Insurance: health insurance basics

health insurance is often called

accident and sickness insurance
or
accident and health insurance

an accident is

bodily injury caused by something unexpected, unintentional, unforseen

sickness is

loss due to illness or disease

types of losses and benefits

-loss of income from disability
-accidental death and dismemberment
-medical expense benefits
-dental expense benefits
-long term care insurance
-limited health exposures & insurance contracts
-prescription coverage
-vision care

disability income insurance

aka "loss of time" insurance
pays weekly or monthly benefit for disabilities resulting from accident or sickness.
primary purpose is to replace loss of personal income due to disability

AD&D Policies pay the policy's

principal sum for accidental death in accordance with policy provisions and definition of accidental death

principal sum

similar in meaning to policy face amount
amount paid if loss of two arms, two legs, or vision in two eyes due to accident

capital sum

amount if the policy is paying an accidental dismemberment benefit

medical expense insurance

commonly referred to as hospitalization insurance, provides benefits for expenses incurred as result of in-hospital treatment.surgery as well as outpatient expenses (doc. visits, lab tests, diagnostic services)

dental expense benefits

- generally sold as part of group health insurance
- offered for preventative maintenance, repair, and replacement of teeth

Long term care insurance

LTC - pays for care of persons with chronic disease/disability and may include wide range of health and social services
often covers nursing home care, home based care, respite care

limited health exposures and insurance contracts

a variety of special health insurance policies are available that provide limited coverage
by law, first page of policy must say "this is a limited policy

Policies under limited exposure

HIT-ABCD
Hospital income insurance
travel accident insurance
accident only insurance
blanket insurance
credit insurance
specified disease or dread disease insurance

Hospital income insurance

pays a specified sum on a daily weekly or monthly basis while insured is confined to a hospital
the amount is not related to expenses or wages lost

travel accident insurance

coverage for death or injury resulting from accidents occurring while insured is fare paying passenger on common carrier

accident only insurance

coverage on injury from accident but not sickness
benefit paid for all or any: death, disability, dismemberment, and hospital/medical expenses

blanket insurance

form of group insurance
individuals are automatically covered under blanket policy and do not receive certificates of insurance

credit insurance

policy issued only to those who are in debt to creditor, coverage limited to amount of debt

specified disease/dread insurance

provides a variety of benefit for certain diseases, usually cancer or heart disease

prescription coverage

normally provided as optional benefit under group medical expense policy
specific cost of prescription usually $2, 3, or 5, and insurance co. pays balance

vision care

only available on a group basis
cover eye exam, cost of lenses/frames, cost of contacts, other corrective items

health insurance is designed to

protect the insured from risk of medical and disability expenses

health insurance provides benefits

exactly when needed

medical expense insurance provides

the insured with necessary funds to cover hospital and physician expenses associated w/ serious illness, this preserving familys savings/assets

surgicenter

health care facility for out patient surgery

skilled nursing facility

engaged in providing skilled nursing care which is nursing care for patients who do not require acute hospital nursing care but need inpatient supervision

managed care

imposes controls on the use of health care services, the providers of health care services, and the amount charged for the services, usually through health maintenance orgs. or preferred provider arrangements

commercial insurers

stock and mutual life insurers and sometimes casualty companies
offer individual and group health plans
include PPO and HMOs

commercial insurers traditionally provide coverage by way of

reimbursement
but are evolving too

reimbursement

pay benefits directly to insured who is responsible for paying providers of medical services

dominant health insurers of the united states

blue cross
blue shield

differences between BCBS and commercial insurers

blues provide benefits on service bases (pays provider directly) rather than reimbursement
blues have contractual relationships with hospitals and doctors

producer's cooperative

Physicians and hospitals that sponsor BC/BS provide the insurance so they are considered to be the producers in the cooperative

Blue cross covers X
Blue shield covers X

blue cross-traditionally hospital service plan- covers hospital expenses
blue shield - traditionally physician service plan - covers medical and surgical expenses

subscribers

members of BC/BS

blues and managed care

many blues subscribers are now covered by blues affiliated HMO or PPO or point of service (POS) plan

POS Plan

type of health plan allowing the covered person to choose to receive a service from participating or nonparticipating provider with different benefit levels associated with in plan/out of plan

HMO

health maintenance organization

purpose of HMO

manage health care and its costs through program of prepaid care that emphasizes prevention and early treatment

service incurred basis

the prepaymet
which is in contrast to the "old" reimbursement method

the emphasis on prevention means HMOs cover

preventative medicine
such as: routine physicals, well-child exams, diagnostic screening paid for inadvance

Health maintenance org. arrangement

HMO handles financial arrangement and makes health care services available because its comprised of:
- medical practitioners who have contracted to provide service
-consumer members agreeing to pay

HMO federal requirements

- certain employers required to offer HMO
-provide government grants

to receive gov. grants, HMO must

- maintain certain minimum financial requirements in terms of net worth of HMO or reserves
-provide defined pkg of health services
-require no more than nominal use charges or copayments
-est. premiums on community rating basis

designated service area

where HMO is allowed to operate

HMO Group model

medical group model"
hmo contracts w/ independent medical group
hmo pays medical group, medical group decides how they want to pay physicians - who remain independent of HMO not salaried employees
hmo often pays group capitation fee
practitioners at risk

capitation fee

fixed amount paid monthly for each HMO member

HMO Staff Model

contracting physicians are paid employee on staff of HMO
generally operate in clinics
HMO might own/operate their own hospital
unlike group model, staff model practitioners are at no risk - simply employed by HMO

HMO Network Model

similar to group, but with many medical groups rather than just 1
may also bring on independent doctors who work out of their own facilities
medical groups are paid capitation fee
individual docs paid capitation fee or discounted fee

HMO Individual Practice Association Model

gives HMO members max. freedom on physicians and locations
allows HMO to contract separately with any combo of individual doctors, medical groups, associations
no separate HMO facility - docs operate out of own priate offices
payment is usually fee-for-se

physicians, hospitals, and other healthcare providers who have contracts with an HMO are

HMOs panel

with an open panel

any and all providers who want to provide service for HMO may do so as long as they agree to HMO requirements

closed panel

limited number of health care providers chosen by HMO

groups that sponsor HMOs are

1. medical schools or associations
2. physicians
3. hospitals
4. service orgs. (such as Blues)
5. labor unions
6. consumer groups
7. insurance co.
8. government entities

Basic health care services HMOs must provide

inpatient hospital and physician services
outpatient medical services
preventative health services
in and out of area emergency services

inpatient hospital and physician services must be provided for a period of

at least 90 days per calendar year for treatment of illness/injury

outpatient medical services

must be provided when prescribed by physician and rendered in non-hospital-based health care facility

preventative health services

with the goal of protection against and early detection and minimization of ill effects and causes of disease or disability must be provided

well child care from _______, eye and ear exams for children ages _____, periodic health eval. and immunizations are all a part of ________

well child care from birth
eye and ear exams children 17 and younger
all a part of preventative health services

in and out of area emergency services

including medically necessary ambulance services, must be available on an inpatient or outpatient basis 24/7

many HMOs also provide one or more supplemental health care services

- prescription drugs
-vision care
-dental care
-home health care
-nursing services
-long term care
-substance abuse services

co-payments on HMO

members of hmo pay be charged copayments for basic services in addition to original monthly payment
HMOs are permitted to require co-pay on supplemental services and to charge an additional amount to monthly fee

exclusions and limitations

are used to limit a benefit provided or specifically exclude a type of coverage, benefit, medical procedure, etc.

Some benefits HMOs may (and often do) exclude

eye exams for older than 17
eyeglasses or contact lenses resulting from eye exam
dental services
prescription drugs
long term physical therapy (more than 90 days)
out of area services (other than emergency)

important features of HMOs

gatekeeper system
24 hour access
open enrollment
nondiscrimination
complaints
prohibited practices
quality assurance
open ended plans
open access HMOs

Gatekeeper system

member must select primary care physician (PCP) who provides or authorizes all care for particular member
PCP makes/authorizes referrals to specialists

24 hour access

members have 24 hour access to HMO
including PCP - need the PCP late night? they're there

open enrollment

1. employer sponsored group plans, a period each year when employees may choose to enroll (usually 30 days) or remain enrolled in HMO or change plans
2. the period when HMO must advertise availability to general public on individual basis

nondiscrimination

when hmo coverage is offered to a group - HMO cannot refuse to cover any individual member even based on preexisting conditions

complaints

all HMOs are required to have a complaint system called "grievance procedure" to resolve written complaints from members

prohibited practices

HMOs are not allowed to engage in certain types of business practices, policies, etc.
HMO cannot discriminate
cannot terminate coverage for reasons other than nonpayment, fraud, deception, violation of terms, failure to meet eligibility requirements, or t

Quality Assurance

required to follow guidelines prescribed by state insurance dept. to ensure quality of service to members
i.e. hours of operation, after hours emergency, etc.

open ended HMO plans

leaky HMO" or "point of service HMO"
participants may use non HMO providers at any time and receive indemnity benefits at a higher deductible and coinsurance amount

open access HMO plans

dissatisfaction with gatekeeper mechanism, delays in care, problems in obtaining referrals have lead to offer open access -- allows members to receive care from network specialists w/o going through gatekeeper
POS plan is more expensive than open-access h

Preferred Provider Organization

PPO
arrangement under which a selected group of independent hospitals and medical practitioners in a certain area (state) agree to provide a range of services at a prearranged cost

the contracting agency or organizer of the PPO may be any one of the following:

traditional insurance companies
Blue Cross/Blue Shield
local groups of hospitals
local groups of physicians
an existing HMO
large employers
trade unions

unlike most HMOs, providers under PPO are paid by

fee-for-service basis
rather than receiving flat monthly amount for each user

as a general rule, users under PPO have more of what over HMO users

choices among doctors and hospitals
however IPA HMO is similar in arrangement

PPOs generally pay in full for what out-of-network services?

emergency services

distinguishable features between PPO and HMO

PPO has no separate physical facility, and HMO usually do

gatekeeper PPO

is a plan that operates as a PPO but requires a PCP for referrals

point of service plans

another form of managed care
subscriber is given a choice of in network and out of network care

highest level of coverage within POS plan

in network coverage
--
plan pays for more medical services and insured wont have to submit claim forms

out of network care means

care is not coordinated by PCP
insured must submit a claim for forms in order to receive benefits

EPOs

exclusive provider organization - type of PPO in which individual members use particular preferred providers instead of choosing among variety of providers

EPO providers are

not paid salary but are paid on fee for service basis

EPOs are characterized by

primary physician who monitors care and makes referrals (gatekeeper concept), utilization management, experience rating, simplified claims processing

employer-administered plans

1. self funding
2. 501(c)(9) Trusts
3. small employers
4. cafeteria plans
5. Medical Savings Accounts (MSA)
6. Flexible Spending Accounts (FSA)
7. High deductible health plan (HDHP)
8. Health Savings Account (HSA)
9. Health reimbursement accounts (HRAs)
1

self funding

if claim costs are fairly predictable, employer pay consider a self funded plan
an employer, not an insurance co., provides the funds to make claim payments for company employees and their dependents

stop loss contract

in the event that claims are higher than predicted, a self-funded health insurance plan can be backed up by stop loss contract designed to limit the employers liability for claims

2 variations for stop loss contract

1. specific stop loss
2. aggregate stop loss

ASO contractual agreement

the insurer provides claim forms, administers claims, and makes payments to health care providers, but employer still provides funds to make claim payments

advantages of self insurance

1. company can save money if losses are less than predicted
2. expense of carrying insurance reduced
3. more vested interest in employees- encouraging them to be well because of assumed risk
4. company has use of money that would otherwise be tied up by i

disadvantages of self insurance

1. actual losses if more than predicted = unexpected loss of funds
2. expenses could be higher than expected if additional personnel are hired to administer claims/manage risk/ offer info
3. income taxes could be higher because no premiums to use as deduc

501(c)(9)

provides for the establishment of voluntary employees' beneficiary associations or 501(c)(9) Trusts -- funding vehicles for the employee benefits offered to members

_______ has caused popularity in 501(c)(9) to diminish

Tax Reform act of 1984

Small employers requirements to ensure insurance coverage at reasonable conditions:

fewer than 25 or 50 employees
1. standard benefit plans offered
2. max. waiting period for preexisting periods
3. insurer may not exclude particular individuals or medical conditions from coverage
5. carriers may cancel or nonrenew small employer plans on

cafeteria plans

defined as a plan in which employees select health benefits from variety of coverage options on basis of their individual and family needs
more complex/expensive than traditional plans, and make sense for larger employers

taxation of cafeteria plans regulated by

section 125 of internal revenue code

Medical Savings Accounts (MSAs) created to

aka Archer MSAs
created to help employees of small employers, as well as self employed, pay for medical care expenses

MSAs are

tax free accounts set up with financial institutions

to qualify for MSA

- employee or spouse who works for small employer that maintains individual or family high-deductible health plan for employee
-self employed person or spouse who maintains an individual or family high deductible health plan

small employer defined as

averaged 50 or less employees during last 2 years

high deductible health plan defined as

annual deductible between $2,000-3,000 for individual or $4,050 and 6,050 for family policy
with max out of pocket 7,400

as of January 2006

no new Archer MSAs can be established, and existing accounts rolled over into HSA

Flexible spending account

the FSA is a cafeteria plan that is funded with employee money by means of salary reduction

salary reduction plan

pretax plan - employee agrees to reduction in compensation and this is used to cover certain medical expenses

FSAs typically best for what size org

moderate to large size

High deductible health plans (HDHP)

offers very low premiums but requires insured to pay relatively high deductible

qualified high deductible plan has minimum deductible of

1,200 - 5,550 for individual
2,400-11,900 for family

HDHP generally paired with

HSA - money grows tax free as long as used for medical expenses

HSAs

since 2004, eligible to people under age of 65 enrolled in HDHPs

people age 55-64 can

make additional catch up contribution of 1,000 for individual policies

employer contributions from HSA

are excluded from employee's taxable income

HRAs

health reimbursement accounts
provided by employer with High deductible plan to create tax-favored savings account for each covered employee where employee can obtain reimbursement for medical expenses not covered

HRAs are the dominant form of

consumer directed health plans

Consumer driven health plans

CDHPs
allow employer to combine high deductible health plan with a spending or reimbursement account
employer contributes certain amount per year, usually 1,000-2,000, which rolls over

typical CDHP focuses on

personalized wellness and prevention

multiple employer trust

provide health insurance benefits to small businesses through a series of trusts usually established on the basis of specific industries (manufacturing, sales and service, real estate, etc.)

generally states require group size of ___ for METs

no such requirements, could be group of 1

METs are formed by

insurers or third party administrators called sponsors

sponsor is responsible for

developing the plan, setting underwriting rules, administering the plan

Multiple employer welfare arrangement

MEWAs
created by small employers who join to provide health insurance benefits for employees often on self-insured basis

blanket policy

usually used for hospital, medical, and surgical coverages

franchise insurance

allows very small groups to have some of the benefits of group insurance (especially the lower cost)

franchise insurance works like group insurance however

there is no master policy-- each individual receives individual policy

franchise insurance offers

hospital, surgical, medical, and disability income coverage
plans may be contributory or noncontributory

X amount of premiums paid for whole franchise group

one

Government health insurance

both federal and state governments offer statutory health insurance programs
on federal level - SS provides disability income and administers medicare
state level- all states have worker's comp laws/medicaid/ etc.

Social security pays 4 types of benefits

1. disability income benefits to workers
2. medicare benefits
3. retirement benefits to workers and dependents
4. survivors benefit to workers family

worker's comp designed to help

persons who suffer loss of income due to injury or sickness that occurs as result of their occupation
required by most states

eligibility for worker's comp

- work in an occupation covered by workers comp
-have had accident/sickness that is work related

benefits under workers comp

medical
income
death
rehab

workers comp medical benefits

provided without limit

income benefits

are paid to employees who suffer work related disabilities
subject to elimination period

death benefits provide 2 types of payments

1. up to a certain dollar amount provided as burial allowance
2. state provides weekly income payments for surviving spouse/children at 66.66% of deceased workers wages

rehabilitation benefits

valuable for reducing workers comp and returning employee to job ASAP
include:
therapy
vocational training
devices such as wheelchair
cost of travel/lodging/living expense while being rehabbed

Medicaid

health care benefits for financially needy
must be 65 or older
intended for those who cant pay medicare

federal-state program

medicaid is federal-state program in that federal gov. encourages states to increase medical assistance to indigent regardless of age by paying 1/2 of admin cost and 50-80% of fees
poorer states receive larger federal grants

health care reform act includes following changes

subsidies - 100-400% FPL
medicaid - expand medicaid to include 133% on FPL, require states to expand medicaid to childless adults, require fed. gov. to pay 100% of costs for newly eligible.
insurance reforms - insurance companies cant deny children based

fixed periodic fee

persons participating in an HMO pay a fixed periodic fee in advance for services performed by participating physicians and hospitals. This fee is payable, whether or not the participant uses any health care service.

accidental means provision

unforeseen, unexpected, unintended cause of an accident - requirement of an accident-based policy that the cause of the mishap must be accidental for any claim to be payable

To control costs, medical insurance plans available from commercial insurers and fraternal organizations are likely to provide care through:

open network PPO
----
Many commercial insurers and fraternals contract with independent physician groups and hospitals, creating extensive, often loosely organized preferred provider organizations for their insureds. Insureds are given lists of approved p

HMO act passed in

Congress passed the Health Maintenance Organization Act in 1973. The act encouraged the formation of HMOs by providing federal assistance for planning and development of federally qualified HMOs.

what happens when insureds go outside of preferred network in PPO plans

A larger deductible is often charged when members obtain medical services from providers outside the preferred provider organization.

fundamental difference btween roth IRA and traditional IRA

contributions to Roth IRAs are never deductible.

franchise or wholesale plan may not insure an individual for more than X amount...

A franchise (or wholesale) plan may not insure an individual for more than $25,000, unless it is written in connection with a professional association, an indebtedness, a sales contract, or a pension plan.

what happens if insured under EPO goes to out of network provider?

EPOs require insureds to use only approved providers, who offer care at a discount. The insured is likely to have to meet deductibles and pay coinsurance amounts.