►SERVICE PROVIDERS

Service providers offer benefits to subscribers in return for the payment of a premium. Benefits are in
the form of services provided by hospitals and physicians in the plan.

Blue Cross and Blue Shield

Blue Cross and Blue Shield are the dominant health insurers of the United States. The nation’s Blue
Cross and Blue Shield plans are loosely affiliated through the national Blue Cross and Blue Shield
Association and most are considered non-profit organizations. The Blues provide the majority of their
benefits on a service basis rather than on a reimbursement basis. This means that the insurer pays the
provider directly for the medical treatment given to the subscriber, instead of reimbursing the insured.

• As participating providers, the doctors and hospitals contractually agree to specific costs for the
  medical services provided to subscribers

• Members of Blue Cross and Blue Shield are known as subscribers

• Blue Cross and Blue Shield plans are called prepaid plans because the subscribers pay a set fee
  (usually each month) for medical services covered under the plan

Health Maintenance Organizations

A health maintenance organization, or HMO, is another type of organization offering comprehensive
prepaid health care services to its subscribing members. HMOs are distinguished by the fact that they
not only finance health care services for their subscribers on a prepayment basis, but they also organize
and deliver the health services as well.

• Subscribers pay a fixed periodic fee to the HMO (as opposed to paying for services only
  when needed) and are provided with a broad range of health services, from routine doctor
  visits to emergency and hospital care

• When joining an HMO, a member will usually be asked to select a primary care physician

• This care is rendered by physicians and hospitals who participate in the HMO

• The payment given to a physician for each member of an HMO assigned to them is called
  capitation

• When the HMO is represented by a group of physicians who are salaried employees and work
  out of the HMO's facility, this is known as a closed panel (sometimes called a staff model HMO)

• For non-emergency situations in a closed network plan, a subscriber may be required to pay up to 100% of the billed amount if a health provider is chosen outside of the network

• An HMO which is characterized by a network of physicians who work out of their own facilities
and participate in the HMO on a part-time basis is known as an open panel.

• HMOs are known for stressing preventive care

• Health maintenance organizations may be self-contained and self-funded based on dues or fees
  from their subscribers. They may also contract for excess insurance or administrative services
  provided by insurance companies. In fact, some HMOs are sponsored by insurance companies.

• Hospital care under a typical HMO plan includes services such as hospitalization, in-hospital lab work and X-rays, inpatient laboratory services, and inpatient mental health care

• HMO’s often require subscribers to select a primary care physician, which is a doctor who provides
  all care for a particular member and controls all referrals for specialized care, and in some
  cases, hospital care

• If a need for emergency health services arises for an enrollee of a health maintenance organization (HMO) using a gatekeeper system, the enrollee should proceed directly to the nearest emergency room

• With HMO prescription drug plans, drugs are usually dispensed through participating pharmacies

• An in-house pharmacy is typically available to enrollees in a staff model

Preferred Provider Organizations

Another type of health insurance provider is the preferred provider organization, or PPO. A preferred
provider organization is a collection of health care providers such as physicians, hospitals, and clinics
who offer their services to certain groups at prearranged discount prices. In return, the group refers its
members to the preferred providers for health care services.

• Unlike HMOs, preferred provider organizations usually operate on a fee-for-service basis
  (where the cost of each service is scheduled), not on a prepaid basis

• Members of the PPO select from among the preferred providers for needed services

• In contrast to HMOs, PPO’s provide a wider choice of physicians

• PPO’s have agreed to offer their services to the group where patient fees are discounted. In
  return, the group refers its members to the PPO and the providers broaden their patient base

• Groups that contract with PPOs are often employers, insurance companies, or other health
  insurance benefit providers

• While these groups do not mandate that individual members must use the PPO, a reduced
  benefit is typical if they do not

• Preferred provider plans can include dental care

►GOVERNMENT INSURANCE PROGRAMS

Medicare

The federally administered Medicare program took effect in 1966. Its purpose is to provide hospital
and medical expense insurance protection to those aged 65 and older. It also provides insurance
protection to any individual who suffers from chronic kidney disease or to those who have been
receiving Social Security Disability benefits for at least 24 months.

• Medicare Part A (Hospital Insurance) covers inpatient care in hospitals and skilled nursing facilities, and it  covers care provided in a hospice and some care provided at home

• Part A covers drugs administered as part of inpatient treatment

• The Social Security Administration handles enrollment for the Medicare program and provides information about Medicare to the public

• All parts of the Medicare program (except for public information and enrollment) are administered by The Centers for Medicare and Medicaid Services

• The day the insured enters a hospital is the first day of a Medicare Part A benefit period

• Skilled nursing facility expenses are sometimes covered by Medicare Part A, but ONLY if the insured was
   hospitalized shortly before entering the facility

• Medicare Part A will cover a maximum of 100 days per benefit period in a skilled nursing facility (days 1-20
   will pay 100%, days 21-100 will pay a flat dollar amount per day)

• The lifetime maximum for inpatient psychiatric care under Part A Medicare is 190 days

• The primary source of financing for Part A is Federal payroll and self-employment taxes

• Medicare Part B (Medical Insurance) provides medical insurance for required doctors’ services,
  outpatient services and medical supplies, and many services not covered by Part A

• Medicare Part B insurance is partially funded by user premiums

• The initial enrollment period for Medicare Part B ends three months after the 65th birthday month

• The open enrollment period for Medicare Part B is January 1 through March 31

• The difference between the physician's actual charges and Medicare's approved amount is called "excess charge"

• A person diagnosed with kidney failure and is covered by a group health plan will be primarily covered by that plan for the first 30 months after diagnosis. After 30 months, this individual's primary coverage will come from Medicare.

Social Security Disability Income

Social Security provides services other than survivorship and retirement benefits. In addition to Medicare, the federal government also provides disability related benefits through the Social Security OASDI program. Let's review some of the important points here.

• To be eligible for Social Security Disability benefits, you need to be fully insured, in which you need at least one quarter of coverage for each calendar year after turning 21 years old. The minimum number of credits needed is 6.

• To be fully insured on a permanent basis, 40 quarter credits are required – at this point you are fully insured for Social Security Disability benefits whether you continue to work or not.

• The maximum Social Security Disability benefit an insured may receive is equal to 100% of the insured's Primary Insurance Amount (PIA)

• Disability income benefits are available to covered workers who qualify under Social Security
  requirements

• One of the requirements is that the individual must be mentally or physically disabled to the point
  where substantial gainful work cannot be performed

• The impairment must be expected to last at least 12 months or result in an earlier death

• A five-month waiting period is required before an individual will qualify for benefits, during
  which time he/she must remain disabled

• The worker's spouse and dependent children are entitled to an income benefit which is a
  percentage of the worker's primary insurance amount

Medicaid

Medicaid is Title XIX of the Social Security Act, added to the Social Security program in 1965. Its purpose
is to provide matching federal funds to states for their medical public assistance plans to help needy
persons, regardless of age.

• Medicaid benefits are generally payable to low income individuals who are blind, disabled, or
  under 21 years of age

• Medicaid is financed by both the federal and state governments (partially funded by the
  federal government and administered by individual states)

• The benefits may be applied to Medicare deductibles and co-payment requirements

TRI-CARE

TRI-CARE is a federal government accident and health plan which provides accident and health coverage to military families.

Federal Employees Health Benefits Program

The Federal Employees Health Benefits (FEHB) Program is a system of "managed competition" through which employee health benefits are provided to civilian government employees and annuitants of the United States government. There are two types of plans that participate in the FEHB program: fee-for-service plans and health maintenance organizations (prepaid).

State Workers' Compensation Programs

• All states have workers’ compensation laws, which were enacted to compensate employees for
  lost wages and medical expenses due to occupational accidents and occupational diseases

• Employers are responsible for providing workers' compensation benefits to their employees and
  do so by purchasing coverage through state programs, private insurers, or by self-insuring

• There is no time limit on how long Workers' Compensation medical expense benefits continue for disabled workers

• The benefits arising from a worker's compensation claim could be inadequate to replace the loss of income

• Under medical expense insurance policies, losses that are covered by workers’ compensation are generally excluded
  from coverage

• Misconduct on the job where injury occurs typically isn’t covered

►ALTERNATIVE METHODS OF PROVIDING HEALTH INSURANCE

Self-Insurance

• Group health coverage can be either self-insured (“self-funded”) or fully insured. Under self-insured plans,
the employer funds and pays for member claims and benefits. The employer can therefore offer specific benefits that
are best suited to employees’ needs. This grants the employer more control over costs and flexibility over benefits.

•Under a partially self-insured plan, an employer may share the risk of covering claims by buying stop-loss insurance

coverage from an insurance company. The employer still remains liable for funding claims under the plan. Stop-
loss policies are most effective for large employers that face the risk of significant losses.

Multiple Employer Trusts (MET)

A method of marketing group benefits to employers who have a small number of employees
is the multiple employer trust (MET). They are usually in the same industry group.

• METs can provide a single type of insurance (e.g., health insurance) or a wide range
of coverages (e.g., life, medical expense, and disability income insurance)

• An employer who wants to get coverage for employees from a MET must first become a
member of the trust by subscribing to it

• A MET may either provide benefits on a self-funded basis or fund benefits with a contract
purchased from an insurance company

• In the latter case, the trust (rather than the subscribing employers) is the master insurance
contract holder

•A MET is sometimes insured and administered by a third-party, which includes duties such as insuring the plan, underwriting, and claims administration

• Participants are issued a joinder agreement (document which an individual is admitted as a
member and bound to the terms of membership)

• The employer's premium payments are directed into a trust from which the plan's benefits and claims are
paid. These trusts are also called 501(c)(9) trusts after the relevant section of the Internal Revenue Code.

• Self-insured plans are common to multiple employer trusts (METs) or multiple employer welfare arrangements (MEWAs). They are also common in cases where the insured group is small, with relatively healthy members and few claims.

• Self-funded plans commonly use the services of an insurance company to act as a third-party administrator of
the plan. Insurers may provide such services without responsibility for claims payment under an Administrative Services
Only (ASO) contract.

Multiple Employer Welfare Arrangements (MEWA)

A multiple employer welfare arrangement (MEWA) is a type of MET which consists of small
employers who have joined to provide affordable health benefits for their employees, often on a self-insured basis.

• They are tax-exempt entities

• Employees covered by a MEWA are required by law to have an employment ­related common bond