Chapter 15

Three types of deductibles:

1. Flat 2. Corridor 3. Integrated

Blanket insurance

Blanket insurance insures members of a group participating in a certain activity, such as members on a sports team, students, or a band of musicians travelling abroad. Individuals covered by the plan are not named on an individual-basis because membership in the group changes frequently. Coverage is issued to all individuals of the group. Certificates of coverage are not issued.

Credit health insurance

Credit health insurance is intended to insure a debt. If a debtor becomes disabled, payments to a creditor are made for the disabled insured until the insured can resume work. Credit health insurance can be sold individually or through a group plan. Credit insurance is most commonly sold through a group plan. Under a credit health policy, the expected policy benefit will be equal to the net amount of the loan at the time of death or disability.

Broad service area-PPO

Generally the service area for a PPO is much larger than the service area of an HMO. The PPO does not own or sub-contract with a clinic and thus is adaptable to larger geographical areas. Many states create PPOs for state employees, for instance.

Emergency care provisions

In- and Out-of-Area emergency services, including medically necessary ambulance services, usually must be available at the HMO clinic on an inpatient or an outpatient basis 24 hours a day, seven days a week. Out-of-Area emergency services may be excluded, however, though patients may purchase the service as a supplement. A subscriber who needs emergency care while on business or vacationing out of the HMO area can usually qualify for benefit. Also, if a subscriber needs to use an urgent care facility in a critical emergency situation, those services will be covered. However, if a subscriber is within the HMO area and uses a non HMO emergency room, the services received will not be covered.

POS Point of service plans

Point-of-Service Plans are a type of managed care in which the subscriber is given a choice of receiving in-network care or out-of-network care. Their flexibility and the control they offer subscribers give them appeal.

Gatekeeper system

The primary care physician (PCP) acts as a "gatekeeper." Patients must visit the PCP when they require medical services. The PCP will consult records of all physicians and other providers in the HMO in order to coordinate the patient's treatment. The PCP determines if he can treat the patient satisfactorily or he needs to issue a referral for the patient to visit a specialist outside the HMO. The purpose of the gatekeeper system is to preclude unnecessary visits and treatments.

Accidental bodily injury

an accident is any event that causes loss, in which the results of the loss were unforeseen. Policies that use the accidental bodily injury definition cover nearly all injuries except for those that were self-inflicted. This more liberal definition can be thought of as a "results only" test. Returning to the chair example above, a disability income policy with the accidental bodily injury test would pay benefits for the person who accidentally broke his tailbone.

AD&D Principal Sum

face amount of the coverage and is paid out if the insured loses two limbs, two hands, two feet, vision in both eyes, or dies as a result of an accident.

AD&D Capital Sum

percentage (usually half) of the principal sum, and is paid out for loss of one limb, primary body part, or eye.

HRA eligibility

HRAs are established and offered through an employer for the benefits of the employee. The employer makes contributions to the HRA, not the employee.

Inside limits

Inside limits are limits placed on certain medical coverages within a policy, such as a dollar limit for room and board, or a dollar limit for x-rays.

Preventative care

Many insurers now cover annual physical examinations and a variety of screens.

Comprehensive

The comprehensive policy covers almost all medical expenses under one policy. The base plan in comprehensive plans includes medical, hospital, and surgical coverage.

Three Managed care models:

1. Health Maintenance Organization (HMO) 2. Preferred Provider Organization (PPO) 3. Point-of-Service Plan (POS)

2nd surgical opinion requirement

The second-surgical opinion option allows subscribers to consult with different medical practitioners for second and third opinions regarding the necessity of surgical procedures. HMOs often require second opinions for some procedures (e.g., tonsillectomies, coronary bypass surgery).

Two types of medical expenses:

1. Basic 2. Major Medical Basic plans provide certain types of medical care. Major medical plans are either a supplement to basic plans, or provide comprehensive care in a standalone plan. Comprehensive care provides broader coverage. Please note: base plans and major medical plans are outdated in the modern insurance market. Managed care plans have essentially replaced these plans.

Distinctive Features of a PPO

1. Broad Service area 2. Broad selection of preferred providers 3. No primary care physician used as "gatekeeper" or Mandatory referrals 4. Emergency Services Exempt from Preferred Providers' Requirement 5. No group-owned facility 6. Fee-for-service pay plan 7. Open Panel 8. Closed Panel

Base Plans:

1. Hospital expense, 2. Surgical expense, 3. Physicians' nonsurgical expense. All three plans, or just one or two may be purchased. There are additional plans available, which may be purchased separately or packaged with other base plans. These include nursing expenses and convalescent care. Base plans were introduced by Blue Cross and Blue Shield during the Great Depression of the 1930s and 1940s. The base plans gave people an affordable means of purchasing coverage for medical, hospital, and surgical benefits. All base plans offer first-dollar coverage, meaning there are no deductibles, and all base plans have low limits for catastrophic coverage. Because base plans do not have cost-sharing mechanisms (deductibles and coinsurance), they are very expensive and are not sold as standalone contracts today. However, many modern health insurance plans are partly made up of base plans.

Features of POS plans:

1. In-Network coverage 2. Out-of-Network coverage

Utilization mgt has two parts:

1. Prospective review (or preadmission certification) 2. Concurrent review.

Two types of major medical policies:

1. Supplemental 2. Comprehensive stand-alone plan

All three plans:

1. The HMO member must go to a group-owned clinic and see whatever primary care physician is available at that time. 2. The PPO member will likely have several approved facilities with a number of physicians near his home from which to choose. And should he still prefer an out-of-network facility, he may use it, though at a slightly higher cost in copayment. 3. The POS member may choose whatever provider or facility he likes, so long as he is willing to pay a larger deductible or co-pay.

How Managed care reduces cost:

1. The organization uses the power of a large group of guaranteed subscribers to secure reduced fees from doctors and other medical providers. 2. They structure plan rules so they encourage preventative care (free annual checkups and screens, for instance) and early diagnoses, thereby reducing the major costs involved in treatment. 3. They monitor use of the plan in order to cut down on needless hospitalizations and treatments or overlong hospital stays.

Closed panel-PPO

A closed panel consists of a limited number of health providers that are chosen by the PPO and treat members of the PPO exclusively. All plan subscribers must receive their health care services from this closed panel of providers to have those services paid for on the prepaid plan. In theory, with a closed panel of fewer providers, the group is better able to manage costs.

HMO closed vs open panel

A panel is comprised of the group model HMO's health care providers including physicians, nurses, clinics and hospitals that are contracted with the HMO. Under an open panel arrangement, medical providers can treat patients who are not members of the HMO; whereas, in a closed panel, the medical providers exclusively treat members of the HMO.

AD&D

AD&D policies provide pure accident coverage and are not considered health policies. A lump-sum benefit is paid if the insured dies in an accident or loses limbs, eyesight, or hearing in an accident. AD&D coverage appears to function more like life insurance, but is, in fact, health insurance strictly covering accidental dismemberment or death. Death must usually occur within 90 days of the accident in order for the policy benefits to pay. AD&D policies can be sold as standalone policies or may be added to life or health insurance policies as riders. Some AD&D policies may pay double, triple, or quadruple the principal sum if the insured dies under specific circumstances. These are termed double indemnity, triple indemnity, or quadruple indemnity. Example: Tom has a $50,000 AD&D policy. If he is in an accident and loses one leg, the policy will pay the capital sum, or $25,000, which is half of the principal sum (half of $50,000). Just as in disability income policies, AD&D policies have a specific definition for "accident." The two definitions used to define an accidental injury are: the "accidental means" definition or the "accidental bodily injury" (results) definition.

Additional base plans

Additional base plans that may be purchased are nurses' expense benefits and convalescent care facility benefits. The nurses' expense benefits provide private duty nursing care based on the patient's care plan. Convalescent care is a daily benefit for confinement in a skilled nursing facility center for recovery after discharge from a hospital.

stop-loss feature

After coinsurance is paid, most major medical policies incorporate a stop-loss feature, also referred to as an out-of-pocket limit, which prevents the insured from incurring catastrophic loss. Once the insured's total out-of-pocket expenses reach the stop-loss limit, the insurer pays the remaining eligible expenses. Some policies specify they will cover 100% of eligible expense after a certain dollar amount of out-of-pocket expenses. Other policies may state that coinsurance will apply only to the next $5,000 of eligible expenses after the deductible is paid, after which the insurer will cover the remaining eligible expenses. Example: Assume Jake has a major medical policy with a $200 deductible and 80/20 coinsurance that applies for the next $5,000 of expenses. After that point, the insurer will cover the remaining eligible expenses. If Jake incurs $30,000 medical expenses, how will the bill be split up? The total bill is $30,000. First, Jake must pay the $200 deductible. This leaves a balance of $29,800. Coinsurance will apply on the next $5,000 of the bill. This means Jake will pay $1,000 of coinsurance (20% of $5,000 is $1,000). This leaves a balance of $28,800, which the insurer will pay. This means Jake's total out-of-pocket expenses on the medical bill are limited to $1,200.

Coinsurance

After the deductible is paid, coinsurance applies. The policy specifies what percentage of the medical expense the insurer and insured are responsible for paying. Usually, the insurer is responsible for the larger portion. One example of coinsurance is 80/20, in which case the insurer pays 80% and the insured pays 20%. Other coinsurance arrangements, such as 70/30 or 50/50, are possible. The purpose of coinsurance is to prevent insureds from over-utilizing the policy. Requiring the insured to participate in the cost of claims discourages insureds from incurring unnecessary medical expense. Example: Assume Ben has a 75/25 major medical plan with a $300 flat annual deductible. If Ben's expenses this year were $1,300 how is the bill split up? The total expenses are $1,300. Ben will pay the flat dollar deductible first. This brings the balance down to $1,000. The insurer will pay 75% of the balance ($750), and Ben will pay 25% of the balance ($250). Therefore, Ben's coinsurance is $250. The insurer paid a total of $750 and Ben paid a total of the deductible plus the coinsurance ($300 + $250) which equals $550. You can double check your work to be sure you calculated correctly: the coinsurance for Ben and the insurer plus the deductible should equal the total bill ($250 + $750 + $300 = $1,300). Check.

Broad selection of preferred providers-PPO

Although members of a PPO must select from a list of Preferred Providers for full coverage, the range of choices is far greater than the range of choices for an HMO. The PPO will pay full benefits only when a Preferred Provider is used. However, if a member uses a non-preferred provider or facility, the PPO usually pays a reduced amount, leaving the member to pay the balance. In addition, deductibles and coinsurance are usually involved for non-network providers.

Ambulatory care

Ambulatory facilities most often are found in hospital outpatient care facilities. They provide alternatives to hospital services and are significantly less expensive.

Health Maintenance Org (HMO)

An HMO (also called a Health Insurance Organization or HIC in some states) is a Managed Health Care plan in which a group of medical providers contracts with a group to provide medical care for its members at prices both agree to and that are lower than the costs of traditional insurance. The HMO is the original model in Managed Health Care. -Before an HMO may offer coverage and benefits to the public, the HMO must obtain a certificate of authority from the state's Department of Insurance. -The HMO owns or contracts with a clinic and staffs it. It subcontracts with a hospital. -Members may use only the group facilities and primary care providers (PCPs). -Only the PCP can refer a patient to a specialist or hospital. -The HMO provides free preventative medical care (annual physical exams and routine well-child visits, immunizations, age related preventative treatment, etc.) in an effort to identify and treat problems early, thus promoting health and saving money. -The HMO has control both of the producers and the purchasers of health care (the medical facilities and staff and the members who will use those). Thus, it stands a good chance of containing costs more efficiently than other managed cared models. -Each member of the HMO pays a specified monthly flat fee for membership. -Each member must be provided with a description of the specific procedure for lodging and resolving any complaints about the plan.

Open Panel- PPO

An open panel opens membership on the panel to any and all providers who want to provide services for the group, so long as they agree to the basic requirements. These providers may treat patients who are members of the HMO or PPO, as well as patients who are not members of the contracting group.

Point-of-Service Plans vs. Open-Ended HMO Plans

An open-ended HMO, also known as a point-of-service HMO, is a hybrid of the HMO model and the Point-of-Service model. Participants may use non-HMO providers at any time and receive indemnity benefits that are subject to higher deductible and coinsurance amounts. Subscribers simply pay more for the privilege of having control of choosing a health care provider.

Travel accident

Another type of accident-only policy is travel accident, which covers death or injury to a fare-paying passenger on a regularly scheduled commercial carrier such as an airplane. Coverage is valid for the duration of the flight.

Base plan exclusions:

Base plans typically exclude benefits for the following: -Preexisting conditions -Elective cosmetic surgery -Infertility services -Eye glasses and contact lenses -Dental expenses, unless resulting from an accidental injury -Substance abuse

Hospital expense

Basic hospital expense covers costs an insured incurs while confined to a hospital, including room and board, nursing care, x-rays, laboratory fees, operating and treatment room, oxygen, blood, medications, and general anesthesia. Basic hospital plans essentially cover all costs on a hospital bill except for physician's fees and surgeries. Two categories: 1. Room and board benefit: The room and board benefit is stated as a dollar amount per day of confinement, up to a maximum number of days. Some policies will pay the actual cost of a semi-private room, rather than specify a dollar amount per day. The benefit may be paid on a reimbursement or indemnity basis. The maximum number of days can range anywhere from 30 to 365 days. 2. Miscellaneous expenses: The miscellaneous or ancillary benefit covers all other costs aside from room and board. The miscellaneous benefit is stated as a multiple of the daily room and board limit.

Physician's nonsurgical expense

Basic medical covers nonsurgical physician's fees for accidental injury or sickness. Basic medical plans usually have a dollar maximum benefit per visit, such as $25 per visit, and a maximum number of visits per year.

Emergency Services Exempt from Preferred Providers' Requirement-PPO

Because of the nature of emergencies, which may require treatment at facilities other than those on the Preferred Provider list or by providers who have not agreed to the PPO arrangement, PPO plans generally pay in full for emergency treatment regardless of where and by whom it is performed.

Capitation

Capitation is the payment method used by HMOs. The HMO pays in-network health care providers a fixed amount for each member of the HMO. In other words, they pay "per head" (cap=head) or per member of the HMO, not per service.

Limited provider choice

Choice of physicians is limited to the group of medical service providers who have agreed to provide services for the agreed-upon price and to uphold the standards of the HMO. These are known as primary care physicians. Members must be referred to health care specialists by a primary care physician. (Health insurance, by contrast, does not limit the choice of physicians.)

Consumer driven health plans (CDHP)

Consumer Driven Health Plans (CDHPs) combine a savings account with high-deductible coverage and are offered by employers to their employees. The savings account can be an HSA or an HRA. The employee uses the funds in the account to pay for medical expenses. After the employee has paid medical expenses amounting to the deductible, the insurer will cover 100% of any additional qualifying medical expenses. Funds in the savings account may be used for any medical expense, such as child care or over-the-counter drugs. CDHPs are governed by employers. The employer establishes employee eligibility, the amount of contribution the employer will make, and rollover.

Copayments

Copayments are small dollar amounts HMO members are charged each time they visit a doctor or use a service, except for those provided free of charge (see above). This copayment is a small percentage of the actual cost of the medical care. Each member receives a certificate of coverage that states exactly the copayment amounts required for basic and supplementary service. HMOs are required to deliver to each subscriber the certificate of coverage, along with any other enrollment information, within 10 days of enrollment.

Corridor deductible

Corridor deductibles are often used for supplementary major medical plans. The corridor deductible coordinates with the basic medical plan. This is how it works: the basic plan pays medical expenses the insured incurs. Once the base plan benefits are exhausted, the insured will pay the full deductible. After that, major medical benefits kick in. Example: Assume Marge has a supplementary major medical plan. Her corridor deductible is $400. The base plan portion is $3,000 and her total bill is $10,000. How is the bill split up? The $400 corridor deductible will apply after $3,000 of basic medical expense benefits, and before the major medical portion of the policy kicks in. The policy will cover the first $3,000 of the $10,000 bill. This leaves $7,000, of which Marge must pay the next $400. This leaves $6,600, which will be used to establish the coinsurance (you will learn about coinsurance later in this module). CH17-MOD2-#2

Dental

Dental benefits are typically not included in traditional medical expense plans. Dental benefits are more frequently sold as specialized medical expense plans on a group basis and rarely as individual policies. Dental plans can also be set up as employer group dental expense plans.

Dread disease

Dread disease, also known as critical illness and specified disease policies, cover specific diseases. An example of a dread disease policy is a cancer or heart disease policy. Dread diseases occur infrequently, but when an individual does contract a dread disease, the medical costs associated with it can be extremely high. Dread disease policies can offer relatively inexpensive coverage compared to full coverage medical expense plans, which may exclude coverage for dread disease regardless.

Eligible expenses:

Eligible expenses under a major medical policy vary from policy to policy, but typically include the following: -Room and board for inpatient hospital stays -Medical and surgical services and supplies while hospitalized -Physician's expenses -Nurse's fees -Physical therapy -Anesthesia -Ambulance to and from the hospital -X-rays and laboratory tests -Oxygen -Blood -Casts, splints, braces, and crutches -Wheelchair rental -Durable medical equipment -Prosthetics -Convalescent nursing care -Prescription drugs -Outpatient care -Dental services resulting from injury to natural teeth

HRA tax benefits

Employer contributions are tax-deductible as a business expense. Benefits are not taxable to employees. The employer establishes employee eligibility rules and funds rollover.

FSA Tax benefits

FSA funds are not subject to federal income or Social Security taxes. Employees contribute a portion of their income earnings to the savings account pre-tax, which lowers their taxable income. In addition, withdrawals may be tax free if you are paying for qualified medical expenses.

FSA eligibility

FSA plans are established and offered through an employer for the benefit of its employees. Employee contributions are made through a voluntary withholding of wages/salary, which is often referred to as a salary reduction agreement. Some plans even involve employers contributing to the account as well.

Flexible spending account (FSA)

Flexible Spending Accounts (FSAs) are tax-advantaged savings accounts in which funds are used for qualified medical expenses and dependent care. There are two types of FSAs: qualified medical expense accounts and dependent care expense accounts. An individual may reimburse qualified expenses for a spouse or dependents in either account. FSAs can be offered with an employer cafeteria plan. Withdrawals from an FSA can be made through an FSA debit card. Funds in an FSA are subject to the use-it or lose-it rule, where all the funds must be used in the plan year. FSA funds can be used for a wide range of medical expenses such as over-the-counter drugs and child care.`

HMO

HMOs are considered pre-paid service organizations. HMOs can be organized in four ways: staff, group, network, and individual practice association model.

Supplementary coverages and exclusions/limitations:

HMOs are not required (but may) provide the following supplementary health care services: -Vision -Dental -Prescription drugs -Home health care -Long-term care HMOs provide comprehensive medical care, but are permitted to exclude or limit coverage for certain medical services. HMOs may exclude eye examinations for individuals over the age of 17, eye glasses, contact lenses, dental, prescription drugs, physical therapy beyond 90 days, and medical services provided outside of the member's service area, except for emergency care.

Ownership of medical clinic or facility

HMOs generally own or are served by a central medical facility, such as a university medical school or an HMO-owned clinic, and subcontracts with one or more hospitals in its service area. In theory, with a closed panel of fewer providers, the group is better able to manage costs.

Complaint system

HMOs must have a complaint system that allows members to provide written complaints to the HMO. Members must be provided with an address and telephone number and forms to forward complaints. In most cases, complaints must be settled within 180 days of the filing.

Nondiscrimination

HMOs offered on a group basis cannot discriminate against certain individuals based on their preexisting conditions, race, color, age, sex, creed, national origin, sexual orientation, or marital status. Termination of coverage can only be based on nonpayment of premiums, copayments, or fraud.

Health reimbursement account HRA

Health Reimbursement Accounts (HRAs) are savings accounts with a high deductible health plan established by employers for their employees. The employer sets aside funds for employee's medical expenses. Employees are reimbursed by their employer for their medical expenses. Contributions are made by the employer, not through employee-elected salary reductions.

Health savings account (HSA)

Health Savings Accounts (HSAs) replaced Medical Savings Accounts in 2003. HSAs are a combination of a savings account and high deductible health plan. Funds in an HSA may be used by the individual, his spouse, and his dependents. Deductibles may be embedded or non-embedded. An embedded deductible is an HSA that has two deductibles: an individual, and a family deductible. The individual deductible is embedded in the family deductible, permitting each family member the opportunity for the policy to cover their medical bills before the total family deductible is met. An HSA with a non-embedded deductible only has the family deductible. The entire deductible must be met before the plan pays any benefits. The deductible can be satisfied by one family member, or by several.

Hospital indemnity/Hospital income

Hospital income / Hospital Indemnity policies pay a flat dollar benefit for each day the insured is confined to a hospital. The dollar benefit varies by policy and may range from $50 to $200 per day. The income benefit may be paid daily, weekly, or monthly. The amount is not based on the insured's income earnings. Premiums for hospital income are low because it is limited coverage. The insured is not restricted to using the hospital income benefit for medical purposes, and may use it for whatever purpose desired. Once the insured is discharged from the hospital, the benefits cease. Hospital indemnity policies are often sold as riders to disability income policies, but may also be sold as standalone policies.

Deductibles

In contrast to basic plans, major medical plans utilize a deductible which must be paid before the policy will begin paying benefits. Deductibles are the amount of a claim the insured must pay before the policy begins to pay. The deductible can range in amount from $500 to $5,000, depending on the policy. The purpose of the deductible is to make the coverage affordable for the insured. Higher deductibles tend to lower premiums and limit smaller claims. Deductibles for group plans are set based on the risk of the entire group or classes of employees.

In network coverage for POS

In-Network coverage means the insured receives care through the network of doctors and hospitals participating in the plan, and all care is coordinated by the insured's primary care physician, who acts as gatekeeper. The PCP is the "gatekeeper" and makes all referrals to specialists and all arrangements regarding hospitalization. In-network coverage is the highest level of coverage in the plan: the plan will pay more for medical services, and the insured won't have to submit claim forms.

Basic hospital services

In-patient hospital and physician services must be provided by an HMO for a period of at least 90 days per calendar year for treatment of illness or injury. Typically, these must occur in a hospital with which the HMO has subcontracted. Basic health care services include: -Room and board, -General nursing care, -Use of operating room and facilities, -Use of intensive care unit, -X-rays, laboratory, and other diagnostic tests, -Maternity care, -Drugs, medications, and anesthesia, and -Physical, radiation, and inhalation therapy. These do not include rehabilitative or home health services. In addition, durable medical equipment is not included as a basic service. Coverage and benefits for durable medical equipment vary between HMO plans and may include annual limits and other restrictions.

Limited policy

Limited policies are restricted by the amount of coverage they provide, the perils they cover or a combination of both. Limited policies must contain a required notice on the policy face page stating the following: "THIS IS A LIMITED POLICY."

Medical expense plans exclusions:

Major medical expense plans typically have exclusions or limitations for the following: -Preexisting conditions -Self-inflicted injuries -Suicide -War or acts of war -Experimental procedures -Organ transplants -Injuries incurred while committing a felony -Cosmetic surgery* -Infertility services -Skilled nursing care and rehabilitation -Home health care -Occupational injuries or sicknesses covered by Workers' Compensation -Care received in government medical facilities -Routine physical exams -Dental care -Eyeglasses and contact lenses -Hearing aids *Note that while cosmetic surgery is excluded from coverage, reconstructive surgery in order to repair damage from an accident will not be excluded.

Major medical policies

Major medical policies were introduced in the 1950s by stock and mutual insurers as a response to the shortcomings of the base plans. Compared to the basic plans, major medical plans provide higher limits for catastrophic coverage and broader coverage for medical expenses. Essentially, after the insured pays the deductible, the policy will cover the remainder of medical expenses up to a stated maximum. Most major medical plans are offered as individual and group plans.

Medical Expenses

Medical expense plans are all the health insurance plans, other than disability income, that cover the cost of medical care. Medical expense plans pay medical bills. Where disability income policies are designed to insure only a working individual, medical expense plans are designed to cover an individual or a family. Medical expense policies may strictly cover accidents or may cover both accident and sickness. Medical expense policies are available as individual and group plans. Most medical expense plans have deductibles and coinsurance, requiring the insured to share in the cost of medical care. Benefits from medical expense plans are not taxed. Medical expense policies may pay benefits in the following ways: reimbursement (expense-occurred), where the policyholder is reimbursed for the cost of medical care; service basis, where providers are paid directly by the insurer; or on an indemnity basis, where the policy pays a fixed amount regardless of the cost of medical care. Dependents are the family members to whom coverage is extended. Children must be covered from the moment of birth or adoption; however, the insurer may require notification of the birth or adoption within 31 days in order to continue coverage. Coverage of dependent children must continue until age nineteen (19), or if the dependent child is unable to be employed due to mental or physical impairments and is dependent on the policy owner for support, there is no age limit and coverage will continue.

Managed Care Plan

Most of the new plans were what is called Managed Care Plans. The purpose of managed care is simple: provide good medical care at affordable cost through monitoring all aspects of treatment. To achieve this, most groups involve themselves both in the actual provision of medical care and in the financial coverage for medical service. The extent of their involvement in medical care varies, but the dual control gives these groups advantages in containing costs.

PPO disadvantage

One disadvantage of PPOs occurs when a PPO contracts with a group of physicians rather than individual doctors, where individual doctors may move out of a practice for a number of reasons and the contract does not automatically go with them. A PPO participant may find that their doctor is no longer a contracted provider for this reason and be reimbursed with a lower scale of benefits.

Out of network coverage for POS

Out-of-network coverage applies when the insured receives care from a medical provider who does not participate in the plan's network of providers, and the care is not co-ordinated by the PCP. In Out-of-Network Coverage, the insured usually pays more of the actual cost of care than if he had used In-Network Coverage, and he must also submit claim forms to receive benefits. Services rendered by non-preferred providers must be covered at a rate of at least 80 % of the coverage offered for the services of preferred providers. Note: Emergencies are exempted from the lower level of coverage in out-of-network service.

FSA contribution limits

Prior to the Patient Protection and Affordable Care Act that was signed into law in 2010, there was no limit on the amount of money you or your employer could contribute to the accounts. In 2014, the annual limit for qualified medical expense accounts is $2,500, indexed annually. The $2,500 limit is the maximum contribution that each employee may make for the year, regardless of whether the employee has a spouse or dependents whose expenses are also reimbursed through his or her qualified medical expense account. The annual limit on dependent care accounts is $5,000 per year. Married spouses can each elect an FSA, but their total combined elections cannot exceed $5,000. Withdrawals in excess of $5,000 are taxed.

Hospital outpatient benefits

Recent evidence shows many treatments can be provided without need for a hospital stay and at much less cost for the same service as an inpatient admission. These include certain surgeries, a variety of medical tests, family planning, diagnostic testing, and treatments for chronic diseases. Policies and plans have been revised in light of this evidence. Intensive care, by definition, cannot be offered as outpatient care service.

HMO Network model

Similar to the group model, a network model HMO contracts with two or more medical groups (instead of one) to provide medical services to HMO members. Some network model HMOs contract with independent physicians who provide medical services from their independent offices. Compared to the group model, the network model provides members with greater accessibility to medical providers. Non-HMO members who use physicians from a network model HMO are charged on a fee‐for‐service basis.

Restoration of benefits

Some major medical policies include a feature called the restoration of benefits. This allows the maximum lifetime benefit to be restored to its original amount after a large portion of the benefits have been used. Example: Tom's major medical policy with the restoration feature has a maximum lifetime benefit of $300,000. Tom has cancer using up $250,000 of his policy's total benefits. The policy will restore to the $300,000.

Integrated deductible

Some supplementary major medical plans have an integrated deductible instead of a corridor deductible. The integrated deductible is incorporated into the basic plan's coverage. For example, if the supplementary plan has a $600 deductible and the insured incurs a loss of $1,000 under the basic plan, the deductible is fulfilled. All of the above types of deductibles may be determined in two ways. If the major medical plan has a calendar year deductible, the deductible amount applies once per calendar year. After the calendar year deductible is met, all other claims in that calendar year will not have a deductible applied. On the other hand, if the major medical plan has a per cause deductible, a separate deductible applies for each separate accident or illness.

Supplementary

Supplementary major medical plans cover expenses not included under basic medical plans. Coverage is also provided for expenses in excess of basic plan dollar maximums, and for benefits that have been exhausted under the basic plan. Supplementary major medical plans pick up where the base plans leave off. In some cases, supplementary major medical plans will cover expenses excluded by base plans.

Preventative health services

The HMO provides free prepaid annual examinations and diagnostic screenings, well-child care from birth, eye and ear examinations for children age 17 and under, and immunizations. The pre-payment is called a service-incurred basis, meaning the member pays for a range of services provided by the HMO and also pays a nominal co-pay for services that are not exempt from co-pay. Traditional health insurance coverage, on the other hand, pays only for the treatment of disease or illness, not for preventative care. Typically, it also pays on a reimbursement basis (i.e., the insured pays the medical fee and is reimbursed by the insurance company). In addition to preventative health services, HMOs also offer health education programs to promote better health choices, such as smoking cessation, diabetes management, and childbirth preparation classes.

Service area limited

The HMO service area is a defined geographic area to which services are limited. To be eligible to enroll in the HMO, an individual must reside within this area, which generally is fairly small.

PPO Preferred Provider Org

The Preferred Provider Organization evolved out of the HMO model. It offers the patient more choices in doctors and medical facilities than an HMO offers. A PPO is a managed-care arrangement under which a selected group of independent hospitals and medical practitioners in an area, such as a state, agrees to provide a range of services at a prearranged cost. The organizer or contracting agency of a PPO might be one of a number of groups. Examples include: -Large employers -Trade unions -Blue Cross/Blue Shield groups -Traditional insurance companies -Local groups of hospitals. A PPO network exists for the purpose of contracting with doctors, hospitals, and other provider groups, such as physical therapists. The contract is usually between the network and the provider; however, insurance companies, TPAs, and on rare occasions, large employers who have their individual claims payment units may also be contracting parties. There is no case when the individual employee will be part of a PPO contract. Organizers and providers agree on medical service fees that are lower than those charged patients not associated with the PPO. Providers are willing to agree to this arrangement in return for guaranteed payment from the PPO and sometimes, a potential increase in the number of patients. Subscribers must be provided with a complete list of preferred providers, classified by medical specialty and geographic area.

Surgical Expense

The basic surgical expense plan pays surgical costs including surgeon fees, anesthesia, and post-surgery recovery. The plan contains a list of covered surgical procedures and the dollar limit for each procedure. This list of surgical procedures is referred to as a schedule. The most complex procedures are assigned the highest dollar benefit, while the least complex have the lowest. For surgical procedures not listed on the schedule, the plan will indemnify the insured based on the absolute or relative value of the surgical procedure. Basic surgical plans today typically do not cover the full cost of surgery. Plan limits range anywhere from $500 to $5,000. Example: David needs surgery to repair his broken femur. He is insured under his parents' basic surgical expense plan. The plan covers $2,000 for his surgery. This is the absolute value of femur surgery. Even if the actual cost of the surgery is $20,000, the plan will pay a maximum of $2,000. A few months later, David slips on the ice and breaks his ankle. Ankle surgery is not scheduled, but the insurer specifies that ankle surgery is 25% as complex as femur surgery, so the plan will pay a maximum of $500 to repair David's ankle. This is the relative value of ankle surgery. Some basic surgical plans may not use a schedule of indemnities. These nonscheduled plans pay for surgical procedures based on the usual, reasonable and customary fees. Usual, reasonable and customary charges are based on amounts typically charged by surgeons for a certain procedure in a particular geographic area.

Prescriptions

The benefits provided by prescription drug plans vary depending on the policy. Some policies require the insured to pay a small deductible - a copay, for each prescription drug purchase. The copay may be anywhere from $5 to $40. Most prescription drug plans pay benefits on a reimbursement basis or issue drug cards for insureds to use. When the insured uses the drug card, the insured pays the deductible and the pharmacy bills the insurer for the balance. Prescription plans may have a dispensing limit, or a limit on how much of a prescription an insured can purchase at a time. Prescription plans may exclude coverage for fertility drugs, experimental drugs, or vitamins.

tax benefits

The employer and employees make contributions to health savings accounts. Contributions are vested immediately. Contributions are tax deductible for individuals and are made on a salary-reduction basis. Employer-made contributions are not taxable income to the employee. Funds in an HSA can be used tax-free (no tax on principal or interest) for qualified health expenses. If funds are used for non-health purchases, a 20% penalty plus tax is assessed. Funds in an HSA rollover from year to year. Withdrawals made after the age of 65 for non-health purchases are taxed, but not penalized.

Flat deductible

The flat dollar deductible must be paid before the policy will pay benefits. A family deductible is typically three times the amount of the individual deductible. Therefore, if three members of a four-member family satisfy the individual deductible amount, there is no additional deductible for the fourth family member.

Open enrollment

The following open enrollment provisions only apply to group HMO enrollment. All group HMOs must have a period of open enrollment at least once per year where they advertise availability of the HMO to the general public on an individual basis. During the open enrollment period, which typically lasts 30 days, new individuals are allowed to enroll in the HMO and the HMO may not reject any applicant for health reasons. Preexisting conditions cannot be excluded. However, some states do have laws which permit HMOs to exclude certain individuals during the enrollment period who are hospitalized or have a chronic illness or permanent injury.

Individual practice association model

The individual practice association model functions like the group model except the HMO contracts with medical groups, physicians' associations, and independent physicians, that in turn, contract with their member physicians to provide health care services. While members can choose any doctor in the panel, they will not be able to pick their surgeon, but will most likely be referred to a specific HMO member surgeon by their primary care physician.

Maximum lifetime benefits

The maximum lifetime benefit is the total amount an insurer will pay on a policy for any one insured individual. Most major medical policies have maximum lifetime benefits of $1 million.

contribution limits

The minimum deductibles and contribution limits for HSAs are indexed. In 2014, the minimum deductible for a single individual is $1,250 and for a family is $2,500. For 2014, if you have self-only HDHP coverage, you can contribute up to $3,300. If you have family HDHP coverage you can contribute up to $6,550. If you are an eligible individual who is age 55 or older at the end of your tax year, your contribution limit is increased by $1,000. The maximum out-of-pocket spending (the maximum amount an individual must spend out-of-pocket before catastrophic coverage begins to pay 100% of qualifying medical expenses) in an HSA is $6,350 for a single individual and $12,700 for a family.`

Nursing home

The nursing home benefit pays a dollar amount for each day the insured is confined to a nursing home or convalescent care center. The benefit period may range from 30 days to 365 days.

HRA contribution limits

There are no contribution limits for HRAs.

HSA eligibility

To be eligible for an HSA, an employee must meet the following requirements: - Cannot have other health insurance coverage (except disability income, long-term care or limited coverage) - Cannot be eligible for Medicare - Cannot be a dependent on another persons' tax return.

HMO group model

Under the group model, also referred to as a medical group or group practice model, the HMO contracts with one independent medical group to provide medical services to HMO members. The HMO pays the medical group, which in turn pays each physician in the group. Each physician is paid on a contract‐basis with the HMO, not as a salaried employee. Essentially, the HMO rents the medical providers. The capitation method may be used to pay HMO physicians.

HMO staff model

Under the staff model, physicians are employees of the HMO. Physicians provide care from the HMO's clinic. Some staff model HMOs have their own hospitals.

Fee-for-service -PPO

Unlike most prepaid HMO arrangements, where providers are paid a flat monthly amount for each plan user, in PPOs providers are paid on a fee-for-service basis.

Utilization management

Utilization Management is the cost-control program used by HMOs that includes primary care physicians as "gatekeepers," utilization reviews, and prescription drug formularies. Utilization management assures patients receive necessary care, but not unnecessary care. Utilization Review includes preadmission review, concurrent review (while patient is in a hospital), and discharge review plans.

Utilization management

Utilization Review is one cost-control mechanism currently being used by insurers and employers in order to assure the best treatment is being given in the best possible setting for the insured. Utilization Review is an evaluation of the propriety, necessity, and quality of health care.

Vision

Vision expense plans cover the cost of annual eye exams, and either eyeglasses or contact lenses every two years. Vision care policies may be purchased separately, or in some cases are included in group health plans. Vision plans may exclude sunglasses, replacement lenses or frames and medical or surgical costs that are covered by other health insurance policies.

Accidental means

the reason for the accident must be unintentional and unexpected. In other words, the insured must be unaware that the risk would create a loss, and be unaware that the events leading up to the risk have the potential for loss. In this way, the accidental means definition is more restrictive than the accidental bodily injury definition. Therefore, the accidental means definition can be thought of as a "cause and effect" test. Example: A person decides to sit down in a chair, and notices that one of the legs on the chair is wobbly, but sits down anyway. Suddenly, the chair breaks and the person falls to the ground, breaking his tailbone. The accidental means test says that the person should have known not to sit down in a chair that was not sturdy, because it has the potential to cause an injury. In this scenario, a disability income policy with the accidental means definition would not pay benefits.