Medical Expense Plans and Concepts

Transcription

1 9 Medical Expense Plans and Concepts LEARNING OBJECTIVES Upon the completion of this chapter, you will be able to: 1. Define earned and unearned premium 2. Identify the differences between Indemnity and Service plans 3. Distinguish which providers have insureds and which have subscribers 4. Compare and contrast the characteristics of an HMO, PPO and a POS 5. Explain the role of a Primary Care Physician or Gatekeeper 6. Recall the terminology associated with Major Medical Expense plans 7. List 3 Limited Medical Expense policies 8. Recognize the types of dental care coverages and plan types OVERVIEW The purpose of this chapter is to explain the characteristics and features that distinguish many of the various health care providers as to their philosophies in the delivery of health care. This chapter will also provide an overview of the traditional Medical Expense Plans available and the benefits, provisions and exclusions associated with these plans. 9.1 General Definitions Term Earned Premium Unearned Premium Service Area Subscriber Insured Definition Portion of a premium for which protection has already been given Portion of a premium for which policy protection has not yet been given The primary geographical area of coverage and service provided by a Health Maintenance Organization (HMO) A person applying for coverage through a service provider A person applying for coverage through an indemnity provider 9.2 Classification of Healthcare Plans The major classifications of plans include: Indemnity (Reimbursement) Plan The insured can choose any doctor or hospital without referrals or a primary care physician. The plan requires the insured to pay up front for services, and then submit a claim for reimbursement. The insurer will pay benefits directly to the insured as specified in the policy up to the amount of expenses incurred. Indemnity plans are generally marketed through commercial insurers. A.D.Banker&Company 117

2 CHAPTER NINE Service Plan The plan pays benefits directly to the providers of health care rather than as a reimbursement to the subscriber. Plan participants are called subscribers and pay a premium or subscription fee. Service plan providers include Blue Cross and Blue Shield, Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Point of Service plans (POS). The plans can be prepaid or have a contractual agreement with a healthcare provider to accept a negotiated fee for services. Self-Insured (Self-Funded) Plan A plan offered through employers, associations, or unions who pay claims out of their own funds instead of funding claims through an insurer. 9.3 Payment and Benefit Structure Payment Structure Comparisons 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. Scheduled Payment A health plan with limits as to what will be paid for covered expenses. These plans are most associated with covering day to day losses based on a specified or flat dollar amount. Scheduled benefit plans are not designed to cover catastrophic losses and have limited annual benefits. Cash or Indemnity Payment (Hospital 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. Fee-for-Service Provides a separate payment to a healthcare provider for each medical service received by a patient. Prepaid Medical benefits are provided to a subscriber in exchange for predetermined monthly premiums paid in advance. Usual, Customary, Reasonable (UCR) Benefits are not scheduled, but are based on the average fee charged by all providers 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. Lifetime Limit The maximum a policy will pay for covered losses during the lifetime of an insured. Annual Limit The maximum a policy will for covered losses per year. Per-Cause The maximum a policy will pay for covered losses per claim. Fee for Service Pay benefits based on actual services provided. Fee for Service vs. Prepaid Plan Prepaid Plan Provide benefits based on a designated fee (capitation fee), regardless of any services provided. 118 A.D.Banker&Company

3 MEDICAL EXPENSE PLANS AND CONCEPTS Retention Question 1 The terms usual, customary, and reasonable refer to which of the following? a. The standard accepted medical procedure for a given illness or injury b. The most commonly performed operations or treatments in a given territory c. A non-physician s evaluation and approval of a medical procedure recommended by a patient s physician or surgeon d. The average charge for a medical procedure, treatment, or service in a defined geographical area 9.4 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. In most states, the Blues are considered not-for-profit organizations and are regulated under special legislation. They are also given some special consideration by the IRS. The Blues have traditionally offered benefits in the form of services, not indemnity or reimbursement plans. The payments are made directly to the providers under a contractual agreement (fee for service). 9.5 Health Maintenance Organizations (HMOs) An HMO is regarded as a managed health care system providing a comprehensive array of medical services on a prepaid basis, which means little or no out-of-pocket expenses. Members enrolled in managed care plans are called subscribers, as opposed to insureds. All subscribers must live within a specific geographic region called the service area. The HMO has a contract with medical providers within the service area and subscribers must seek treatment from a contracted provider. Typically, the HMO provider is paid a set fee, known as a capitation fee, per enrollee. Coverage will not be provided outside the service area, except in cases of an emergency. HMOs emphasize preventive medicine by providing prepaid routine medical exams, wellness programs and diagnostic screenings. Early detection of a condition reduces unnecessary procedures, surgeries, and hospitalizations. Although HMOs provide services on a prepaid basis, members are still required to make a copayment for office visits and hospital services. The copayment is considered an administrative fee and is not based on the specific services provided. The copayment helps to discourage unnecessary use of medical resources, such as emergency room services for non-emergency care. Subscribers do not pay deductibles, file claims, or receive a bill. HMOs are deemed to be both a health care financing and servicing mechanism. The principal objectives are to reduce medical expenses by: Stressing preventive medicine through physical exams and diagnostic procedures Reducing the number of unnecessary hospital admissions Reducing the average number of days per hospital visit Reducing duplication of benefits Saving on administrative costs A.D.Banker&Company 119

4 CHAPTER NINE HMOs are required to provide basic health care services including the usual physician, hospitalization, laboratory, x-ray, urgent care, emergency and preventive services, and out-of-area coverage for emergency care. Payments are provided to member hospitals on a predetermined basis. Emergency care outside of the network must be covered for necessary services at the nearest emergency room. Other supplemental benefits such as medical equipment, dental care, vision, physical therapy, chiropractic services, and some pharmaceutical benefits are optional. Physician services include care provided by a primary care physician or primary care provider (PCP) also known as a Gatekeeper. This is a physician who provides both the first contact for a person with an undiagnosed health concern as well as continuing care of varied medical conditions. An HMO will require subscribers to seek treatment through a PCP before seeing a specialist. Primary Care Physician vs. Specialist Physician Primary Care Physician Specialist Physician A Primary Care Physician (Gatekeeper) monitors health care needs and helps to control costs by not recommending unnecessary services (including referrals to other physicians and specialists). Not utilizing the primary care physician will cause a claim to be denied. The Primary Care Physician will determine if the covered person needs ongoing care from a specialist. Specialist or Referral Physician will treat a member if the Primary Care Physician has made a referral, usually after all other treatments have been exhausted. Examples of specialists include neurologists, cardiologists, and oncologists. After an HMO has been in operation for 24 months, it may have an annual open enrollment period of at least 1 month during which it accepts enrollees up to the limits of its capacity. HMOs provide payments to member hospitals on a predetermined basis. Care outside of the network is covered but limited to specific treatment. Emergency care must be covered for necessary services at the nearest emergency room. Standard HMO Modes There are 3 standard HMO models: Group Model The HMO contracts with an independent medical group to provide a variety of medical services to subscribers. Under the agreement, the HMO pays a capitation fee to the medical group entity directly. A capitation fee is a fixed amount paid monthly per subscriber. The medical group will then pay the individual physicians who remain independent of the HMO. Staff Model (Closed-Panel) Contracting physicians are paid employees working on the staff of the HMO. They generally operate in a clinic setting at the HMO s physical facilities. As hospital services are required, staff doctors and HMO administrators arrange for these services. The staff model is considered closed panel since the providers do not work outside of the HMO and subscribers must use the providers on staff for treatment, with very few exceptions. Unlike the group model, practitioners in the staff model are under no financial risk. The HMO, as the employer, takes the risk. Independent Practice Association (IPA) Model (Open-Panel) This model gives HMO members the maximum freedom of choice of physicians and locations because the HMO is allowed to contract with a network of independent physicians who are part of an independent practice association. Physicians operate out of their own private offices and subscribers may be individuals the physicians were already treating. Payment to physicians is by capitation (per subscriber) or on a fee-for-service basis negotiated in advance. Since the IPA 120 A.D.Banker&Company

5 MEDICAL EXPENSE PLANS AND CONCEPTS model contracts with physicians in private practice who also treat non HMO patients, this is considered an open panel plan. Retention Question 2 Managed health care plans generally refer to covered persons as. a. Insureds b. Participants c. Subscribers d. Members Retention Question 3 HMOs usually require patients to select a as the person who will oversee and direct their basic health care in most cases. a. Primary Care Physician b. Care coordinator c. Medical social worker d. Insurance agent or broker 9.6 Preferred Provider Organizations (PPOs) PPOs are an arrangement under which a selected group of independent hospitals and medical practitioners become preferred providers in a geographic area. Unlike an HMO prepaid plan, the providers perform services to subscribers and charge a discounted fee-for-service negotiated in advance. Payment is made directly to the provider after treatment is received. The contracting agency or organizer of a PPO might be a commercial insurance company, Blue Cross/Blue Shield, local group of hospitals and physicians, an HMO, large employers, or trade unions. Subscribers have more choices among doctors and hospitals under a PPO arrangement. Subscribers can choose a preferred provider or out of network provider. If an out-of-network provider is utilized, the PPO pays a reduced amount and the subscriber will have a larger out-of-pocket cost. PPOs share the concept of cost reduction by health care management and differ from HMOs in that PPOs do not have separate physical facilities and are less stringently regulated since any group agreeing upon the arrangements may be a PPO. Exclusive Provider Organization (EPO) An EPO is a type of PPO that REQUIRES a subscriber to seek treatment from a network provider. Unlike an HMO, use of a primary care physician and referral to a specialist are not required and the provider is paid a negotiated fee-for-service Retention Question 4 The primary reason persons choose to enroll in a PPO plan instead of an HMO is usually. a. Freedom to choose any service provider anywhere in the U.S. b. Freedom to choose any service provider in the PPO network without referral c. PPO premiums are at least 25% less than those charged by HMOs d. Their regular physician does not participate in any available HMO plan A.D.Banker&Company 121

6 CHAPTER NINE 9.7 Point of Service (POS) These Plans combine PPO and HMO benefits. Members can choose (at the point of service) which part of the plan to use. If the subscriber stays in network (open-panel HMO), benefits are paid as an HMO. A Primary Care Physician, or gatekeeper, will apply and referrals will be necessary if the plan is being utilized as an HMO. If the subscriber uses an out-of-network provider, they will have a higher out-of-pocket responsibility. This feature is similar to an indemnity plan and the provider will be paid based on a fee-for-service. Any Provider vs. Limited Choice Any Provider Limited Choice These are more flexible plans that allow the insured or subscriber to choose any provider to receive benefits. 9.8 Basic Health Insurance Policy 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 Basic Expense Policies traditionally cover an insured for nonsurgical doctor visits while in the hospital (medical expense), the charges for room and board while hospitalized (hospital expense), and can be expanded to include payment for office visits, diagnostic x-rays, laboratory charges, ambulance, and the cost of the operating room (miscellaneous expense), and the surgeon s fees associated with surgery (surgeon expense). For an additional premium, maternity benefits may also be provided. Basic Expense Policies typically do not cover routine vision or dental care. The insured is free to choose any physician, surgeon, hospital, or other health care provider. Referrals to specialists are not a requirement for coverage. These policies specify the benefit limit for covered expenses as either a flat dollar amount or a schedule of benefits. The benefit limit may be less than actual expenses incurred. Basic plans do not have a deductible; therefore, they are known as providing First Dollar coverage. The Basic insurance policy characteristics are: 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. Basic Hospital Expense Pays for a hospital room and board (semi-private) with a daily limit of coverage. Miscellaneous hospital expenses may also be provided up to a specified limit per day for inpatient x-rays, lab work, operating room expense, medication, and cost of the anesthesia. Basic Surgical Expense Pays surgeon and anesthesiologist fees for the cost of a surgical procedure. These policies usually provide benefits based on a surgical schedule to specify benefit limits for each surgical procedure. If a surgery is not listed in the policy, the company will pay based on the coverage of a comparable surgery. Using a relative value scale is another approach that may be used to calculate benefits. This method assigns a number of points and a dollar value per point based on the level and difficulty of a procedure. 122 A.D.Banker&Company

7 MEDICAL EXPENSE PLANS AND CONCEPTS Retention Question 5 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, the insured pays the rest b. Beneficiaries receive the first dollar of refund when an insured dies and passes the claim to the insurance company c. 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 d. The insured pays the first dollar of every claim, and the insurer pays 80% after that 9.9 Major Medical Expense Insurance and Terminology Medical Expense Policies covering sickness and accident usually required that an illness must be diagnosed and treated while the policy is in force for coverage to apply. The terms of the policy determine the amount of benefits paid upon claim. Medical Expense Policies normally provide coverage with a benefit period of January 1 through December 31 of each year. These policies do not cover loss of income while hospitalized. Major Medical Policy Major Medical Policies provide benefits for potentially catastrophic and/or prolonged injury or illness. These policies include a lifetime limit. The limit does not include the out of pocket expenses the insured pays, including deductibles and coinsurance amounts. Hospice and Home Health care are not normally covered. Major medical expense policies are characterized by the following provisions: Deductible An initial amount the insured must meet per year before benefits are paid. This applies as per person or family. Deductibles can vary in cost and are designed to allow the insured to assume a portion of the risk. Changing the deductible will affect the premium cost. Higher deductibles result in a lower premium. Coinsurance 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. 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. Common Accident Deductible If several family members are injured in the same accident, only one deductible is applied. 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. 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. A.D.Banker&Company 123

8 CHAPTER NINE Supplemental Major Medical Policy This plan provides for Major Medical coverage designed to supplement a Basic Plan. It is written to pay benefits once the Basic Plan benefits are exhausted. The Basic Plan provides first dollar coverage. Once the Basic Plan benefits are exhausted, a Corridor Deductible is required to be paid before the start of coverage under the Supplemental Major Medical plan. Comprehensive Major Medical Policy Comprehensive Major Medical insurance coverage combines the features of the Basic and Major Medical policy into a single policy. Benefits provide for reimbursement of covered expenses on a usual, customary, and reasonable basis. The insured has the freedom to choose any hospital, physician, or surgeon, or other health care providers. This policy requires an initial Flat Deductible that is paid before the Basic plan begins to provide coverage. An additional Integrated Deductible must be met before the Major Medical benefits are payable. This policy provides the most comprehensive coverage of all medical expense plans. Retention Question 6 An insured is covered under a major medical plan where she works. The plan has a $300 deductible, 80/20 co-insurance, and a $5,000 stop-loss including deductible. A severe injury is suffered and the total covered cost for treatment is $28,000. How much will the insurance company cover? a. $5,000 b. $22,160 c. $23,000 d. $28, Medical Expense Benefits and Provisions Medical expense plans include specified benefits and provisions as determined by federal and state regulation. Certain requirements and limits may apply. If applicable, additional information about these topics is presented in the state law chapter. 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. The coverage must include injury and sickness, including the necessary care and treatment of medically diagnosed congenital defects and birth abnormalities. Notification of birth or adoption and payment of the required premium must be within a month (30-31 days) after the date of birth or adoption, in order to continue coverage; otherwise, the coverage is only for the first month. 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. 124 A.D.Banker&Company

9 Mental Illness and Substance Abuse MEDICAL EXPENSE PLANS AND CONCEPTS Coverage for mental illness and substance abuse will be subject to the same deductibles and coinsurance factors as those that apply to any physical illness. It is provided on an inpatient and outpatient basis and includes the treatment of alcohol abuse and chemical dependency. Many plans will have limitations on the benefits provided on an outpatient basis. Prescription Drugs A prescription drug benefit is most often found in a group health insurance policy. However, some individual health insurance policies may integrate benefits with a medical plan or provide benefits for an additional cost. This benefit may be written requiring a small copayment, a flat amount, or an out-of-pocket percentage for each prescription. Maternity Benefits Medical plans will usually cover the complications of pregnancy as an illness, but normal birthing costs may be limited or excluded. Maternity benefits typically provide 96 hours of inpatient care following a caesarean section birth. Normal birth inpatient care is 48 hours. A shorter stay may be allowed if approved by the attending physician. Retention Question 7 Newborn children are covered under health insurance plans beginning. a. On the 14th day following birth b. On the 15th day following birth c. On the 31st day following birth d. Immediately at birth and for at least 31 days 9.11 Medical Expense Insurance Optional Benefits Vision Care This provides for 1 routine annual examination (refraction). It may provide payment for the cost of lenses, frames, contact lenses, but not the cost to replace frames or lenses that are lost or broken. It does not pay for sunglasses or safety glasses. This coverage does not pay for medical expenses incurred from disease or injuries to the eye. Hearing Most insurance plans do not cover the cost of hearing aids. Some insurance programs and supplemental programs do provide hearing aid coverage. A few health insurance plans allow you, for an extra premium, to add additional hearing coverage 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. A.D.Banker&Company 125

10 CHAPTER NINE Types of Limited Policies Accidental Death and Dismemberment Provides that the face amount, 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 total eyesight (both eyes) or the loss of any two limbs, double dismemberment, due to an accident. The capital sum, typically 50% of the principal sum, may be paid for the loss of one limb, single dismemberment, or sight in one eye due to and within 90 days of the accident. Limited Accident Provides benefits for accidental injuries associated with specific events, such as traveling out of the country or on a common carrier. Critical Illness ( Dread Disease or Limited Sickness Plans) Provides specific benefits for a specified sickness, such as Cancer Plans and Heart Disease Plans. 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. Short-Term Medical Short-term medical insurance is temporary coverage that provides limited benefits for a short period of time period, typically 30 days - 12 months. Short-term plans are designed to immediately fill coverage gaps temporarily for individuals who have lost coverage due to change in employment, need proof of insurance to participate in special activities, or need coverage while waiting to become eligible for Medicare. While the premiums are considerably lower than major medical plans, these policies do not cover the minimum essential health benefits, including pre-existing conditions, and are not guaranteed issue. Individuals who do not maintain coverage as required under the ACA may be subject to a tax penalty. 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 health insurance coverage. Blanket insurance is not individually underwritten and no certificate or policy is issued to anyone other than the contracting organization. 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. Retention Question 8 A typical hospital indemnity insurance plan provides payment of benefits in which of the following ways? a. According to a written schedule of benefits for common procedures and treatments b. According to a daily or monthly benefit amount without regard to actual medical expenses c. In an amount equal to the insured s copay or coinsurance amounts d. As reimbursement for necessary medical expenses paid by the insured 126 A.D.Banker&Company

11 MEDICAL EXPENSE PLANS AND CONCEPTS Retention Question 9 What is the benefit of a credit disability insurance plan? a. It automatically pays 100% of the balance of a person s debt if permanently disabled b. It makes the minimum monthly payment on a person s debt for a stated period of time c. It prevents foreclosure on a person s home in the event of any disability lasting more than one year d. It waives the repayment of credit card debt during the entire time a person remains totally disabled 9.13 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 by the insurer 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 some individual or group disability or medical expense policies: Pre-existing 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 Active military service Overseas residence Coverage payable under a government plan Commission or attempt of a felony Retention Question 10 Which of the following would likely be treated as a common exclusion found in most health insurance policies? a. A U.S. citizen, who owns and resides in a home in Costa Rica, needs an operation b. An honorably discharged Navy veteran who visits his primary care physician c. A homemaker who is seriously injured in an unintentional accident and needs physical therapy d. A retired commercial airline pilot receiving preventive care 9.14 Dental Insurance A dental plan offered by an insurer must state the benefits, the exclusions, and any limitations 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). A.D.Banker&Company 127

12 CHAPTER NINE Choice of Providers There are as many choices of dental coverage as there are choices of 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. 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 Benefits may be payable on a Scheduled plan, a Nonscheduled plan or a combination of both. 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 usual, reasonable, and customary basis. Dentures are a major dental expense and would be paid using this benefit provision. 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 usual, customary, and reasonable basis. Benefit Categories Type of Dental Care Diagnostic/Preventive Basic Major Characteristics Routine diagnostic and preventive care services includes routine checkups, x-rays and cleaning Fillings, periodontics and root canals are considered to be basic care Major dental care includes any crowns, dentures or bridge work, and orthodontics 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. 128 A.D.Banker&Company

13 Exclusions Purely cosmetic services (unless necessitated by an accident) 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 MEDICAL EXPENSE PLANS AND CONCEPTS 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. 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. Employer Group Dental Expense 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. Integrated Deductibles vs. Stand-alone Plans Group dental insurance can be combined with medical expense insurance and have an integrated (shared) deductible. Stand-alone dental plans are issued separate from other types of group insurance and require a separate deductible. 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. A.D.Banker&Company 129

14 CHAPTER NINE Retention Question 11 All of the following types of dental treatment are found in a dental insurance plan, EXCEPT: a. Orthotics b. Periodontics c. Prosthodontics d. Endodontics Retention Question 12 What does it mean if dental benefits are scheduled? a. Benefits are limited to specified maximums per procedure b. Two scheduled visits to the dentist are allowed per year c. A dentist must get insurance company pre-approval of all visits d. A dentist must get insurance company pre-approval of any and all procedures ahead of time Retention Question 13 All of the following are common exclusions found in dental insurance plans, EXCEPT: a. Cosmetic procedures that is not necessary for sound dental health b. Coverage for teeth that are missing at the time coverage takes effect c. Emergency dental treatment d. Expenses for oral hygiene instructions and plaque control programs Chapter Nine Lightning Facts 1. Service areas are defined by geographical boundaries and used by HMOs and PPOs to determine the usual, customary, and reasonable charges for health care expenses A subscriber is a person applying for health coverage through a service provider, such as an HMO Indemnity plans pay stated benefits to insureds for reimbursement for expenses incurred Service plans pay benefits directly to service providers (hospitals, doctors, therapists, laboratories, radiology centers, etc.). Most service plans today are managed care plans Self-insured plans are typically used by large employers with healthier work forces to reduce the cost of providing health care benefits by paying actual claims expenses instead of paying insurance premiums Commercial insurers typically offer traditional reimbursement (shared expense) plans of health insurance An HMO is regarded as a comprehensive managed health care system to voluntarily enrolled persons living within a specific geographic area. HMOs are generally limited in the number of providers from which to choose HMOs emphasize preventive medicine and early treatment with prepaid routine exams, stress management and diagnostic screening techniques HMO s require the subscriber to be treated by a Primary Care Physician or Gatekeeper to obtain a referral to a Specialty Physician. 130 A.D.Banker&Company

15 MEDICAL EXPENSE PLANS AND CONCEPTS 10. PPO plans charge a discounted fee-for-service in advance. PPO physicians receive prenegotiated payments for office visits and related patient services only when rendered. Subscribers pay copays and/or coinsurance in addition to a relatively small annual deductible HMOs are either open or closed panel. Under open panel, the doctor can work with anyone and under closed panel, the doctor can work only with HMO members who are employed by the HMO PPO plans permit subscribers to use both network providers as well as non-network providers for their health care. Although the subscribers may choose to use any service provider, they will have lower out-of-pocket expenses when using only network providers Usual, customary, and reasonable (UCR) refers to the basis on which covered medical expenses are reimbursed Blue Cross ( BC ) plans provide benefits for inpatient hospitalization expenses and Blue Shield ( BS ) plans cover physician and outpatient health care expenses. Each plan operates on a service contract. In many states, the two organizations operate jointly as BCBS and are notfor-profit organizations HMOs are deemed to be both a health care financing and servicing mechanism whose principle objectives are to reduce medical expenses The emphasis in managed care plans is on preventive medicine and wellness, recognizing that it is less costly to keep persons healthy rather than treating them after they become ill. By limiting the out-of-pocket expense for physician office visits, subscribers are encouraged to see their PCP on a regular basis HMO subscribers benefit by having to pay only service copays for the majority of their health care needs, but must agree to use only network providers, except in emergency situations or when outside their plan s service area The primary reason that persons choose coverage from PPOs over HMOs is choice of service providers is not limited. A subscriber may obtain health care services for covered expenses from any properly licensed provider, in or out of the PPO s network Services received from out-of-network PPO providers usually require the subscriber to pay higher deductibles, higher copays, and higher coinsurance percentages, and benefits are limited to the UCR rates for similar services within the network A combined Basic Hospital, Medical, and Surgical Expense plan provides a certain amount of annual benefit payments for both inpatient and outpatient hospital expenses, including physician s and surgeon s services in or out of the hospital, and laboratory and other diagnostic services Benefits available under these combined Basic forms of insurance are usually written on a first dollar basis, which means there is no annual deductible that must be satisfied before benefits are paid, as well as on a scheduled benefit basis that states the maximum benefit payable for covered services. Charges which exceed the stated maximum benefit are the responsibility of the insured A Basic Hospital Expense plan covers only inpatient hospital expenses (room and board, laboratory and diagnostics), including those related to surgical procedures, but does not provide benefits for physician s or surgeon s services. It will also cover Emergency Room services if the insured is admitted to the hospital through the ER. Plans may include a daily maximum benefit A Basic Medical Expense plan covers non-surgical physician s services, when not hospitalized, and also covers most outpatient hospital expenses, including Emergency Room and ambulance charges, and laboratory and diagnostic services on an outpatient basis. 9.8 A.D.Banker&Company 131

16 CHAPTER NINE 24. A Basic Surgical Expense plan provides benefits for the services of a surgeon and if a surgery is not listed in the policy, the company will pay based on the coverage of a comparable surgery. It also covers charges for operating rooms and anesthesiology when not covered by a Basic Hospital Expense plan Major Medical insurance is characterized by deductibles and coinsurance. Deductibles are stated dollar amounts an insured must pay, usually before benefits are payable under the terms of the policy. Coinsurance is the percentage of sharing between the insured and the insurer once a deductible has been satisfied A deductible may have to be satisfied before benefits are payable by the insurance company. All health insurance policies must include a stop loss provision and describe an out-of-pocket limit. Once the stop loss or out-of-pocket limits are reached, the insurance company will pay 100% of covered claims A deductible carryover provision allows expenses incurred in the last three or four months of the policy year to be applied to the next year s deductible when the current year deductible has not yet been satisfied All health insurance plans must cover newborn children from the moment of birth. Adopted children are covered from the date of placement. Insureds/subscribers must formally apply for inclusion of the newborn or newly adopted child and pay any additional premium required within 31 days of the child s birth or placement for adoption, and the child cannot be declined for insurance Limited benefit plans including Accidental Death and Dismemberment, Critical Illness or Dread Disease (cancer, HIV/AIDS, heart attack, etc.), Hospital Income (or Indemnity ), and blanket health plans are available. These plans do not necessarily pay benefits in direct relationship to actual medical expenses. Blanket health plans are usually written as excess coverage, and would only pay claims for medical or surgical expenses not covered by other primary insurance Credit disability policies provide for payment of a person s minimum monthly payment when the insured is disabled according to the terms of the policy. Coverage may not exceed the total debt amount or the monthly payment amount Dental expense plans may be written on either an individual or group basis. Plan documents must clearly state the benefits and exclusions applicable to the plan, and describe any annual limitations on benefits available Dental plans may cover expenses differently according to the various dental specialties, which include endodontics (tooth decay, including pulp and root canal therapy), orthodontics (alignment of teeth and bite), periodontics (oral disease and care of gums), prosthodontics (replacement of missing or repair of damaged teeth implants, bridges, crowns, and dentures), restorative care for natural teeth (treating caries), and oral surgery to treat oral disease, injury, or congenital malformation Common exclusions in dental expense plans include cosmetic services (teeth whitening, veneers, applied protective coatings, etc. unless medically necessary), replacement of prosthetic appliances, claims covered under Workers Compensation laws, continuing treatments which began prior to the effective date of coverage (except under group plans which are replacement policies) Deductibles in dental expense plans may be waived for purely preventive care such as diagnostic exams and x-rays, and teeth cleaning. Certain plans may include both copays and coinsurance A.D.Banker&Company