Chapter 9 Medical Expense plans and concepts

Comprehensive "Supplemental" Major Medical

2 separate policies - Basic First Dollar Coverage and a Major Medical Policy separated by a Corridor deductible.

Subscriber

A person applying for coverage through a service provider

Credit Insurance (Credit Disability Insurance)

Covers a debtor, with the creditor receiving benefits to pay the debt if the debtor becomes disabled as defined in the policy. It is commonly sold as a group plan; however, individual contracts may be written. Coverage may not exceed the total amount of the debt or the amount of the monthly payment. The debtor has a right to know that the creditor has an insurance policy on them, even if the creditor pays the premium. Credit health covers accidental death only.

Limited Policies

Limited health exposures are generally covered by limited policies that specify the exposure to be covered and the amount of the corresponding benefit, such as prescription drugs, vision care, etc. State laws require that the agent/insurer make special note or reminder to the insured regarding the fact that the policy pays only under stipulated conditions.

Principle amount

Pays Death benefits and Double Dismemberment (Full Amount)

Basic surgical expense

Pays surgeon and anesthesiologist fees for the cost of a surgical procedure.

Capital Amount

Pays the lesser amount (usually ½ the benefit) (for the loss of one arm, one leg, one eye, etc.)

Prepaid

Provides and coordinates health care in return for predetermined monthly premiums.

Critical illness (Dread Disease or Limited Sickness Plans)

Provides specific benefits for a specified sickness, such as Cancer Plans and Heart Disease Plans.

Third Party Administrator (TPA)

TPA provides administrative services for employers. It acts as liaison between the insurer and employer in certifying eligibility, processing claims, etc.

Service Area

The primary geographical area of coverage and service provided by a Health Maintenance organization (HMO)

Insured

A person applying for coverage through an indemnity provider.

Self-Insured Providers (Self-Funded)

Consists of employers who pay claims out of their own funds instead of funding claims through an insurer.

Dependent Child Coverage (Limiting Age Law)

Federal law requires that every policy providing coverage for a dependent child extends coverage up to age 26 (through age 25). This includes natural children, adopted children, married or unmarried, even if eligible for other insurance. There is no requirement for a dependent child to be enrolled as a full time student to qualify.

Basic

Fillings, periodontics and root canals are considered to be basic care

Usual, Customary, Reasonable (UCR)

Is not scheduled, but is based on the average fee charged by all doctors in a given geographical area. Many insurers pay the (UCR) amount and the balance of any overcharges or costs of any disallowed services are the insured's responsibility.

Know the following key points, BC/BS

Is set up as not-for-profit Is government regulated Pays directly to the providers Pays on a fee for service basis Is considered to be a producer cooperative

Any Provider These are more flexible plans that allow the insured or subscriber to choose any provider to receive benefits

Limited Choice Other plans may only provide benefits to a limited choice of providers who must be pre-approved by the insurer or service provider. These providers have typically agreed to reduce their fees

Major

Major dental care includes any crowns, dentures or bridge work, and orthodontics

Blanket Payment

Maximum dollar limit set, with no itemizing of costs, used for groups covered under a blanket policy for a specified period or event.

Adverse Selection

Minimizing adverse selection is a goal and concern of underwriting group dental plans. The policy may include a 1-year benefit reduction of up to 50%, or exclude certain benefits altogether for a specified period for those who enroll after the initial eligibility date. Frequent open enrollments would add more exposure to immediate claims and concerns of increasing adverse selection.

Service Providers

Pay benefits to the providers of health care rather than to the insured. Service providers include Blue Cross and Blue Shield, Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs) and Point of Service plans (POSs).

indemnity (Hospital Indemnity income)

Pays a specified daily amount up to the stated maximum number of days, or even lifetime. Benefits often double or triple while an insured is confined in an intensive care unit.

Reimbursement

Pays benefits to the provider for the medical services received

fee-for-service

Pays directly to the provider for medical services

Basic Hospital expenses

Pays for a hospital room (semi-private), and for board and miscellaneous hospital expenses, up to a limit.

Basic Medical Expense

Pays for office visits, diagnostic x-rays, laboratory charges, ambulance and nursing expenses when not hospitalized. Some plans may include coverage for prescription drugs.

Limited Accident

Provides benefits for accidental injuries associated with specific events, such as traveling out of the country or on a common carrier.

Dental insurance exclusions

Purely cosmetic services (unless necessitated by an accident) Example Teeth whitening is excluded. Replacement of prosthetic devices Duplicate dentures or prosthetic devices Oral hygiene instruction or training Occupational injuries covered by Workers' Compensation Services furnished by or on behalf of government agencies Certain services that began prior to the date of coverage

Miniumum premium Plan (MPP)

The insurer administers the plan while the employer is self-insured to a specified limit. The employer has a stop-loss policy with the insurer; after the limit has been reached, the insurer plays the claim over and above the stop loss up to the policy limit

Annual Limit

The maximum a policy will pay for covered losses during the lifetime of an insured

Lifetime limit

The maximum a policy will pay for covered losses during the lifetime of an insured

Per-cause

The maximum a policy will pay for covered losses per claim

Annual limit

The maximum a policy will pay for covered losses per year

Comprehensive Major Medical Policy (Basic and Major Medical in 1 Single Policy)

The most recent version of Major Medical coverage combines the best features of the Basic policies and Major Medical policy into a single policy and includes "reasonable and necessary" medical expenses. This policy provides the most complete hospital coverage. These policies are available as individual policies or group. These policies usually have a deductible, coinsurance clause, and a stop loss limit. Non-Routine Treatment under a comprehensive policy pays a percentage, such as 80% of the reasonable and customary charges. Routine Treatment simply pays a scheduled or listed amount.

Unearned Premium

The portion of premium for which policy protection has not yet been given.

Commercial Insurers

They traditionally market a reimbursement typer contract that pays directly to the insured

Medical Expense Policies

covering sickness and disease usually require that the illness must be diagnosed and treated while the policy is in force for coverage to apply

Administrative Service Only (ASO)

AN insurer provides claim forms, administer claims, and makes parents to providers but the employer provides the funds

Employer Group Dental Expense

- Adverse Selection - Integrated Deductibles vs. Stand-alone Plans

Know the following about HMO's:

- Enacted by the Government under the HMO Act - BOTH federally and state regulated - Most HMO's are structured for profit - Consumer cooperative HMO's are not-for-profit - Considered a Managed Care System - Emphasizes preventative medicine - Provide BOTH the Health Care (Doctors) and the Health Coverage (Insurance) - Prescription Drugs ARE OPTIONAL and not required - HMO's may exclude or limit coverage, but not as readily as a commercial insurer - Group models pay the group entity not the doctors - Staff models pay the doctors directly - IPA model pays doctors either by capitation (salary) or fee for service - Has a Gatekeeper-Primary Care Physician (PCP)

Common Exclusions

- Preexisting conditions may be excluded, or subject to a probationary period - Intentionally self-inflicted injuries (suicide) - War or any act of war - Elective cosmetic surgery - Medical expenses payable under Workers' Compensation, or any Occupational Disease Law - Military service and overseas residence - Coverage payable under a government plan - Commission or attempt of a felony

Benefit Categories Type of Dental Care

-Diagnostic/Preventive - Basic - Major

Comprehensive Major Medical:

1 single policy combining Basic First Dollar Coverage and Major Medical Coverage into a single policy without a corridor deductible.

All the following are types of dental treatment, EXCEPT: A Orthotics B Endodontics C Prosthodontics D Periodontics

A Dental treatments available in dental insurance plans include: restorative, oral surgery, Endodontics, Periodontics, Prosthodontics, and orthodontics.

Dental Insurance

A dental plan offered by an insurer must state the benefits, the exclusions, and any reductions in coverage. Plans are normally written stating an annual maximum dollar benefit, not the number of appointments or the number of teeth repaired. Dental insurance contracts may be written on either an individual or group basis. Some plans limit the selection of dentists; others the benefits. Services received immediately prior to a plan termination are normally covered. Some group health and dental plans share the same deductible (integrated deductible).

Out of Pocket Limits - Stop Loss Provision (may also be called stop loss limit)

A maximum dollar limit set on the coinsurance to limit the out-of-pocket expense that an insured can incur in a policy year. This may or may not include the deductible. Once the out-of-pocket limit has been reached, the stop loss provision kicks in and the policy will cover 100% of covered losses for the balance of the year.

Coinsurance (percentage participation)

After the annual deductible has been met, the coinsurance feature applies. Coinsurance is a cost sharing feature and is stated as a percentage of sharing between the insurer and the insured, such as 80/20, 70/30, 60/40. The insurer pays the larger amount.

Newborn infant coverage

All individual and group health insurance policies, written on an expense-incurred basis, providing coverage for dependents of the insured must provide coverage for the insured's newborn child from the moment of birth. Adopted children are covered at the date of placement for adoption

Restoration of Benefits Provision

Allows an insured to restore a certain amount each year for coverage limits lost due to a previous claim payment(s). Restoration only occurs after a specified dollar amount has been exhausted and after the insured has proven insurability

Predetermination of Benefits (Precertification or Prior Authorization)

Although this procedure is normally not mandatory, it does allow both the patient and dentist to know what will be covered before treatment. This knowledge enables the insurer to maintain some control over unnecessary or more expensive than necessary procedures and gives the insured an opportunity to seek less expensive care if he/she knows the benefits are limited.

Comparison of Plans: Fee for service vs Prepaid Plan

Any Provider vs Limited Choice

Which of the following would likely be treated as a common exclusion found in major medical policies? A The spouse of an honorably discharged Navy veteran who visits their primary care physician B A U.S. citizen, who owns and resides in a home in Costa Rica, needs an operation C A retired commercial airline pilot receiving medical care D A college student who is seriously injured in an unintentional accident and needs physical therapy

B An individual residing outside of the United States is excluded from coverage.

What does it mean if dental benefits are scheduled? A A dentist must get insurance company pre-approval of all visits B Benefits are limited to specified maximums per procedure C A dentist must get insurance company pre-approval of any and all procedures ahead of time D Two scheduled visits to the dentist are allowed per year

B If the dental policy offers scheduled benefits they are limited to specified maximums per procedure, with benefits usually lower than usual, reasonable, and customary.

Newborn children are covered under health insurance plans beginning ___________. A On the 15th day following birth B Immediately at birth and for at least 31 days C On the 14th day following birth D On the 31st day following birth

B Newborn children are automatically covered during the first 31 days following their birth. To continue coverage under a group or individual policy, the primary insured/subscriber must formally apply for coverage for the child before 31 days have elapsed and pay any additional premium required. The child cannot be declined for insurance at that time.

HMO: Managed Care Plan Copayment must be paid by subscribers Utilizes a Primary Care Physician Major Medical Policy Coinsurance Include a high maximum lifetime limit Provides catastrophic coverage

Basic Health Insurance Plans: Limited miscellaneous hospital and medical expenses Provide First Dollar coverage Hospital benefits based on a daily limit

Scheduled Basic Plan

Benefits are paid based on a schedule of procedures Benefit maximums are commonly paid on an amount lower than the usual, customary, and reasonable dental charges.

Nonscheduled (Comprehensive) Plan

Benefits are paid on a reasonable and customary basis. Dentures are a major dental expense and would be paid using this benefit provision.

Blue Cross and Blue Shield Associations (BCBS)

Blue Cross and Blue Shield are prepaid plans, with plan subscribers paying a set fee, usually monthly, for the services of doctors and hospitals at a predetermined price (negotiated fee). Blue Cross is a hospital service plan with a contractual agreement with the hospital. Blue Shield is a physician service plan with a contractual agreement with the physicians. Physicians respond directly to service providers.

Basic health care expense plans are frequently referred to as "first dollar" plans. This means _______________________. A The insurance company pays the first dollar of every claim, and the insured pays the rest B Coverage is provided, often at 100% of the expense, from the first day of the plan year, up to a stated maximum benefit and without a deductible C The insured pays the first dollar of every claim, and the insurer pays 80% after that D Beneficiaries receive the first dollar of refund when an insured dies and passes the claim to the insurance company

C A first-dollar plan means that there is no deductible which must be satisfied by an insured before a claim is payable by the insurance company.

An insured is covered under a major medical plan with a $300 deductible, 80/20 coinsurance, and a $5,000 stop-loss limit. A severe injury is suffered and the total covered cost for treatment is $28,000. How much will the insurance company cover? A $22,160 B $5,000 C $23,000 D $28,000

C The insured will pay $5,000 since this is the stop-loss in the contract. The insurance company will pay the balance of $23,000. The insurance company picks up 100% of the costs after the insured satisfies the deductible and co-insurance up to the total out of pocket amount of $5,000.

All of the following are common exclusions found in dental insurance plans EXCEPT: A Coverage for teeth that are missing at the time coverage takes effect B Cosmetic procedures that is not necessary for sound dental health C Emergency dental treatment D Expenses for oral hygiene instructions and plaque control programs

C While emergency dental treatment is covered it can be limited in benefit amount if treatment is obtained outside the plan's service area.

Managed health care plans generally refer to covered persons as ____________. A Participants B Insureds C Subscribers D Members

C Because most HMO and PPO plans are operated by corporations that were organized specifically to provide health care benefits and do not offer other forms of insurance, they tend to refer to covered persons as subscribers rather than insureds.

HMOs usually require patients to select a _____________________ as the person who will oversee and direct their basic health care in most cases. A Medical social worker B Care coordinator C Primary Care Physician D Insurance agent or broker

C Selecting a primary care physician (PCP) is generally a requirement when a person enrolls in an HMO. The PCP is responsible for managing the subscriber's health care.

Claim Example: Claim $1,100 Deductible $100 Coinsurance 80/20 (Insured's OOP is 20%) Total Claim - Deductible + Coinsurance % of Claims Balance = Out of Pocket Cost (OOP)

Claim Amount$1,100 Subtract the Deductible$100 (Insured Pays) Balance$1,000 Subtract 20% Coinsurance of Balance$200 (Insured Pays) Balance (Insurer Paid)$800 Total Out of Pocket (OOP) Expense Paid by the Insured:$300

Combination Plans

Combines the benefits of both the Basic and Comprehensive plans. Some procedures are paid based on a schedule while others are paid on a reasonable and customary basis.

Indemnity Provider (Reimbursement)

Commercial insurers who pay benefits to the insured for reimbursement for expenses incurred

Comprehensive Major Medical Policies 2 categories:

Comprehensive supplemental major medical Comprehensive Major medical

What is the benefit of a credit disability insurance plan? A It waives the repayment of credit card debt during the entire time a person remains totally disabled B It prevents foreclosure on a person's home in the event of any disability lasting more than one year C It automatically pays 100% of the balance of a person's debt if they become permanently disabled D It makes the minimum monthly payment on a person's debt for a stated period of time

D Credit disability policies are typically written as a group form of insurance to creditors with at least 100 debtor accounts, and who add at least 100 new accounts annually. The policy usually provides for the payment of required minimum monthly payments for up to two years. The insured must be totally disabled according to the terms of the policy, which also specifies a minimum duration of disability that must be satisfied before the benefit begins.

A typical hospital indemnity insurance plan provides payment of benefits in which of the following ways? A As reimbursement for necessary medical expenses paid by the insured B In an amount equal to the insured's copay or coinsurance amounts C According to a written schedule of benefits for common procedures and treatments D According to a daily or monthly benefit amount without regard to actual medical expenses

D Hospital indemnity plans provide stated cash benefits for each day an insured is confined in an acute care hospital. Benefits may be increased when the insured is confined in a specialized unit such as intensive care ("ICU") or direct observation ("DOU").

Limitations (Designed to Control Costs and Eliminate Unnecessary Dental Care)

Deductibles are normally waived for routine preventive care, exams, and/or cleaning. Preventive care is more fully covered, stressing preventive dentistry, similar to an HMO stressing preventive medicine. Coinsurance applies in addition to deductibles. The least expensive treatment will be used. For instance, if it is a question of gold vs. silver fillings, payment is for silver even if gold is used. Both annual and lifetime maximums are imposed.

Dental insurance Deductibles and Coinsurance

Deductibles include an annual amount ($50 - $100) that must be paid before the plan will cover any losses. Once the deductible is met, the plan will impose a coinsurance feature of 20% - 50% for basic and major services. Diagnostic and preventive care is not usually subject to a deductible or coinsurance feature.

Cost containment measures in health care

Deductibles, Exclusions, Limitations, and Coinsurance are provisions that insurance companies will utilize as Cost Containment measures in health care. These measures are used to help reduce the over-utilization of health care benefits. They discourage insureds from using their health care benefits for unnecessary health expenses, particularly when the insured will have to suffer more of the expense.

Referral Plans

Dental referral plans are not insurance and are of limited value. These plans may or may not be associated with a group or individual health insurance plan and may charge monthly fees. Referral plans only offer consumers a list of dentists willing to accept reduced payments for dental treatments. Complaints surrounding these plans include listings for dentists who are either no longer offering such discounts or who are no longer in business. Uninsured persons can often negotiate fee reductions on their own. Referral plans incorporated into group or individual health insurance plans are more likely to include participating dental providers.

Types of Dental Care The dental profession is very specialized and the following is a partial list of dental specialists

Endodontics - Services covering dental pulp care and root canals Orthodontics - Services for teeth alignment and other irregularities of the teeth Periodontics - Services for the treatment of gum problems and disease Prosthodontics - Services provide bridgework and dentures Restorative Care - Services to restore the functional use of natural teeth Oral Surgery - Surgical treatment of diseases, injuries and jaw defects

Mental Illness and Substance Abuse

Every Medical Expense Policy must offer coverage for mental illness and substance abuse. Coverage will be subject to the same deductibles and coinsurance factors as those that apply to any physical illness. Includes coverage on an inpatient and outpatient basis.

Common Exclusions from Coverage

Exclusions are causes or conditions listed in the policy that are not covered and for which no benefits are payable. If an exclusion rider is added after the application is taken and a receipt has been issued, coverage is effective when the insured accepts the policy. The following exclusions are typical of those found in either individual or group disability policies or medical expense policies, depending upon the insurer:

Carryover Provision

Expenses that did not satisfy the previous year's deductible and were incurred in the last 3 months of that year are used towards satisfying the current year's deductible.

Integrated Deductibles vs. Stand-alone Plans

Group dental insurance can be combined with medical expense insurance and integrate or share the deductible. Stand-alone dental plans are issued separate from other types of group insurance and require a separate deductible

family deductible

If a family is insured, a maximum of 2 or 3 deductibles will satisfy the deductible requirement for the entire family per calendar year.

Common Accident Deductible

If several family members are injured in the same accident, only one deductible is applied.

Hospital Income or Indemnity (Cash Payment)

Pays directly to the insured a specified dollar amount per day during hospitalization. Payment is based solely on the number of days the insured is hospitalized. It pays the daily amount stated in the policy.

Earned Premium

Portion of a premium for which protection has already been given.

Fee for Service vs. Prepaid Plan Fee for Service Pay benefits based on actual services provided.

Prepaid Plan Provide benefits based on a designated fee (capitation fee), regardless of any services provided.

Comprehensive Medical and Dental Plans ALL pay for treatment as follows: TEST TIP Routine Treatment = Scheduled Benefits / Non-Routine Treatment = % of UCR.

Routine Treatments - Are considered scheduled benefits, which means the policy actually schedules or lists the limits in which the policy pays for these routine treatments. Non-Routine Treatments - Are considered as a Percentage of Usual, Customary and Reasonable (UCR) benefits.

Diagnostic/Preventive

Routine diagnostic and preventive care services includes routine checkups, x-rays and cleaning

Scheduled Payment

Schedule listing the amount payable for each medical expense.

Dental insurance providers

There are as many choices of dental coverage as there are choices of group health insurance. These choices are as follows: Conventional insured plans offered by insurers Dental service plans Blue Cross/Blue Shield Managed care plans or prepaid dental plans Dental plans must offer the insured a choice of providers regardless of the dental coverage selected.

Blanket

This coverage is sold to organizations whose need to cover specific persons varies, such as common carriers, camps, amusement parks, schools, and athletic teams. It may provide disability income and/or medical and surgical benefits as excess coverage over any primary or secondary health insurance coverage. Blanket insurance is not individually underwritten and no certificate or policy is issued to anyone other than the contracting organization.

Accidental Death and Dismemberment

Usually provides that the death benefit or principal sum will be paid if the insured dies due to an accident within 90 days from the date of the accident. The principal sum will also pay if an insured loses sight in both eyes or loses any two limbs. The policy will not pay for loss due to infectious disease, and again losses must occur within 90 days from the date of the accident. The capital sum, typically 50% of the principal sum, may be paid for the loss of 1 limb due to and within 90 days of the accident.

Remaining Claim Amount - Corridor Deductible x Coinsurance % of Claim Balance = Insureds OOP Cost. How much did the insurer pay in this scenario? Answer: $1,000 + $800 = $1,800 How much did the insured pay OOP in this scenario? Answer: $100 + $200 = $300

Total Claim Example Total Claim$2,100Base Plan Limit of First Dollar Coverage$1,000Corridor Deductible$100Coinsurance %80/20 Do the Math Total Claim$2,100Subtract Base Plan$1,000 Insurer PaysBalance to apply to Major Med Policy$1,100Subtract Corridor Deductible$100 Insured Pays OOPClaim Balance $1,000Subtract Insured's 20% Coinsurance $200 Insured Pay OOPBalance (Insurer Paid)$800 Insurer Pays

Point of Service (POS)

a combination of a PPO and HMO plan using a contracted network of providers and PCP as Gate Keeper to control referrals. out-of-network services incur higher deductible

Preferred Provider Organization (PPO)

group of healthcare providers that provide services to a specific group, often at a reduced rate

Eligible Expenses include:

hospital room and board, intensive care, hospital medical and surgical services, physicians medical, diagnostic and surgical services, nursing services, anesthesia, outpatient services, ambulance charges, x-rays, diagnostic and lab tests, prescription drugs as an inpatient, blood transfusions, oxygen, post hospital rehabilitative care, post hospital home health care, rental of required equipment, prosthetic devices, casts, and braces.