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 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.