Ch. 4 Medical Expense Insurance & Exam

3 approaches used by insurers in providing surgical expense coverage & determining the benefits payable:

1. Surgical Schedule approach also known as (Scheduled Plans)- Every surgical procedure is assigned a dollar amount by the insurer 2. Nonscheduled Plans (reasonable & customary approach)- Pay benefit on Usual, Customary, & Reasonable approach (UCR). -Under UCR the surgical expense is compared to what is deemed reasonable & customary for the geographical part of the country where the surgery was performed. -* The Usual, Customary, & Reasonable approach is the maximum amount an insurer will consider eligible for reimbursement under a health insurance plan. -Nonscheduled plans are moe common under comprehensive & major medical policies. 3. Relative Value Scale Approach- Similar to the surgical schedule method. -The difference is that instead of a flat dollar amount being assigned to every surgical procedure, a specified set of units is assigned. -The policy will carry a stated dollar-per-units amount (known as the conversion factor) to determine the benefit.

preexisting condition

An illness or disorder of a beneficiary that existed before the effective date of insurance coverage. -Most policies contain a benefit limitation on pre-existing conditions. -Limitations apply to all pre-existing conditions where or not the insured declared them on the application. -Unlike the impairment rider, the exclusion for pre-existing conditions is subject to the time limit for certain defenses

Health Savings Account (HSA)

Are designed to help individuals save for qualified health expenses. -HSAs are tax deductible. An individual can make a tax-deductible contrinution to an HSA, & use it to pay for out-of-pocket medical expenses. -Contributions to HSAs by individuals are tax deductible & contributions by an employer are not included in the individual's taxable income

Major Medical Expense Plans

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.

Basic medical expense coverage

Coverage for medical expenses, such as hospital and surgical expenses, physicians' visits, and miscellaneous medical services & nonsurgical service -benefits limited to patients

Corridor Deductible

Covers the gap BTW basic coverage & major medical. -When a major policy is supplementing basic coverage (that contains no deductible), the deductible is not applied until the basic coverage has been exhausted.

Flat Deductible

Deductible comes in to play when a major medical policy is supplementing basic coverage that contains no deductible, the corridor deductible is not applied until the basic coverage has been exhausted.

dental plans

Dental expense insurance is a form of medical expensive health insurance that covers the treatment, care & prevention of dental disease & injury to the insured's teeth. -An important freature is not found in medical expense insurance plan is that they cover diagnostic & preventive care such as teeth cleaning & fluoride treatment

What type of policy would only provide coverage for specific types of illnesses (cancer, stroke, etc)?

Dread disease insurance

Relative Value Scale

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.

All of the following plans allow for employee contributions to be taken on a pre-tax basis EXCEPT:

Health Reimbursement Arrangment Plan

Which of the following is NOT included under a health benefit plan?

Hospital indemnity plan

Limited Risk (Dread Disease) Policies

- provide accidental death or dismemberment benefits for a specified cause such as cancer or heart disease. -benefits paid as a scheduled, fixed-dollar amount for specified perils or medical procedures such as hospital confinement or chemotherapy.

Coinsurance known as Percentage Participation

Is a requirement found in major medical policies that require the insured to participate in the payment of some of the expenses w/ insurer. -After the insured satisfies the deductibles, the insurance company & the insured share in the remainder of expenses. -The insurance company pays higher % of additional expenses usually 75%-80% & the insured pays the rest. -Usually, insured pays 20% and insurance pays 80%.

Pre-Existing Conditions

Is an illness or medical condition that existed before a policy's effective date; usually excluded from coverage, through the policy's standard provisions or by waiver.

Integrated Deductible

Is used when a major medical plan is supplementing basic coverages.

A dread disease policy is considered to be a type of

Limited health insurance policy: provides limited coverages to specific injuries or illnesses such as travel accidents, hospital income & dread diseases.

Medical Savings Account (MSA)

Medicare health savings account program. -Created to help employees of small employers, as well as self-emplpyed individuals, pay for their medical care expenses. -MSA's are TAX-FREE accounts set up w/ financial institution such as banks & insurance companies. -Qualified medical savings accounts are available for employers w/ no more than 50 employees.

stop-loss Limit/maximum Out of Pocket

Most major medical policies contain a stop-loss feature to limit the amount of expense the insured may be exposed to in a policy year. -Often, the stop-loss will state that after the insured has paid a specific amount toward her covered expense, the insurer will pay 100% of the remaining expenses for the remainder of the policy year, up to the maximum limit of the policy.

When an insured has a major medical plan w/ first dollar coverage, how does this impact the benefits paid?

No deductible payment is required

Hospital Indemnity/Fixed Rate Policy

Provides a specific amount on a daily, weekly or monthly basis while the insured is confined to a hospital.

The elimination period under a hospital indemnity plan is

The specified number of days an insured must wait before becoming eligible to receive benefits for each hospitalization

Limited Benefit Policies

There are a variety of health insurance policies providing limited coverage for specific accidents or sickness. -Benefits may be paid on a reimbursement or idenmnity basis -These contracts must specify the type of accident or sickness covered, limited perils & amounts of coverage. Ex: noncovered medical expense, out of pocket payments, accidental injury

Deductible

With major medical insurance, the insured is required to satisfy a deductible before benefits are payable. -Depending upon the specific policy, the deductible may be a Flat deductible, Corridor Deductible, Integrated Deductible

Hospital Expenses

coverage covers hospital room & board, miscellaneous hospital expenses, such as lab & x-ray charges, medicines, use of operating room, & supplies, while the insured is confined in the hospital. -There is no deductible & the limits on room & board are set at a specified dollar amount per day up to a maximum number of days. -these limits may not provide for the full amount of hospital room & board charges incurred by the insured

Jennifer is required to pay a specific sum out of pocket before any benefits are paid in a year. Her health policy most likely contains a(n)

deductible

Per Cause Deductible

insured pays one deductible for all expenses incurred for the same injury or illness. The insured must satisfy a deductible for each accident or illness.

Low frequency diseases can be exclusively covered by what kind of health insurance policies?

limited policies

Surgical Expense

pays part or all of the surgeon's fees for an operation

Benefit Period

period of time for which benefits are available; generally for one year.

Maximum benefits refers to the

upper limit of the total lifetime benefits the insurance company will pay

internal limits

Certain types of expenses may have limits placed on the dollar amount of certain services or on the type of service provided.

What is the tax liability for employer contributions in Health Savings Accounts (HSA's)?

No tax payment needed

critical illness

Policy pays a lump sum to the insured upon the diagnosis & survival of a critical illness. -The policy owner must surivive the illness for a certain period of time, 30-90 days.

Medical Expense Insurance

Provides financial protection against the cost of medical care for accidents & illness. -coverage may be provided for hospital care, physician services, surgical expenses, diagonostic & laboratory services, drugs, nursing, & other medically necessary procedures

A payment system for health care in which the provider is paid for each service given is called

fee-for-service

A proposed insured for a health insurance policy was treated for heart disease w/in the past year. When applying for health insurance, the heart disease treatment

indicates a preexisting condition

Distributions from a Health Savings Account (HSA) for qualifies medical expenses are

tax-free; HSA's are tax deductible

All-cause deductible

the insured only has to meet the deductible amount once during the benefit period

Major Medical expense plans provide coverage for each of the following EXCEPT:

work-related injuries

An insured under a Major Medical expense plan with a zero deductible and 80/20 coinsurance provision files a $1,000 claim. How much of this claim is the insured responsible for?

$200

(Major Medical Expense Plans) These policies provide the following coverages:

1. Comprehensive coverage for hospital expenses, which usually includes room & board. 2. Miscellaneous expenses 3. Nursing services 4. Physician services 5. Catastrophic medical expense protection 6. Benefits for prolonged injury or illness -These policies carry deductibles, coinsurance requirements, & large benefit maximums.

Basic Medical Expense Coverage can be purchased to cover the following:

1. Emergency Accident Benefits 2. Maternity Benefits 3. Mental & Nervous Disorder Care 4. Home Health Care 5. Outpatient Care 6. Nurse's Expenses

Two Common Types of Major Medical Policies:

1. Supplemental 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. 2. Comprehensive Major Medical Policies- Is a combination of basic expense coverage & major medical coverage sold as one policy. -They cover practically all medical expenses, including hospital physicians, surgical nursing, drugs, & laboratory tests. -Include deductible, coinsurance, & are sold on a group basis.