TRADITIONAL
INDEMNITY OR FEE-FOR-SERVICE
Early
hospital and medical plans offered by insurance companies paid either a fixed
amount for specific diseases or medical procedures (schedule benefits) or a
percentage of the provider's fee. The relationship between the patient and the
medical provider was not changed. The patient received medical care and was
responsible for paying the provider.
If the service was covered by the policy,
the insurance company was responsible for reimbursing or indemnifying the
patient based on the provisions of the insurance contract ("reimbursement
benefits"). Health insurance plans that are not based on a network of
contracted providers, or that base payments on a percentage of provider
charges, are still described as indemnity or fee-for-service plans.[18]
BLUE CROSS BLUE
SHIELD ASSOCIATION
MAIN ARTICLE:
BLUE CROSS BLUE SHIELD ASSOCIATION
The
Blue Cross and Blue Shield Association (BCBSA) is a federation of 38 separate
health insurance organizations and companies in the United States. Combined,
they directly or indirectly provide health insurance to over 100 million
Americans.[85] BCBSA insurance companies are franchisees, independent of the
association (and traditionally each other), offering insurance plans within
defined regions under one or both of the association's brands. Blue Cross Blue
Shield insurers offer some form of health insurance coverage in every U.S.
state. They also act as administrators of Medicare in many states or regions of
the U.S., and provide coverage to state government employees as well as to the
federal government employees under a nationwide option of the Federal Employees
Health Benefit Plan.[86]
HEALTH
MAINTENANCE ORGANIZATIONS
MAIN ARTICLE:
HEALTH MAINTENANCE ORGANIZATION
A
health maintenance organization (HMO) is a type of managed care organization
(MCO) that provides a form of health care coverage that is fulfilled through
hospitals, doctors, and other providers with which the HMO has a contract. The
Health Maintenance Organization Act of 1973 required employers with 25 or more
employees to offer federally certified HMO options.[87] Unlike traditional
indemnity insurance, an HMO covers only care rendered by those doctors and
other professionals who have agreed to treat patients in accordance with the
HMO's guidelines and restrictions in exchange for a steady stream of customers.
Benefits are provided through a network of providers. Providers may be
employees of the HMO ("staff model"), employees of a provider group
that has contracted with the HMO ("group model"), or members of an
independent practice association ("IPA model"). HMOs may also use a
combination of these approaches ("network model").[18][88]
MANAGED CARE
MAIN ARTICLE:
MANAGED CARE
The
term managed care is used to describe a variety of techniques intended to
reduce the cost of health benefits and improve the quality of care. It is also
used to describe organizations that use these techniques ("managed care
organization").[89] Many of these techniques were pioneered by HMOs, but
they are now used in a wide variety of private health insurance programs.
Through the 1990s, managed care grew from about 25% US employees with
employer-sponsored coverage to the vast majority.[90]
Rise
of managed care in the US Year Conventional
plans
HMOs PPOs POS plans HDHP/SOs
1998
14% 27%
35% 24%
~
1999
10% 28%
39% 24%
~
2000
8% 29%
42% 21%
~
2001
7% 24%
46% 23%
~
2002
4% 27%
52% 18%
~
2003
5% 24%
54% 17%
~
2004
5% 25%
55% 15%
~
2005
3% 21%
61% 15%
~
2006
3% 20%
60% 13%
4%
2007
3% 21%
57% 15%
5%
2008
2% 20%
58% 12%
8%
NETWORK-BASED
MANAGED CARE
Many
managed care programs are based on a panel or network of contracted health care
providers. Such programs typically include:
A set of selected providers that furnish a
comprehensive array of health care services to enrollees;
Explicit standards for selecting providers;
Formal utilization review and quality
improvement programs;
An emphasis on preventive care; and
Financial incentives to encourage enrollees
to use care efficiently.
Provider
networks can be used to reduce costs by negotiating favorable fees from
providers, selecting cost effective providers, and creating financial
incentives for providers to practice more efficiently.[21] A survey issued in
2009 by America's Health Insurance Plans found that patients going to
out-of-network providers are sometimes charged extremely high fees.[91][92]
Network-based
plans may be either closed or open. With a closed network, enrollees' expenses
are generally only covered when they go to network providers. Only limited
services are covered outside the network—typically only emergency and
out-of-area care. Most traditional HMOs were closed network plans. Open network
plans provide some coverage when an enrollee uses non-network provider,
generally at a lower benefit level to encourage the use of network providers.
Most preferred provider organization plans are open-network (those that are not
are often described as exclusive provider organizations, or EPOs), as are point
of service (POS) plans.
The
terms "open panel" and "closed panel" are sometimes used to
describe which health care providers in a community have the opportunity to
participate in a plan. In a "closed panel" HMO, the network providers
are either HMO employees (staff model) or members of large group practices with
which the HMO has a contract. In an "open panel" plan the HMO or PPO
contracts with independent practitioners, opening participation in the network
to any provider in the community that meets the plan's credential requirements
and is willing to accept the terms of the plan's contract.
Other
managed care techniques
Other
managed care techniques include such elements as disease management, case
management, wellness incentives, patient education, utilization management and
utilization review. These techniques can be applied to both network-based
benefit programs and benefit programs that are not based on a provider network.
The use of managed care techniques without a provider network is sometimes
described as "managed indemnity."
Blurring
lines
Over
time, the operations of many Blue Cross and Blue Shield operations have become
more similar to those of commercial health insurance companies.[93] However,
some Blue Cross and Blue Shield plans continue to serve as insurers of last
resort.[94] Similarly, the benefits offered by Blues plans, commercial
insurers, and HMOs are converging in many respects due to market pressures. One
example is the convergence of preferred provider organization (PPO) plans
offered by Blues and commercial insurers and the point of service plans offered
by HMOs. Historically, commercial insurers, Blue Cross and Blue Shield plans,
and HMOs might be subject to different regulatory oversight in a state (e.g.,
the Department of Insurance for insurance companies, versus the Department of
Health for HMOs). Today, it is common for commercial insurance companies to
have HMOs as subsidiaries, and for HMOs to have insurers as subsidiaries (the
state license for an HMO is typically different from that for an insurance
company).[18][88][95] At one time the distinctions between traditional
indemnity insurance, HMOs and PPOs were very clear; today, it can be difficult
to distinguish between the products offered by the various types of
organization operating in the market.[96]
The
blurring of distinctions between the different types of health care coverage
can be seen in the history of the industry's trade associations. The two
primary HMO trade associations were the Group Health Association of America and
the American Managed Care and Review Association. After merging, they were
known as American Association of Health Plans (AAHP). The primary trade
association for commercial health insurers was the Health Insurance Association
of America (HIAA). These two have now merged, and are known as America’s Health
Insurance Plans (AHIP).
New
types of medical plans
In
recent years, various new types of medical plans have been introduced.
HIGH-DEDUCTIBLE
HEALTH PLAN (HDHP)
Plans
with much higher deductibles than traditional health plans – primarily providing
coverage for catastrophic illness – have been introduced.[97] Because of the
high deductible, these provide little coverage for everyday expenses – and thus
have potentially high out-of-pocket expenses – but do cover major expenses.
Couple with these are various forms of savings plans.
MAIN ARTICLE:
DISABILITY INSURANCE
Disability
income (DI) insurance pays benefits to individuals who lose their ability to
work due to injury or illness. DI insurance replaces income lost while the
policyholder is unable to work during a period of disability (in contrast to
medical expense insurance, which pays for the cost of medical care).[113] For
most working age adults, the risk of disability is greater than the risk of
premature death, and the resulting reduction in lifetime earnings can be
significant. Private disability insurance is sold on both a group and an
individual basis. Policies may be designed to cover long-term disabilities (LTD
coverage) or short-term disabilities (STD coverage).[114] Business owners can
also purchase disability overhead insurance to cover the overhead expenses of
their business while they are unable to work.[115]
A
basic level of disability income protection is provided through the Social
Security Disability Insurance (SSDI) program for qualified workers who are
totally and permanently disabled (the worker is incapable of engaging in any
"substantial gainful work" and the disability is expected to last at
least 12 months or result in death).
Long-term
care insurance
Main
article: Long term care insurance
Long-term
care (LTC) insurance reimburses the policyholder for the cost of long-term or
custodial care services designed to minimize or compensate for the loss of
functioning due to age, disability or chronic illness.[116] LTC has many
surface similarities to long-term disability insurance. There are at least two
fundamental differences, however. LTC policies cover the cost of certain types
of chronic care, while long-term-disability policies replace income lost while
the policyholder is unable to work. For LTC, the event triggering benefits is
the need for chronic care, while the triggering event for disability insurance
is the inability to work.[113]
Private
LTC insurance is growing in popularity in the US. Premiums have remained
relatively stable in recent years. However, the coverage is quite expensive, especially
when consumers wait until retirement age to purchase it. The average age of new
purchasers was 61 in 2005, and has been dropping.[117]
Supplemental
coverage
Private
insurers offer a variety of supplemental coverages in both the group and individual
markets. These are not designed to provide the primary source of medical or
disability protection for an individual, but can assist with unexpected
expenses and provide additional peace of mind for insureds. Supplemental
coverages include Medicare supplement insurance, hospital indemnity insurance,
dental insurance, vision insurance, accidental death and dismemberment
insurance and specified disease insurance.[18]
Supplemental
coverages are intended to:
Supplement a primary medical expense plan by
paying for expenses that are excluded or subject to the primary plan's
cost-sharing requirements (e.g., co-payments, deductibles, etc.);
Cover related expenses such as dental or
vision care;
Assist with additional expenses that may be
associated with a serious illness or injury.[18]
MEDICARE
SUPPLEMENT COVERAGE (MEDIGAP)
MAIN ARTICLE:
MEDIGAP
Medicare
Supplement policies are designed to cover expenses not covered (or only
partially covered) by the "original Medicare" (Parts A & B)
fee-for-service benefits. They are only available to individuals enrolled in
Medicare Parts A & B. Medigap plans may be purchased on a guaranteed issue
basis (no health questions asked) during a six-month open enrollment period
when an individual first becomes eligible for Medicare. The benefits offered by
Medigap plans are standardized.
Hospital
indemnity insurance
Hospital
indemnity insurance provides a fixed daily, weekly or monthly benefit while the
insured is confined in a hospital. The payment is not dependent on actual
hospital charges, and is most commonly expressed as a flat dollar amount.
Hospital indemnity benefits are paid in addition to any other benefits that may
be available, and are typically used to pay out-of-pocket and non-covered
expenses associated with the primary medical plan, and to help with additional
expenses (e.g., child care) incurred while in the hospital.[18][88]
SCHEDULED HEALTH
INSURANCE PLANS
Scheduled
health insurance plans are an expanded form of Hospital Indemnity plans. In
recent years, these plans have taken the name mini-med plans or association
plans. These plans may provide benefits for hospitalization, surgical, and
physician services. However, they are not meant to replace a traditional
comprehensive health insurance plan. Scheduled health insurance plans are more
of a basic policy providing access to day-to-day health care such as going to
the doctor or getting a prescription drug, but these benefits will be limited
and are not meant to be effective for catastrophic events. Payments are based
upon the plan's "schedule of benefits" and are usually paid directly
to the service provider. These plans cost much less than comprehensive health
insurance. Annual benefit maximums for a typical scheduled health insurance
plan may range from $1,000 to $25,000.[118]
DENTAL INSURANCE
MAIN ARTICLE:
DENTAL INSURANCE
Dental
insurance helps pay for the cost of necessary dental care. Few medical expense
plans include coverage for dental expenses. About 97% of dental benefits in the
United States is provided through separate policies from carriers—both
stand-alone and medical affiliates—that specialize in this coverage. Typically,
these dental plans offer comprehensive preventive benefits. However, major
dental expenses, such as crowns and root canals, are just partially covered.
Also, most carriers offer a lower rate if you select a plan that utilizes their
Network providers. Discount dental programs are also available. These do not
constitute insurance, but provide participants with access to discounted fees
for dental work.
VISION CARE
INSURANCE
MAIN ARTICLE:
VISION INSURANCE
Vision
care insurance provides coverage for routine eye care and is typically written
to complement other medical benefits. Vision benefits are designed to encourage
routine eye examinations and ensure that appropriate treatment is provided.[18]
Specified
disease
Main
article: Critical illness insurance
Specified
disease provides benefits for one or more specifically identified conditions.
Benefits can be used to fill gaps in a primary medical plan, such as
co-payments and deductibles, or to assist with additional expenses such as
transportation and child care costs.[18]
Accidental
death and dismemberment insurance
Main
article: Accidental death and dismemberment insurance
AD&D
insurance is offered by group insurers and provides benefits in the event of
accidental death. It also provides benefits for certain specified types of
bodily injuries (e.g., loss of a limb or loss of sight) when they are the
direct result of an accident.[18]
Insurance companies have high
administrative costs.[119] Private health insurers are a significant portion of
the U.S. economy directly employing (in 2004) almost 470,000 people at an
average salary of $61,409.[120]
Health insurance companies are not actually
providing traditional insurance, which involves the pooling of risk, because
the vast majority of purchasers actually do face the harms that they are
"insuring" against. Instead, as Edward Beiser and Jacob Appel have
separately argued, health insurers are better thought of as low-risk money
managers who pocket the interest on what are really long-term healthcare
savings accounts.[121][122]
According to a study by a pro-health reform group published February 11,
the nation's largest five health insurance companies posted a 56 percent gain
in 2009 profits over 2008. The insurers (Wellpoint, UnitedHealth, Cigna, Aetna
and Humana) cover the majority of Americans with health insurance.[123]