The Health Care Industry
Part 2 - Medical Insurance
Karen F. Nichols, MSA
School of Allied Health Professions
University of Nebraska Medical Center
Coverage is the scope of the
financial protection provided under
a contract of insurance for payment
of health care services.
Benefits are those amounts
payable by the insurance company
to a member based upon the
specific allowances for coverage in
a health insurance plan.
A claim is a demand to the
insurance company for the payment
of benefits under the insurance
contract.
An Explanation of Benefits (EOB) is a summary of
benefits provided to subscribers of the policy by the
insurance company in response to a claim.
Covered Benefits are the medically necessary services
that are specifically provided for under the provisions of
Evidence of Coverage. A covered benefit must always be
medically necessary, but not every medically necessary
service is a covered benefit.
Allowed Amount is the maximum dollar amount
assigned for a procedure based on various pricing
mechanisms. Also known as a maximum allowable.
The deductible is a specified amount of money a member must pay
before insurance benefits begin. Usually expressed in terms of an
"annual" amount.
A Co-payment or cost-sharing is an arrangement in which a member of a
health maintenance organization (HMO) pays a specified flat amount for a
specific service (such as $10.00 for an office visit or $3.00 for each
prescription drug).
Co-Insurance is a policy provision frequently found in major medical
insurance policies under which the insured individual and the insurer share
hospital and medical expenses according to a specified ratio or fixed
percentage (e.g., 20% coinsurance and 80% insurance payment).
Often co-insurance and co-payments apply after first
meeting a deductible requirement.
Out-of -pocket expenses are costs borne by the
member that are not covered by an insurance or
health care plan.
Capitation is a prepayment system within an
HMO whereby the physician is paid monthly
for each member who has chosen him/her as
their physician for a specific set of services
regardless of whether or not the member is
seen.
Capitation rates are based on average
annual services a physician is expected to
provide to his/her patients.
Cost Shifting is the term used for charging
one group of patients more in order to make
up for underpayment by others. Most
commonly, charging some privately insured
patients more in order to make up for
underpayment by Medicaid or Medicare.
Third-Party Payment is payment by a financial agent
such as an HMO, insurance company, or government
rather than direct payment by the patient for medical
care services.
Fee-For-Service is a method of reimbursement based
on payment of specific amounts for specific services
received, in contrast to the advance payment of an
insurance premium or membership fee for coverage,
through which the payment to the supplier is provided.
Group Insurance is any insurance
policy or health services contract by
which groups of employees (and
often their dependents) are covered
under a single policy or contract,
issued by their employer or other
group entity.
Private insurance or Individual Plans
are a type of insurance plan for
individuals and their dependents who
are not eligible for coverage through an
employer group (group coverage).
Major Medical Expense Insurance is designed to help offset
the heavy medical expenses resulting from catastrophic or
prolonged illness or injury.
Policies generally provide benefits payments for 75 to 80
percent of most types of medical expenses above a deductible
paid by the insured.
Medicare (Title XVIII) is a nationwide, federally
administered health insurance program for: people 65
years of age and older, some people with disabilities
under age 65, and people with End-Stage Renal Disease
(permanent kidney failure requiring dialysis or a
transplant). Medicare has Two Parts: Part A and Part B.
Medicare Part A is:
Hospital insurance- It helps pay for: care
in hospitals as an inpatient, critical
access hospitals (small facilities that give
limited outpatient and inpatient services
to people in rural areas), skilled nursing
facilities, hospice care, and some home
health care.
Most people get Part A automatically
when they turn age 65. They do not
have to pay a monthly payment called a
premium for Part A because they or a
spouse paid Medicare taxes while they
were working. If the person (or spouse)
did not pay Medicare taxes when they
worked and are age 65 or older, they
may still be able to buy Part A.
Medicare Part B is:
Medical insurance- It helps pay for doctors,
services, outpatient hospital care, and some
other medical services that Part A does not
cover, such as the services of physical and
occupational therapists, and some home
health care.
Part B helps pay for these covered services
and supplies when they are medically
necessary. Recipients pay the Medicare
Part B premium of $50.00 per month and in
some cases more if the person did not
choose Part B when they first became
eligible at age 65. Enrolling in part B is a
choice. Part B services are financed by a
combination of enrollee premiums and
general tax revenues.
Medicare Supplementary Medical Insurance (SMI)
under Part B of Title XVII of the Social Security Act
covers Medicare beneficiaries for physician services,
medical supplies, and other outpatient treatment.
Beneficiaries are responsible for monthly premiums, co-
payments, deductibles, and balance billing.
Medigap or Medicare Supplement
Policies are private health
insurance plans that cover some
costs not paid for by Medicare such
as co-insurance and deductibles.
Prescription Drugs for Medicare recipients-
Medicare pays for pharmaceuticals provided in
hospitals, but not for those provided in
outpatient setting.
Medicaid (Title XIX) of the Social Security Act became law in
1965. It is a government health insurance program for
certain low-income and needy people. It covers
approximately 36 million Americans including children, the
aged, blind, and/or disabled, and people who are eligible to
receive federally assisted income maintenance payments.
The program's costs are shared by the federal and state
governments, and paid for by general tax revenue to assist
States in the provision of adequate medical care. Medicaid
is the largest program providing medical and health-related
services to America's poorest people. Within broad national
guidelines that the Federal government provides, each of
the States: establishes its own eligibility standards;
determines the type, amount, duration, and scope of
services; sets the rate of payment for services; and
administers its own program.
This is The End of
The Health Care Industry, Part 2.
Please proceed with Part 3, Managed Care.