Individual & Group Health Insurance – FAQ’s

 

There are many questions that people have regarding health insurance. This is because the insurance purchasing process involves many people, from the customer and the agent to the underwriter and insurance company. For the average consumer, it is easy to become baffled by the process; but learning about the process, educating yourself, gives you much more purchasing power.

 

Below are some questions and answers that are among the most common that individuals and self-employed consumers of health insurance have. To learn about the health insurance process, simply scroll the list.

 

Overview of insurance

 

Q: What is the major difference between group and individual insurance?

 

A: The major difference between group and individual insurance involves evidence of insurability. To purchase individual insurance, a person must generally answer a health questionnaire and undergo a medical examination (often referred to as a paramed exam) to provide evidence of insurability to the insurance company. An insurer may decline coverage on the basis of the applicant's personal habits, health, medical history, age, income or any other factors that bear on risk acceptance, or the insurer may issue a policy with limitations on coverage.

 

Most group insurance, however, is issued without medical examination or other evidence of individual insurability because the insurer knows that it can cover enough individuals to balance those in poor health against those in good health. The risk of an insurer failing to achieve this balance is diminished as the size of the group increases, or as the insurer underwrites additional group policies and increases the total number of individuals covered. This is known as the "law of large numbers." Exceptions to this rule exist when the size of the group is under ten (10) employees and the numbers are not sufficient enough to offset the cost of pre-existing conditions, whereby the insurance carrier may increase the rates to compensate.

 

Q: What are the various ways that individuals receive health insurance protection?

 

A: Besides participating in group insurance plans, individuals may also be covered under federal and state government-sponsored programs such as Medicare and Medicaid, service-type plans such as Blue Cross/Blue Shield or so-called alternative health care systems such as health maintenance organizations (HMOs) and preferred provider organizations (PPOs). Insurance may also be purchased privately on an individual basis, or through mass purchasing groups such as credit unions and professional or trade associations.

 

Q: What are the advantages of group insurance over individual insurance?

 

A: For an employer that intends to provide insurance protection to its employees, the group approach ensures that all employees, regardless of health, can be covered. Those with known health problems, who might otherwise be unable to obtain individual insurance, can be covered automatically upon employment without evidence of insurability. Although some limits may be imposed on new hires for certain conditions that predate their enrollment in the plan, most employees can receive coverage as soon as

they are eligible.

 

Group insurance offers a lower cost per unit of protection than individual insurance, because the economies of scale resulting from selling, installing and servicing one plan covering many individuals. In addition, group plans are typically more flexible and tend to provide more liberal benefits than individual coverage.

 

 

 

 

Q: What types of group protection do most employers provide?

 

A: Although there are many variations of each, the four major types of insurance coverage provided by employers to their employees are life, accidental death and dismemberment (A D & D), disability and health or medical. Some employers also provide additional coverage’s, including group legal, travel, accident, vision and dental care.

 

 

Q: How can a labor union provide group insurance?

 

A: A labor union can provide group insurance for its members under a policy issued to the union. The union is the policyholder, just as the trust is the policyholder under a MET. A union may purchase a group policy for a large number of members who are employed by the same company, or for union members working for different companies. Group insurance purchased through a union is particularly advantageous in industries such as construction, where union members may work for many employers during a year. Despite the opportunity for labor unions to purchase group insurance, few group contracts are issued to unions today. Organized labor more often obtains insurance benefits for its members through collective bargaining with employers. As a result, union members are usually covered under group insurance plans sponsored by one or more employers.

 

Types of Insurance Plans

 

Q: What is an HMO?

 

A: A health maintenance organization (HMO) is an organization that provides comprehensive health care to a voluntarily enrolled population at a predetermined price. Members usually pay fixed fees called co-pays for physician or hospital services.  Members must select a Primary Care Physician when enrolling in the HMO.  The Primary Care Physician (PCP) is responsible for coordinating all of the member’s care, including managing referrals to specialists and hospitals as needed. Claims are not covered by the HMO unless the member has worked with the PCP and obtained referrals for the services. HMOs do not have a pre-existing conditions clause, which means that a member is covered for any health services once enrolled in a plan. Members must utilize the HMO network and have referrals in order for the care to be covered.

 

 Q: What is a PPO?

 

A: A preferred provider organization (PPO) is an association that contracts with a  network of doctors, clinics, hospitals, dentists or other health care service providers to provide care at prearranged rates or discounts.  You do not need a referral to see a specialist who is in the network.  If you join a PPO, you should find you have more flexibility then with an HMO, but your total out of pocket costs are likely to be somewhat higher.

 

Q. Are there different types of  PPO’s?

 

A: There are different networks depending on the area of the country you are in.  Some of these networks are PPOM (Preferred Provider Organization of Midwest), Preferred Choices, PHCS (Preferred Health Care Systems), Beechstreet, etc. The PPO network is simply a list of physicians and hospitals that participate. The coverage of the health plan that uses these PPO networks may vary from company to company. The PPO network is not the insurance provider. It is just the list of participating providers.

 

Q. What is traditional coverage?

 

A: Traditional coverage refers to the original type of coverage provided by insurance carriers when health insurance first began.  In effect it allows a person to go to any doctor or hospital without concern for network affiliation.  This type of coverage is generally the most expensive with fewer benefits.  You can use any provider.  The bill is submitted to the insurance company, which pays the portion they consider usual and customary.  You will have a deductible that will need to be satisfied before benefits start.

Q. What is a POS?

 

A:  This refers to Point Of Service and has characteristics of both a PPO and an HMO. Usually with a POS, the member must select a Primary Care Physician (PCP) just as in an HMO. Like an HMO, the PCP manages the member’s health care and obtains referrals for specialty care as necessary.

 

If the member works with his or her PCP, then the member’s out of pocket costs will be lower. If the member does not work with his or her PCP, the services will still be covered (unlike in an HMO), but the member’s out of pocket costs will be higher. POS plans vary widely; it is best to talk with a plan itself to learn how it works.

 

Q: What is a self-insured plan?

 

A: A self insured plan is one in which the employer pays for each health care service or claim that is incurred by its employees, rather than paying a flat premium each month for an insurance company to cover the claims. The employer takes the risk for its employees’ health care costs.

 

In this way, the employer may save money over the costs of premium dollars by cutting out the cushion that the insurance company builds in when charging premiums. In addition, self-insuring its population allows the employer more flexibility in determining plan design, and it also gives the employer more flexibility in cash flow.

 

Most employers that self-insure their populations are very large. There are some plans that allow smaller employers--as small as 50 employees--to self-insure their plans, however. These programs allow the employer to put what is called “stop-loss” or “excess-loss” insurance into place. Stop-loss is like catastrophic insurance for the employer--at a certain level of cost for claims; the stop-loss insurance will step in and pay the claims.

 

Self-insured plans can be complicated, and there are many federal regulations that must be adhered to according to ERISA. This is another reason that generally only large companies decide to self-insure their health care.

 

Q: Can an employer work directly with an insurance company?

 

A: It is possible for an employer to deal directly with an insurer through a group sales representative to purchase group insurance.

 

Premium rates and underwriting practices vary considerably from one insurer to another, however. In addition, the coverage’s provided are rarely identical. This means that comparison shopping is often beyond the capability of all but the most sophisticated purchases; for example, the very large company that has sufficient internal employee benefits expertise to do so.

 

For this reason, many group insurance purchasers do not deal directly with insurance company underwriters or group insurance representatives, preferring instead to deal with an intermediary that has the expertise in understanding all facets of the insurance industry.

 

Smaller employers need a qualified professional to act as intermediary because they lack the resources and expertise to handle their group insurance needs. An intermediary can help them define their needs and objectives, design a plan to meet those criteria, select the proper purchasing and funding vehicle, obtain competitive quotes from insurers and service the plan.

 

Q. What is an HSA?

 

A: An HSA is an individual “Health Savings Account” and was enacted into law in 2003 with an effective date of January 1st, 2004.  It replaced the MSA (Medical Savings Account).  The money is contributed as pre-tax dollars by individuals in much the same way they might contribute to an IRA.  The money may be withdrawn to pay for medical expenses throughout the year, or following years.

 

If the money is used to pay medical expenses, it is not taxed.  If the money in the HAS is used for anything else it is subject to taxes and penalty.  Most HAS administrators pay a set amount of interest on the money in the account. This account can be a permanent account, rolling over unused money from year to year.  At age 65, the individual may withdraw the unused money as retirement income.

 

Q: What is a base plus plan?

 

A: A base plus plan is a two-part health insurance plan. Basic medical coverage --for such expenses as hospitalization, surgery, physician's visits, diagnostic laboratory tests and x-rays -- is provided under the first part. There may be limits on these expenses, such as a limited number of hospital days

and a surgical schedule, but no deductible or coinsurance applies to the covered expenses. The employee is reimbursed starting with the first dollar of expenses.

 

The second, or major medical, part of the plan covers other health expenses. The coverage is broad, with fewer limits; however, a deductible is required before the employee is reimbursed for expenses.

 

Q: What are the advantages to a base plus plan?

 

A: From the employee's point of view, base plus plans appear to provide more generous benefits because of the lack of deductibles and coinsurance in the basic medical part.

 

Q: What is a comprehensive plan and its advantages?

 

A: A comprehensive plan provides coverage for most medical services using one reimbursement formula. In a pure comprehensive plan, a deductible must be met before reimbursement for any covered expenses begins, and coinsurance applies to all covered expenses until the maximum employee out-of-pocket expense limit is reached. Additional covered expenses are paid in full. Because employees share from the beginning in the cost of their medical expenses when they are incurred, a comprehensive plan encourages them to use more cost-effective health care. The patient is more likely to be cost conscious and to seek out more cost-effective health care services and providers.

 

 

Q: What kinds of hospital outpatient expenses are covered?

 

A: Outpatient expenses are generally considered to be services at the rendered at the hospital facility but without an overnight stay.  Three basic kinds of care are covered: emergency treatment, surgery and services rendered in the outpatient lab or x-ray department.

 

Q: What types of services are generally covered by a group health insurance plan?

 

A: Base plus and comprehensive plans vary by insurer, but generally cover the same kinds of services. These include:

. Professional services of doctors of medicine and osteopathy and other recognized medical practitioners

. Hospital charges for semiprivate room and board and other necessary services and supplies

. Surgical charges

. Services of registered nurses and, in some cases, licensed practical nurses

. Home health care

. Physiotherapy

. Anesthetics and their administration

. X-rays and other diagnostic laboratory procedures

. X-ray or radium treatment

. Oxygen and other gases and their administration

. Blood transfusions, including the cost of bloom when charged

. Drugs and medicines requiring a prescription

. Specified ambulance services

. Rental of durable mechanical equipment required for therapeutic use

. Artificial limbs and other prosthetic appliances, except replacement of such appliances

. Casts, splints, trusses, braces and crutches

. Rental of a wheelchair or hospital-type bed

 

Q. What is a Split Funded Plan?

 

·         Employers receive weekly claims registers online.

·         Additional benefits can be self funded.

·         Plan includes self funded Prescription Drug Program

·         Contraceptive coverage is included in Prescription Drug Program, but can be excluded.

·         The Routine Exam is self funded.

·         Supplemental Accident is always self funded.

·         Previous plan deductibles can be credited if that plan is cancelled mid year.

·         Family maximum is two times single maximum

·         Initial year long contract years are available

·         Deductibles for employee and employer must accumulate on the same type of year, contract or calendar.

·         Monthly accommodation and terminal liability are available.

·         Balance of office visit charges after co-pay goes toward the employer’s deductible.

·         Employee out of pocket maximum reduces the employer’s self funded liability.

 

Other Insurance questions

 

Q: What is a risk?

 

A: The risk an insurance company assumes when it agrees to cover a particular group is the possibility that claims will exceed the expected level. It is the chance of financial loss inherent in the group; Insurance companies use it to determine whether they will underwrite an insurance policy on a particular group.

The spread of risk is necessary not only because of the expected variations in a population's health but also because some policyholders -- particularly very small groups --purchase group insurance to cover certain individuals with known health problems, This is a more costly way to obtain coverage for those high-risk individuals, but often the only way possible, given the evidence-of-insurability requirement for individual policies.

 

Q. Who is an eligible employee?

 

A. An eligible employee is any employee who meets the definition in the plan for participation. Definitions of eligible employee vary widely from employer to employer, though they may be influenced by legal considerations and company structure.

 

Q: Will an insurance carrier deny certain employees coverage under a group health insurance plan?

A: Generally, insurers will not deny coverage to any full-time employee. Inherent in the principle of group insurance is the understanding that all employees can be covered. Most carriers, however, require an employee to be actively at work on the day the employer-provider coverage becomes effective, and to have enrolled in a contributory plan within the time required.

 

Legal considerations regarding plan design.

 

Q: Are employers required by federal law to purchase group insurance for their employees?

 

A: Presently, no federal law requires employers to provide their employee with group insurance. There have been initiatives in Congress, however, that would require employers to provide specified minimum levels of health benefits, and there is every likelihood that some form of national standard will be legislated in the next few years.

 

Q: What is a mandate benefit?

 

A: A mandate benefit is a specific coverage that an insurer is required to include in its contract under state law. For example, most states require that coverage for substance-abuse treatment be provided. Other kinds of coverage that are mandated in some states include coverage for newborn children, mental and nervous disorders and hospice care.

 

Q: What is the minimum and maximum number of employees allowed by state law to participate in a group health insurance plan?

 

A: Most states require that an employer enroll a minimum number of employees (generally ten, though fewer in some states) for coverage in order to purchase and maintain a group health insurance plan. This minimum size requirement reduces the potential for adverse selection. There is no legal limit to the number of employees that may be covered under a group health insurance plan.

 

Deductibles, Co-payments and Reimbursements

 

Q. What is an Office Co-pay?  

 

A:  The office co-pay is a fixed amount in dollars or percentage you pay for each Doctor office visit with balance of the cost paid by an insurance carrier.

 

Q: What is a deductible?

 

A: It is a specific dollar amount that an individual must pay (or "satisfy") before reimbursement or plan benefits start.  Usually the higher the deductible, the lower the cost of the health insurance plan. Only expenses for covered services apply towards the deductible amount.

 

Q: For insured employees with dependent coverage, does the deductible for each person have to be satisfied before reimbursement begins?

 

A: For many plans, each person covered under a group health insurance plan must meet a deductible before hospital expenses will be covered. However, plans usually include some type of family deductible in order to limit a family's exposure for health care expenses.  The family deductible is usually some multiple of the individual deductible, generally two or three. For the family deductible to be satisfied, the combined expenses of covered family members are accumulated. Some plans require, however, that at least one family member satisfy the full individual deductible before the family deductible can be met.

 

Many plans cover doctor office visits and limited outpatient services without requiring that the deductible is satisfied. Check with your benefits administrator to determine whether this is true for your health plan.

 

Q: What is coinsurance?

 

A: Coinsurance is a feature found in most group health insurance plans.  It sets forth the percentage of covered expenses that the employees and the health insurance plan will pay. The most common coinsurance level is one in which the employee pays 20 percent of the expenses and the insurer pays 80

percent. This is called 80 percent coinsurance.

 

Q: What is a covered expense and are there limits?

 

A: A covered expense is an eligible expense under a group health insurance plan. A covered expense is an expense incurred by a covered individual that will be reimbursed in whole or in part under the group health insurance plan.

For example, under most health insurance plans, doctors' visits are a covered expense. That is, a doctor's fee up to the amount provided by the plan will be reimbursed by the insurer Just because an expense is covered does not mean that the coverage is unlimited. Both base plus and comprehensive plans have limits on the expenses for which they will reimburse, In addition, some form of deductible and coinsurance is often applicable. Insurers limit covered expenses in a variety of ways.

 

 One way is to cap allowable payments for a certain procedure or service. A common example of this type of limit would be a surgical schedule. Insurers also restrict covered expenses by limiting the number of visits or days for home health care or skilled nursing care, or by establishing a reasonable and customary charge.

 

Dental, vision and prescription drug plans

 

Q: Do health insurance plans cover dental care?

 

A: Proper dental care has been considered a budgetable expense, so traditionally, it has not been included in group health insurance plans. In the 1970s, as its cost increased, dental care was added to employee benefits plans. Some plans include dental coverage as part of the medical plan; others include dental coverage as a separate plan. However, many health insurance plans do provide coverage for non cosmetic dental work necessary as the result of an accident. Some plans include limited coverage for hospital room

and board expenses related to dental procedures, such as removal of impacted wisdom teeth, performed in a hospital.

 

Q: What is direct reimbursement for dental care?

 

A: Direct reimbursement is a noninsured dental program in which an employer agrees to pay for a specified percentage or amount of receipted dental expenses. It has been used by smaller employers as a way of avoiding both the costs associated with an insured plan and the administrative complexity that often accompanies insurance company programs. And, since dental expenses are more predictable than medical expenses -- seldom involving emergencies or catastrophic expenses -- the risk to employers is considerably smaller.

 

Q: Are all types of dental services covered by insurance?

 

A: Usually not. Dental services are often divided into different coverage levels.

 

 Level I services include semiannual examinations, semiannual cleaning, x-rays and diagnosis. Most plans cover at least preventive and diagnostic care.

 

Level II (basic services) includes simple restoration (fillings), crowns and jackets, repair of crowns, extractions and endodontics (root canals and internal pulp treatment).

 

Level III (major services) includes dentures, bridges and replacement of bridges and dentures. In order to

emphasize prevention, many plans cover the Level I services at higher reimbursement levels than Level II or III services.

 

Q: How is vision care covered?

 

A: Most health insurance plans provide coverage for medical care related to eye injury or disease, but do not cover the costs of periodic eye examinations or corrective lenses. Like dental care, vision care is a relatively new employee benefit, offered by employers that can afford to expand their employee benefits plans to include additional fringe benefits previously considered budgetable. Vision care is most often covered on a scheduled basis that pays a fixed dollar amount for examinations, lenses and frames.

Vision care is almost universally noncontributory due to the potential for biased selection.

 

 

Q: Are all prescription drugs covered under health care plans?

 

A: No.

 

Most health insurance plans that cover hospitalization cover the drugs that are administered during a hospital stay. However, in order to have outpatient drugs covered by a group health plan or an individual health plan, the coverage must be added on by a “rider.”

 

Prescription coverage is very expensive, and is not a required aspect of most health plans. In addition, if a prescription drug coverage rider is added to a plan, it still may have some limitations.

 

For example, experimental drugs are rarely covered. Drugs that are considered “lifestyle” drugs--such as ones for erectile dysfunction (e.g., Viagra), infertility, weight loss, etc., are often either not covered, or covered at higher co-payments.

 

Q: Are there different types of drug plans?

 

A: There are a number of variations, but the principal types of prescription medication plans are open panel, closed panel, mail order and prescription drug card plans.

 

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