Health Insurance Fundamentals Chapters 9, 10, 11&12

I. Development of Medical Expense Coverage u 1st stage: Birth of the Blues during the 30s u 2nd stage: Major medical plans were introduced by insurance companies in the 40s u 3rd stage: Role of the federal government has increased during the 60s u 4th stage: Reactions to increasing costs during the 70s

HMO Act of 1973 was passed u 5th stage: 1980s and 1990s continued change HIPAA passed in 1996 significant growth in managed care plans continued growth of self-funding

II. Cost Containment and Managed care u A. Reasons for increasing costs: – aging population –AIDS –increase in MMP –technological advances

u B. Measures for cost containment Benefit plan design: deductibles, coinsurance, exclusions and limitation Alternative providers: HMOs and PPOs Alternative funding methods Claims review Health education Use of external cost-control systems Managed care consumer-directed plans

u C. Traditional Providers: insurance companies and Blues a. Blues provide service benefits b. Blues enjoy favorable tax treatment c. Insurance companies provide indemnity benefits d. The distinction between Blues and insurance companies is disappearing

u D. Hospital Expense Benefits (basic plan): 1. Room and board 2. Duration of benefits varies from 31 days to Amount of benefits: flat amount or cost of semiprivate room 4. Intensive care: in excess

u Exclusions Major Medical Expenses: u Types u Exclusions u Deductibles: initial, corridor, all-cause, per-cause, family deductible u Coinsurance u Maximum benefits

Managed Care Plans u HMOs: an organized system of health care that provides comprehensive medical services on a prepaid basis to subscribers living within a specific geographic location. u Characteristics: broad package of inpatient and outpatient services emphasize preventive care small or no co-payments

u Delivery of medical services: usually provided by employed personnel or under contract with HMO u Cost control: preventive care, outpatient treatment and use of salaried employees u Types: Staff-model, network-model, individual practice associations

u PPOs: group of providers that contract with employers, insurers, workers, TPAs to provide services at a reduced fee. u Providers are paid on a fee-for-service u Employees can use non-PPO participants but may have to pay more u Exclusive-provider organization: does not provide coverage outside the network

u Point-of- Service Plans: combine traditional medical expense plan with an HMO or PPO u Participant chooses where to receive treatment u Higher deductibles and copayments for out- of-service coverage