RMIN 4000 Exam 4 Brown UGA
Cost Sharing in Health Insurance - answer• Copayments • Deductibles
• Coinsurance
• Out-of-Pocket Maximum Limits
Copayment - answerA 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 - answer• 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 - answer• 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 - answer• 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? - answer4,000-1,000 (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 - answer• 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 - answer• 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 - answer• 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) - answer• 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 - answer1. 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 - answer• 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 - answer• 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) - answer• 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 - answer• 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 - answer• 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 - answer• 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) - answer• 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) - answer• 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 - answer• 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.
- Health insurance is more affordable (lower premiums).
• Disadvantages
-High cost to consumers who use a lot of healthcare.
-Low-income individuals/families may not be able to afford high deductible.
-Because of high deductible, some insureds may postpone needed medical care.
Cost Sharing in Health Insurance - answer• Copayments • Deductibles
• Coinsurance
• Out-of-Pocket Maximum Limits
Copayment - answerA 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 - answer• 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 - answer• 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 - answer• 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? - answer4,000-1,000 (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 - answer• 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 - answer• 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 - answer• 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) - answer• 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 - answer1. 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 - answer• 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 - answer• 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) - answer• 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 - answer• 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 - answer• 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 - answer• 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) - answer• 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) - answer• 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 - answer• 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.
- Health insurance is more affordable (lower premiums).
• Disadvantages
-High cost to consumers who use a lot of healthcare.
-Low-income individuals/families may not be able to afford high deductible.
-Because of high deductible, some insureds may postpone needed medical care.
