WHAT IS HEALTH INSURANCE?
• HEALTH INSURANCE BASICS
• HEALTH CARE PLANS
• FEE-FOR-SERVICE CHARGE


Managed Care – An Overview

􀂃 Managed care plans provide comprehensive health services to their members
and offer financial incentives for patients to use health service providers that
have a contract with the plan.
􀂃 Instead of paying separately for each service that the insured uses, the plans pay
providers in advance for a package of services they may render in future. That is
how they are able to cut costs.
􀂃 Like indemnity plans, most managed care plans require members to make a copayment
when they get treatment. A co-payment is a specific dollar amount,
rarely more than $30, or a percentage of the cost of a service, and is due at each
visit to a health care provider.
􀂃 Most of the other types of coverages are tied to some form of life insurance or
related plans. They are often intended to cover people who have difficulty in
obtaining traditional health insurance due to health or medical history.
Managed care imposes controls on the use of health care services and the providers of
health care services, usually through Health Maintenance Organizations (HMOs) or
Preferred Provider Organizations (PPOs). The insured or policyholder in these plans
is often referred to as a member.
An HMO is an entity that contracts with medical service providers - be they hospitals or
doctors - and employers, to provide medical care to a group of individuals. The HMO
gets paid at a fixed price per patient in return. Patients generally do not have any
significant “out-of-pocket” expenses.
Managed care plans involving HMOs usually require members to choose a primary care
doctor from the plan’s list of doctors. The primary care doctor, also called a gatekeeper,
controls the type of medical care a patient can access. It is only after the primary care
doctor decides that the patient’s situation is beyond his/her expertise that the member
gets to see a specialist.

HEALTH MAINTENANCE ORGANIZATIONS
• HMO BENEFITS
• PREFERRED PROVIDER ORGANIZATIONS
• MECHANICS OF A PPO

HMO Coverage

HMOs provide a wide range of health care services, referred to as basic health care
services. [Any additional services will come under supplemental health care services.]
Every HMO is required to provide its members with a list of the basic services that are
covered under the plan.
These services include:
• In-patient hospital and physician services for illness and injury (minimum of 90
days per calendar year). In the case of inpatient treatment for mental/emotional
problems, the minimum limit is reduced to about 30 days.
• Diagnostic services, laboratory and other services including short-term therapy in
an outpatient service category.
• Services in the preventative area, namely childcare and periodic health
evaluations and including things such as eye and ear examinations for children
under 18.
• Emergency services like ambulances, available 24 hours a day, every day of the
week.
HMO Benefits
Covers even preventative measures like routine physical examinations and programs
for quitting drugs and losing weight, etc. Members pay a set (often monthly) fee for a
broad class of “necessary health care.”
Exclusions/Limitations
􀂃 Eye examinations and refractions for persons over age ((people 65 and older)
􀂃 Eyeglasses or contact lenses
􀂃 Dental services
􀂃 Prescription drugs (other than those administered in hospital)
􀂃 Long-term physical therapy (over 90 days)
􀂃 Out-of-area benefits
Termination

HMOs can only terminate coverage in case of:

􀂃 Non-payment of premiums or co-payments
􀂃 Fraud or deception
􀂃 A violation of contract terms
􀂃 Failure to meet or continue to meet eligibility requirements
􀂃 A termination of the group contract under which a member is covered
Preferred Provider Organizations (PPOs)
A PPO is a hybrid of a regular fee-for-service plan and an HMO. It is designed to
provide increased benefits to members who use doctors and hospitals within its
network. Unlike HMOs, PPOs do not utilize primary care gatekeepers. A single
physician does not manage an individual’s health care services.
Managed care plans have shown an increasing number of employees enrolled in these
programs, at the expense of growth in HMOs. Like large corporations, smaller
companies also show a growing trend in signing up for PPO services for their
employees.

Mechanics of a PPO

􀂃 The insurance company enters into agreements with select physicians to form a
“preferred provider” network.
􀂃 The basic difference between an HMO and a PPO is that a member of a PPO
may opt for a physician outside this preferred provider network. Of course, this
would mean increased costs for both the member and the insurance company.
􀂃 In using a medical practitioner in the network, a member may have a higher
coinsurance rate (i.e. he/she would have to pay a lower percentage of the
medical cost) and would also have lower deductibles; that way, they pay a lower
amount towards the medical bill before the insurance coverage kicks in.

PPOs vs. HMOs
• TRADITIONAL INSURANCE VS. MANAGED CARE
• WHAT IS MEDICARE?

PPOs vs. HMOs

There are several reasons that make PPOs better choices for certain people than
HMOs. The most important of these being that it affords them the luxury of
exercising their choices, as well as allows for people to continue with medical
professionals whom they trust. In cases where members are sure that the
deductibles limit will be exceeded, the financial value of the insurance plan is greatly
enhanced.
Traditional Insurance vs. Managed Care
Traditional insurance is a means by which the individual is in control of who his/her
medical professional is going to be. In the event that premium amounts are the
deciding factor, Managed Care comes out the winner. Some of the main differences
between the two philosophies manifest themselves in the rules regarding the choice
of the medical practitioner, a specialist consultation, and out-of-pocket expenses.
For specialist consultations under managed care, the primary care provider
determines if and when such consultation becomes necessary. Also, managed care
rules state that the insured make co-payments for network visits and prescriptions;
and in case of visits outside the network, insurance coverage kicks in after payment
of a deductible. In an insurance indemnity, the insured will pay an annual
deductible, and a co-insurance up to a specified limit.

What is Medicare?

Medicare is a federal health insurance program intended for the following:
􀂃 The aged (people 65 and older)
􀂃 People of any age with permanent kidney failure
􀂃 Certain disabled people
Technically, Medicare is part of the Social Security System (and is administered by the
Health Care Financing Administration, an agency of the Department of Health and
Human Services) and is financed by workers and their employers through the payment
of the Medicare Tax. However, because the program is federally funded, participants
pay very little.
Depending on the coverage required, enrollment in Medicare can be either automatic or
optional. An individual must file the right paperwork to get the full package of Medicare
coverage. The coverage includes hospitalization as well as basic medical expenses.
Medicare Coverage
Medicare coverage is determined by federal health care experts, and in amounts that
are deemed to be reasonable by these experts. Medicare provides coverage in two
parts: A and B. Part A deals with Hospital Insurance; including home health care and
nursing facilities during recuperation after hospitalization. Medical Expense Insurance
is covered by Part B.
Important Point: Medicare Part A coverage also includes an 80% payment of
durable medical equipment such as wheelchairs etc.

Part A Exclusions

Medicare Hospital Insurance makes the following exclusions:
• Private room charges (unless it is a medical necessity)
• Private nursing care
• The first three pints of blood received in one calendar year
Medical Expense Insurance relates to services rendered by doctors, laboratory tests like
pap smears, x-rays etc. The insureds pay an annual deductible amount, and 20% of the
amount approved (the balance 80% being paid by Medicare). In case of a difference
between the amount approved and the amount actually incurred, the patient bears the
differential.