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Employer-Sponsored Health Insurance McGraw-Hill/Irwin Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved. Chapter 5

5-3 LEARNING OBJECTIVES Health insurance concepts Origins of employer-sponsored health care plans Relevant federal and state laws Fee-for-service vs. managed care plans Consumer-driven health care plans Retiree healthcare benefits

5-4 HEALTH INSURANCE PROGRAMS Fee - for - Services Plans Managed Care Plans Point - of - Service Plans

5-5 INDIVIDUAL COVERAGE Protection for Employee Sometimes Covers Dependents Based on Underwriting Process –Evidence of Health Status –Mortality Tables –Morbidity Tables

5-6 GROUP PLANS Single Employer Arrangements Pooled Coverage Multiple Employer Welfare Arrangements Multiple Employee Trusts Voluntary Employee Beneficiary Assoc. Collective Bargaining Agreements

5-7 FEDERAL REGULATIONS ON HEALTH INSURANCE Health Maintenance Organization Act of 1973 (HMO) Employee Retirement Income Security Act of 1974 (ERISA) Americans with Disabilities Act of 1990 (ADA) IRS Tax Regulations

5-8 HMO ACT Regulated at Federal & State Levels Amended in 1988 to Encourage Employers to Offer Choices Must be Offered, if under FLSA Must Follow Department of Health and Human Services Guidelines Dual Choice Requirements

5-9 ADA Prohibits Discrimination in Employment Based on Disability Administered by EEOC Permits Employers to Make Disability - Based Distinctions in Benefit Plans

5-10 MULTIPLE PAYER VS. SINGLE PAYER US system – multiple payer system Dramatically rising health care costs President Bush’s policy offering tax incentives for individual purchase of health insurance Potential for single payer health care system dependent on rising costs and future political outcomes

5-11 FEE - FOR - SERVICES PLANS Cash Benefits to Employee or Provider, after Services Rendered Eligible Expenses Include: –Hospital –Surgical –Physician Charges

5-12 FEE - FOR - SERVICES PLANS Indemnity –Contract between Employer & Provider –Insurance Benefits Paid from Financial Reserves Self - Funded –Benefits Paid from Company Assets –Burden Less than Policy Premiums

5-13 FEE - FOR - SERVICES PLANS BENEFITS Hospitalization –Inpatient –Outpatient Surgical –Usual, Customary, Reasonable Charges –Not for Elective Surgeries Physician Charges –Hospital, Office, and Home Visits

5-14 FEE - FOR - SERVICES PLANS COST - CONTROL STIPULATIONS Deductibles Coinsurance Out - of - Pocket Maximums Preexisting Condition Clauses Preadmission Certification Second Surgical Opinions Maximum Benefit Limits

5-15 SUPPLEMENTAL MAJOR MEDICAL PLANS Covers Expenses Exceeding Maximum Benefit Limits May Include: –Prescription Drugs –Medical Equipment & Appliances –Private Duty Nursing –Ambulance Service Same Stipulations as Fee - for - Service

5-16 COMPREHENSIVE MAJOR MEDICAL PLANS Extends Coverage to More Services Usually a Single Deductible for all Services Reduces Coverage Duplication

5-17 MANAGED CARE PLANS Health Maintenance Organizations (HMOs) Preferred Provider Organizations (PPOs) Point - of - Service Plans (POSs)

5-18 HMOs Provide Prepaid Medical Services Fully Covered or Copayments 2 Main Types –Prepaid Group Practices, or –Individual Practice Associations

5-19 PREPAID GROUP PRACTICES Staff Model Group Model Network Model

5-20 PPOs Select Group of Providers Employers, Providers, or Third-Party Administrators Guarantee Patient Load Exclusive Provider Organization Similar Stipulations, Different Levels than HMOs

5-21 POSs Features Similar to HMOs and Fee - for - Service Plans Nominal Copayments Employees can Seek Care Outside of Network

5-22 SPECIALITY INSURANCE Also Called Carve - Out Plans Part of Specialty HMOs & PPOs Includes: –Dental Coverage –Vision Coverage –Prescription Drug Coverage –Maternity Care

5-23 COST CONTROL Formularies –Lists Cost Effective, Appropriate Drugs –Plans Vary Multiple-Tiers –Generic ($ 5- $10 per) –Formulary Brand Name ($10 - $25 per) –Non-formulary Brand Name ($25 +)

5-24 CONSUMER - DRIVEN HEALTH CARE Controls Costs Increases Choice Kinds –Flexible Spending Accounts –Health Reimbursement Arrangements Plans Have Higher Deductibles

5-25 RETIREE HEALTH CARE BENEFITS Retiree health costs a disincentive for firms FASB106 changed method for how companies recognize costs of non-pension retirement benefits FASB Requires companies to disclose substantial information about the economic value and costs of retiree health care programs FASB 158