a sickness or disease contracted after the policy has been in force at least

30 days; or a sickness or disease that first manifests itself after the policy is in force.

The partial disability benefit is typically

50% of the total disability benefit, and is limited to a certain period of time

Basic medical expense coverage is often referred to as

Basic Physicians' Nonsurgical Expense Coverage because it provides coverage for nonsurgical services a physician provides. However, the benefits are usually limited to visits to patients confined in the hospital No deductible with benefits, but coverage is usually limited to number of visits per day, limit per visit, or limit per hospital stay

There are three types of disability income policies used for businesses:

Business Overhead Expense, Key Person Disability, and Disability Buy-sell insurance

In North Carolina managed care includes both

Health Maintenance Organizations (HMOs), and Preferred Provider Organizations (PPOs).

Basic hospital, surgical and medical policies and the major medical policies are commonly grouped into what are referred to as

Medical Expense Insurance. They provide benefits for the cost of medical care that results from accidents or sickness.

There are two common types of Major Medical Policies available,

Supplemental Major Medical Policies and Comprehensive Major Medical Policies

Presumptive Disability is a provision that is found in most disability income policies which specifies the conditions that will automatically qualify the insured for full disability benefits

These conditions are dismemberment (the loss of use of any two limbs), total and permanent blindness, or loss of speech or hearing. Some policies require actual severance of limbs rather than loss of use

Basic surgical expense coverage

This coverage is commonly written in conjunction with Hospital Expense policies. These policies pay for the costs of surgeons' services, whether the surgery is performed in or out of the hospital Coverage includes surgeons' fees, anesthesiologist, and the operating room when it is not covered as a miscellaneous medical item No deductible, but coverage is limited

If you are injured in the normal duties of your job, then what pays for surgery and physical therapy?

Workers compensation

If you are injured in the normal duties of your job, what pays for the loss of income?

Your disability policy

In a PPO, the insured does not have to select

a primary care physician. The insured may choose medical providers not found on the preferred list and still retain coverage.

A deductible is

a specified dollar amount that the insured must pay first before the insurance company will pay the policy benefits

Injury is defined using either the

accidental bodily injury definition, or the accidental means definition

The principal sum is paid for

accidental death. This amount is usually equal the amount of coverage under the insurance contract, or the face amount

Accidental Death and Dismemberment rider pays for

accidental losses only, and is thus considered a pure form of accident insurance.

The cost of living adjustment (COLA) rider will help protect

against inflation. Under this rider the insured's monthly benefit will be increased automatically, once claim payments have begun.

Some supplemental major plans also include an integrated deductible in which case the

amount of the deductible may be satisfied by the amount paid under basic medical expense coverage

Stop-loss amount would be the

amount that the insured pays out of pocket during the year. When the insured's out-of-pocket expenses reach the stop-loss, the insurance company then provides coverage at 100% of eligible expenses for the remainder of the year. The out of pocket expenses that qualify for the stop-loss would be the insured's portion of the coinsurance and it may or may not include the deductible. The higher the stop-loss, the lower the premium will be.

Most major medical policies feature an

annual deductible that, as the name implies, is paid once in any year, regardless of the amount of claims in that year

Care is provided to members of the HMO by a limited number of physicians that

are approved to practice in the HMO

Comprehensive major medical plan is a combination of

basic expense coverage and major medical coverage, sol as one policy. They cover practically all medical expenses, hospital, physicians, surgical, nursing, drugs, laboratory tests, etc.

Residual disability is the type of disability income policy that provides

benefits for loss of income when a person returns to work after a total disability, but is still not able to work as long or at the same level he/she worked before becoming disabled Residual disability will help pay for loss of earnings

As opposed to the limited coverage available under the Basic Medical Expense Policies, Major Medical Expense Policies offer a

broad range of coverage under one policy.

A policy that uses the accidental bodily injury definition will provide

broader coverage than a policy that uses the accidental means definition

The policy may also contain a provision which applies when more than one family member is injured in a single accident, also called the

common accident provision. In this case, only one deductible applies for all family members involved in the same accident

in order to determine the amount payable, the assigned points (relative value) are multiplied by a

conversion factor. This conversion factor represents the total amount payable per point

The basic expense policy will provide coverage on a first-dollar basis (no deductible). After the limits of the basic policy are exhausted, the insured must pay a

corridor deductible before the major medical coverage will pay benefits. The corridor deductible derives its name from the fact that it is applied between the basic coverage and the major medical coverage

Basic hospital expense coverage

cover room and board, and miscellaneous hospital expenses, such as lab and x-ray charges, medicines, use of operating room and supplies, while the insured is confined in a hospital

Comprehensive major medical policies include a

deductible and coinsurance, and are generally sold on a group basis

Some policies also include a carry-over provision that states that if the insured

did not incur enough expenses during the year to meet the deductible, any expenses incurred during the last 3 months may be carried over to the next policy year to satisfy the new annual deductible

In a Disability buy-sell insurance policy; Disability buyout agreement specifies who will purchase a

disabled partner's interest and legally obligates that person or party to purchase such interest upon disability.

Basic coverage is referred to as first-dollar coverage because they usually

do not require the insured to pay a deductible. This differs from Major Medical Expense insurance. However, the basic medical coverages usually have more limited coverage than the major medical policies

The purpose of the elimination period is to

eliminate coverage for short-term disabilities in which the insured will be able to return to work in a relatively short period of time.

Supplementary Major Medical Policies are used to supplement the coverage payable under a basic medical expense policy. After the basic policy pays the supplemental major medical will provide coverage for

expenses that were not covered by the basic policy, and expenses that exceed the maximum. If the time limitation is used up in the basic policy, the supplemental coverage will provide coverage thereafter

The Preferred Provider Organizations (PPOs) could be seen as the traditional medical systems' answer to HMOs. In the PPO system, the physicians are paid

fees for their services rather than a salary, but the member is encouraged to visit approved member physicians that have previously agreed upon the fees to be charged.

HMOs operate on a capitated basis: the HMO receives a

flat amount each month attributed to each member, whether they see a physician or not. In essence, it is a prepaid medical plan. As a member of the plan, you will receive all services necessary from the member physicians and hospitals.

The HMO offers services to those living within specific

geographic boundaries, such as county lines or city limits. If individuals live within the boundaries, they are eligible to belong to the HMO, but if they do not live within the boundaries they are ineligible.

By means of the Health Maintenance Act of 1973, Congress strongly supported the growth of

health maintenance organizations (HMOs) in this country. The act forced employers with more than 25 employees to offer HMO as an alternative to their regular health plans

Probationary Period is another type of waiting period that is imposed under some disability income policies. It does not replace the elimination period, but is

in addition to it.

Guaranteed Insurability Rider, also referred to as Future Increase Option, allows an insured to

increase the benefit level to a specific predetermined amount at certain times or on certain occasions without proof of insurability. The times when the benefit may be increased are generally at ages 25, 28, 31, 34, 37 and 40. An increase may also be taken at one's marriage or the birth of a child. In order to exercise this rider, the insured must qualify from an income standpoint to prevent overinsurance

Benefit period refers to the

length of time over which the monthly disability benefit payments will last for each disability after the elimination period has been satisfied.

Stop-Loss limit is a provision in the policy that

limits the amount of coinsurance that a policyholder must pay - Are there co-payments the individual must pay for certain services, such as doctor visits? If one uses doctors outside a plan's network, how much more will he or she pay? - Is there a limit on how much the plan will pay for a person's care in a year or over a lifetime? (A single hospital stay for a serious condition could cost hundreds of thousands of dollars.)

Any medical expense plan that attempts to contain costs by controlling the behavior of participants is considered a

managed care program

The benefit limits are the

maximum benefits the insurer is willing to accept for an individual risk.

A copayment is a specific part of the cost of care or a flat dollar amount that must be paid by the

member. For example, the member may be required to pay $5, $10 or $25 for each office visit

The HMO provides the member with inpatient hospital care, in or out of the service area. The services may be limited for treatment of

mental, emotional or nervous disorders, including alcohol or drug rehabilitation or treatment.

Primary Care Provider (PCP) is a health care professional who is responsible for

monitoring an individual's overall health care needs. Typically, a PCP serves as a "gatekeeper" for an individual's medical care, referring the individual to specialists and admitting them to hospitals when needed

Adverse selection takes place when

more people with high loss records buy insurance than people with average or below average loss records

A hospital indemnity policy provides a specific amount on a daily, weekly or monthly basis while the insured is confined to a hospital. Payment under this type of policy is unrelated to the medical expense incurred, but based only on the

number of days confined in a hospital. This can also be called a hospital fixed-rate policy

Elimination period is a waiting period that is imposed on the insured from the

onset of disability until benefits payments commence. It is a deductible measured in days, instead of dollars.

The insured is allowed to receive care from any provider, but if the insured selects a PPO provider, the insured will realize lower

out-of-pocket costs. Conversely, if a non-network provider is used, the insured's out-of-pocket costs will be higher.

Business overhead expense (BOE) insurance is a unique type of policy that is sold to small business owners who must continue to meet

overhead expenses such as rent, utilities, employee salaries, installment purchases, leaded equipment, etc., following a disability

the purpose of the partial disability benefit is to cover a

partial loss of income when the insured is disabled to the point that he or she can still report to work, but is not able to perform al of the regular duties of the job

The capital sum is a

percentage of that principal sum paid by the policy, this happens in case of accidental dismemberment or loss of sight in one eye. The amount of the benefit will vary according to the severity of the injury.

Benefit limitations - the amount of monthly benefit that is payable under most disability income policies is based on a

percentage of the insured's past earnings.

Individual deductible which is when each insured is

personally responsible for a specified deductible amount each year

A PPO is a group of

physicians and hospitals that contract with employers, insurers, or third party organizations to provide medical care services at a reduced fee.

Many HMOs offer plan members the option to self direct care, as one would under an indemnity or PPO plan, rather than get referrals from primary care physicians. An HMO with this opt-out provision is known as a

point-of-service (POS) plan. How the plan functions (compared to an HMO or indemnity plan) depends on whether individual plan members use their primary care physician or self direct their care at the "point of service"

per occurrence deductible or flat deductible which the insured is required to pay for each claim,

possibly resulting in more than one deductible being paid in a given year

If the person can only work part-time or at a lesser paying position, residual disability will make up the difference between their

present earnings and what they were earning prior to disability

The main goal of the HMO Act was to reduce the cost of health care by utilizing

preventative care. While most insurance plans offered no benefits for preventive care prior to 1973, HMOs offer free annual check-ups for the entire family. In this way, the HMOs hope to catch diseases in the earliest stages, when treatment has the greatest chance for success. The HMOs also offer free or low-cost immunizations to members in an effort to prevent certain diseases

When an individual becomes a member of the HMO they will choose their

primary care physician (PCP) or gatekeeper. Once chosen, the primary care physician or HMO will be regularly compensated for being responsible for the care of that member, whether care is provided or not. It should be in the primary care physician's best interest to keep this member healthy to prevent future time for treatment of disease

The HMO tries to limit costs by only providing care from physicians that meet their standards and are willing to

provide care at a prenegotiated price

The purpose for the probationary period is to

reduce the chances of adverse selection against the insurer. This helps the insurer guard against those individuals who would purchase a disability income policy shortly after developing a disease or other health condition that warrants immediate attention.

In order for the member to get to see a specialist, the primary care physician (gatekeeper) must

refer the member. The referral system keeps the member away from higher priced specialists unless it is truly necessary.

When the relative value approach is used, each surgical procedure will be assigned a number of points that are

relative to the number of points assigned to the maximum benefit. The maximum points are usually assigned to major surgical procedures, such as open-heart surgery

Disability income insurance is designed to

replace lost income in the event of this contingency, and is a vital component of a comprehensive insurance program. May be purchased individually or through an employer on a group basis

Emergency care must be provided for the member in or out of the HMOs

service area. If emergency care is being provided for a member outside the service area, the HMO will be eager to get the member back into the service area so that care can be provided by salaried member physicians

The HMO provides benefits in the form of

services rather than in the form of reimbursement for the services of the physician or hospital. The HMO concept is unique in that the HMO provides both the financing and patient care for its members.

Most major medical policies include a coinsurance provision that provides for the

sharing of expenses between the insured and the insurance company

The probationary period applies to only

sickness, not accidents or injury

There is no deductible in basic hospital expense coverage and the limits on room and board are set at a

specified dollar amount per day up to a maximum number of days

Any physician or hospital that qualifies and agrees to follow the PPO's

standards and charge the appropriate fees that the PPO has established can be added to the PPO's approved list at any time

Social Insurance Supplement (SIS) or Social Security Riders are used to

supplement or replace benefits that might be payable under social security disability

Payments for surgical expenses are usually fixed amounts based on a

surgical fee schedule. Insurance companies use fee schedules to determine the average cost of a procedure according to usual, customary and reasonable charges

Each basic surgical expense coverage contract has a

surgical schedule that lists the types of operations covered and their assigned dollar amounts. If the operation is not listed, the contract may pay for a comparable operation.

Premiums paid for BOE insurance are

tax deductible to the business as business expense. However, the benefits received are taxable to the business as received

Partial disability is often defined as

the inability to perform one or more of the regular duties of one's own occupation or the inability to work on a full-time basis, which results in a decrease in the individual's income.

"own occupation" definition of total disability is defined as

the inability to perform the duties of one's own occupation This is the more LIBERAL definition which makes it easier to qualify for disability benefits

Disability income and long-term care policies usually have a

time deductible in the form of elimination period

family deductible whereby the annual deductible is satisfied if

two or more family members pay a deductible in a given year, regardless of the amount of claims incurred by additional family members

"any occupation" definition of total disability requires the insured to be

unable to perform any occupation for which he or she is reasonably suited by reason of education, training or experience

Accidental bodily injury means the damage to the body is

unexpected and unintended.

Accidental means indicates that the cause of the accident must be

unexpected and unintended.

Generally, disability income policies do not cover losses arising from

war, military service, intentionally self-inflicted injuries, overseas residence, or injuries suffered while committing or attempting to commit a felony