DEFINITION OF HEALTH INSURANCE. Health insurance is a type of insurance that covers part or all of the costs of treatment for the occurrence of health risks or disease. The following definitions are those approved for use in Federal surveys that collect information about employer-sponsored health insurance in February 2002 by the Interdepartmental Committee on Employment-based Health Insurance Surveys. These definitions are currently being used in data collection for the BLS National Compensation Survey. The Committee will periodically review and revise these definitions to ensure they remain relevant and accurate.
The acronym “ASO” stands for “administrative services only.” A contractual agreement whereby an employer hires a third party to provide administrative services on their behalf, such as claims processing and billing, with the employer taking on the liability for any claims that may be filed against them.
♦ Self-insured health care plans typically operate this way.
In health insurance, coinsurance refers to a cost-sharing arrangement in which the insured person is responsible for paying a predetermined percentage of covered medical costs after the deductible (if any) has been met.
♦ After meeting their deductible (if applicable), policyholders with health insurance often must pay a set percentage of their out-of-pocket medical expenses through a cost-sharing arrangement known as coinsurance.
♦ Coinsurance amounts may vary depending on whether services are provided by an approved provider (defined as one with whom the insurer has a contract or agreement outlining payment levels and other requirements of the contract) or a non-approved provider.
♦ The amount of your coinsurance may change depending on whether or not the medical care you receive was provided by a provider the insurance company has pre-negotiated rates with..
Copayments are a type of cost sharing in health insurance plans that require insured individuals to pay a predetermined dollar amount at the time of service. In this case, the insurance company is responsible for covering the remaining cost.
♦ Individual services may require their own copayments.
♦ A deductible may need to be met before a copayment is due under some plans.
Deductible: the amount of money an insured person must pay out of pocket before an insurance company begins paying for medical care received during the benefit period (typically a year). Plan deductibles can be set on a per-person or per-family basis.
♦ Plans may have different minimum out-of-pocket expenses for various medical procedures. A plan might, for instance, have a deductible for each hospital stay.
♦A higher deductible may apply if you receive care from a provider who is not on the approved list.
Flexible spending accounts or arrangements (FSA) – Health savings accounts (HSAs) are a type of tax-deferred savings account provided by some employers as a way for their workers to save money for medical costs that aren’t covered by the company’s health insurance plan. To an FSA, the employer may add their own contributions. Any cash or benefits received must be used by the end of the benefit year or be forfeited. Childcare FSAs can be established alongside medical FSAs, but they are not interchangeable.
Flexible benefits plan (Cafeteria plan) (IRS 125 Plan) – Some employers offer their employees the chance to set aside pre-tax dollars in a special savings account designated for medical expenses that aren’t covered by the group health insurance policy. These accounts are known as health savings accounts (HSAs). Employer contributions can be made to an FSA. In order to avoid losing any money or benefits, recipients must use them before the end of the benefit year. Setting up a flexible spending account for child care is possible alongside setting up a health care FSA, but the two are distinct.
Fully insured plan – A type of health insurance in which the company pays neither the claims nor the administrative costs incurred by its employees.
Gatekeeper – Medical care, diagnostic testing, referrals to specialists, and inpatient stays may all need to be coordinated and authorized by a gatekeeper in some health insurance plans.
Group purchasing arrangement – There is a wide variety of ways in which two or more small businesses can join forces to purchase health insurance for their employees. Health care cooperatives, alliances, and business coalitions are just a few examples of possible organizational structures along these lines. Governance, functions, and legal standing under federal and State statutes are some of the ways in which they diverge from one another. Organizations fall into two broad categories: those that are set up or chartered by states, and those that are wholly run by private interests. Some organizations centralize purchasing duties more than others. This may include risk pooling, price negotiation, employee health plan selection, and other administrative duties. Different local, state, and federal laws may apply to them depending on the nature of their operations. Multiple Employer Welfare Arrangements is one possible category under which they fall under the law (MEWAs).
♦ Association Health Plans –In common parlance, this term can be used to refer to any group health insurance program funded by a group. Furthermore, the Health Insurance Portability and Accountability Act of 1996 defines it in such a way as to exempt from certain regulations insurance companies that sell insurance to small employers only through association health plans that meet the definition.
Health Care Plans and Systems
♦ As medical costs are incurred, patients and doctors can claim reimbursement from their insurance company under an indemnity plan.
♦ Conventional indemnity plans give members the freedom to see any doctor they want without worrying about whether or not they will be covered by the plan. These plans provide for timely reimbursement to the patient and/or provider.
♦ A preferred provider organization (PPO) plan is a type of health insurance in which patients are covered by a predetermined group of doctors and hospitals (such as hospitals and physicians). It is possible for enrollees to see providers outside the network, but doing so will result in higher out-of-pocket expenses due to higher deductibles, higher coinsurance rates, or non discounted charges.
♦ In a Preferred Provider Organization (PPO) health insurance plan, patients are only allowed to visit a specified network of medical facilities and physicians (such as hospitals and physicians). Participants can still see doctors who aren’t in their insurance network, but they’ll have to pay more for their care because of things like higher deductibles, higher coinsurance rates, or non discounted charges.
♦ HMO stands for “health maintenance organization,” a type of health care plan in which the insurer and the provider share the costs of providing medical care to members.
♦ A health maintenance organization (HMO) is a type of healthcare delivery system that takes on both the financial risks (insurance and service risk) and administrative burdens of providing medical care to its members.
♦ Closed-panel HMOs (where patients can only receive services from a select group of providers) with a staff model have doctors working for the HMO rather than independently. HMO doctors only see patients at HMO clinics and hospitals.
♦ A health maintenance organization (HMO) with a network model contracts with multiple physician groups to provide care for its members. These groups may be large and/or comprise multiple specialties. As an option, the physician groups may treat patients with both HMO and non-HMO insurance.
♦Care for its members is provided by a network of medical practices contracted with by the HMO. These teams could be quite sizable and/or feature experts from a wide range of fields. The medical teams have the option of seeing patients with both HMO and non-HMO coverage. Care for its members is provided by a network of medical practices contracted with by the HMO. These teams could be quite sizable and/or feature experts from various fields. The medical practices may, but are not required to, provide care to patients with both HMO and non-HMO plans.
♦ Plan offered by health maintenance organizations (HMOs) that combine elements of both preferred provider organizations (PPOs) and HMOs is called a point-of-service (POS) plan. As far as in-network care is concerned, POS plans are very similar to HMOs. Reimbursement for out-of-network care is typically handled in a manner consistent with that of traditional indemnity plans (e.g., provider reimbursement based on a fee schedule or usual, customary and reasonable charges).
♦ PHO stands for “physician hospital organization,” which refers to a grouping of doctors and hospitals working together to increase their influence in negotiations and cut back on overhead. They market their products and services to managed care organizations and corporate clients.
Comprehensive health care for members is a hallmark of managed care plans, as are financial incentives for patients to see doctors in the network of the plan. A few cases of managed care are:
♦ Health maintenance organizations (HMOs),
♦ Preferred provider organizations (PPOs),
♦ Exclusive provider organizations (EPOs), and
♦ Point of service plans (POSs).
Managed care provisions – Controls built into health plans that help insurers monitor and control members’ health care spending, utilization, and outcomes. These are some of the many benefits that patients can expect from managed care:
♦ Preadmission certification – And the doctor’s okay for hospitalization that was given before the patient was admitted. In non-emergency situations, the health care provider’s financial responsibility for care is reduced or eliminated if a preadmission certification is not obtained.
♦ Utilization review – Moreover, the doctor’s approval for hospitalization was obtained before the patient was admitted. If a preadmission certification is not obtained prior to a patient’s admission, the hospital or clinic may be relieved of some or all of the financial responsibility for the patient’s care.
♦ Preadmission testing -Plus, the doctor’s approval for hospitalization that was obtained before the patient was admitted. Without a preadmission certification, the hospital or clinic may not be held financially responsible for the care it provides in non-emergency situations.
♦ Non-emergency weekend admission restriction – A regulation that caps patient reimbursement for weekend hospitalizations in the absence of an emergency.
♦ Second surgical opinion – A method of controlling healthcare expenditures that recommends or mandates a second medical opinion before a patient goes through with an elective or non-urgent procedure recommended by their primary care physician. If a participant does not get a second opinion, their reimbursement may be reduced or even halted entirely depending on the program. Board-certified specialists who have no vested interest in the outcome are the ones who are typically consulted for such plans.
Maximum plan dollar limit – This is the most the insurance company will pay out annually for medical care for the policyholder and their dependents.
♦ An annual cap and a lifetime cap are two types of caps that can be placed on a plan.
♦ The most commonly used cap is $1 million per person over the course of their lifetime.
Maximum out-of-pocket expense – This is the annual maximum amount that a member of the group will be responsible for paying. Up until that point, the plan and the member share the cost of the covered expense. Sometimes there is a lifetime cap after which the insurance company stops paying for covered expenses. Please refer to the preceding definition.