Exam (elaborations)
RMIN 4000 Exam 4 Brown UGA
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RMIN 4000 Exam 4 Brown UGA
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RMIN 4000 Exam 4 Brown UGACost Sharing in Health Insurance - -• Copayments • Deductibles
• Coinsurance
• Out-of-Pocket Maximum Limits
- Copayment - -A flat amount the insured must pay for certain benefits,
such as an office visit or generic drug. Does not count towards annual
deductible.
Examples :
-$25 for visit to primary care physician.
-$5 for a generic drug (prescription).
- Calendar-Year Deductible - -• An aggregate deductible that must be
satisfied during the calendar year.
• The amount the insured is responsible for in total (over all claims during
the policy period) before the insurer pays anything.
• Policies may include an individual and/or family deductible.
- Coinsurance - -• The percentage of the bill in excess of the deductible,
which the insured must pay out-of-pocket up to some maximum annual
dollar limit.
Helps to prevent overutilization of plan benefits.
Typically 20%, 25%, or 30%.
- Out-of-Pocket (OOP) Maximum Limit - -• The most the insured will have to
pay out-of-pocket in a calendar year.
• After the out-of-pocket limit is met, the insurer pays 100% of all eligible
expenses.
• Also called a stop-loss limit.
- Jon Snow was recently stabbed with resulting medical bills of $4,000. His
health insurance includes the following:
• $1,000 calendar- year deductible
• 80/20 coinsurance clause
• $5,000 out-of-pocket max
1. After insurance is applied, how much will Jon owe for the medical bill?
2. Jon needs surgery during the same calendar year that costs $30,000. After
insurance is applied, how much will Jon owe for the surgery? - -4,000-1,000
(deductible) = 3,000
3,000 *.20 = 600
Consider the out of pocket max, John already paid 1,000 (deductible) + 600
(coinsurance).
5,000 - 1,600 = 3,400 is all Jon will pay for the 30,000 dollar surgery
, - Individual Medical Expense (Health) Insurance - -• Protects an individual or
family for covered medical expenses because of sickness or injury.
• Important in providing health insurance to individuals and families who are
not able to purchase group insurance (through their employer).
- Group Medical Expense (Health) Insurance - -• Employee benefit that pays
the cost of hospital care, physicians' and surgeons' fees, and related medical
expenses.
• Usually provided through a managed care plan.
- Managed Care Plan - -• Medical expense plan that provides covered
services to the members in a cost-effective manner.
Choice of physicians and hospitals may be limited.
Includes HMO, PPO, and POS plans.
- Health Maintenance Organization (HMO) - -• System that provides
healthcare to its members on a prepaid basis in a particular area.
• Negotiates rates/agreements with hospitals and physicians to provide
medical services.
May own hospitals and employ physicians.
Choice of providers (doctors/hospitals) is limited.
- Structure of HMO - -1. Employee enrolls in HMO plan.
2. Employee selects Primary Care Physician (PCP) from
the HMO's network of doctors.
3. PCP acts as a "gatekeeper." You must receive a referral from the PCP to
see a specialist.
- HMO - Capitation Fee - -• Many HMO plans do not pay based on an FFS
(fee-for service).
• Instead, physicians and medical groups are paid a fixed annual amount for
each plan member regardless of the frequency or type of service provided.
• Shifts risk of overutilization to the medical provider.
- HMO Advantages & Disadvantages - -• Advantages
-Although premiums are high, annual costs may be lower because cost-
sharing is lower (coinsurance, deductibles).
-Broad care; usually good communication between providers.
• Disadvantages
-Little to no out of network coverage.
-Must get referrals through PCP.o If you join an HMO, you'll likely have to
change doctors.
- Preferred Provider Organizations (PPOs) - -• Plan that contracts with
healthcare providers to provide certain medical services at discounted fees.
• Plan forms a "network" of providers.
, • Patients are not required to use a provider within the network, but the
deductible and copay are lower if they do.
- PPO Healthcare Providers - -• Provide services at a discount from full
charges (pay based on FFS).
• If the provider's actual charge exceeds the negotiated fee, the provider
absorbs the cost.
- PPO Advantages & Disadvantages - -• Advantages
-No referral needed for specialist.
-Can go to out-of-network physicians (but pay higher deductible,
coinsurance).
• Disadvantages
- More cost sharing than HMO.
- Out-of-network physicians may bill insured for amounts in excess of FFS.
-Less efficient communication between providers.
-Billing is more complicated than HMO since each medical provider has their
own system.
- Point of Service (POS) Plan - -• Hybrid of HMO and PPO.
• Typically structured as an HMO, but members can go outside of network for
care.
• If patients see providers who are in the network, they pay little or nothing
out of pocket.
• Deductibles and copayments are higher if patients see providers outside
the network.
- Consumer Directed Health Plan (CDHP) - -• Plan that combines a high-
deductible health plan with a health savings account (HSA).
• A high-deductible health plan (HDHP) has an annual deductible that is
substantially higher than traditional plans.
• Example - My policy has a $2,200 individual deductible and $4,400 family
deductible.
- Health Savings Account (HSA) - -• Tax exempt account established
exclusively for the purpose of paying qualified medical expenses.
• Must be covered under a high-deductible health plan.
• Account is an investment account from which the account holder can
withdraw money tax-free for medical costs.
• Employees and employers can contribute to the account up to a certain
annual maximum amount.
- CDHP Advantages & Disadvantages - -• Advantages
-Consumers with high deductibles will be more cost sensitive and avoid
unnecessary tests.
-If not used, money in the HSA can be saved for retirement.
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