MEDICAL and HEALTH INSURANCE

If you recall, we explained that there are two broad categories of health insurance policies: disability and medical expense. Thus far we have covered disability. Now we’ll take a look at basic medical expense insurance.

Basic medical expense policies provide for medical expenses that result from accidents and sickness. This is a loose term that refers to various medical, hospital and surgical benefits.

The broad category of medical expense coverage provides a wide range of benefits for hospital, surgical and medical care. Other benefits may apply as well, such as private nurses, convalescent care, and more.

Policies may be written as such that they may be limited to only one or two types of coverage like hospital or miscellaneous medical costs or surgical expenses. These are known as basic plans.

Other, more broadly written, policies may cover all expenses resulting from accident or illness using some specific exceptions.

Medical plans include fee-for-service wherein doctors and other providers receive a payment that does not exceed their billed charge for service provided.

Prepaid plans provide medical or hospital benefits in the form of service rather than dollars. Many things need to be considered when selecting a medical expense plan such as:

Specified coverage versus comprehensive care. In other words does the plan feature only specific benefits or is the coverage comprehensive?

Any provider versus a limited number of providers. Are you required to choose from a specific list of providers?

National versus regional operation. Is the plan limited to a specific geographical region or operate nationwide?

Insured versus subscribers. Are participants considered insureds (the person who receives the benefit) or subscribers (the person who is paying the premium)?

We are going to take a look at the limited coverage for hospital, medical and surgical expenses. Discussing this separately first, will help you to understand how the components are combined in major medical and comprehensive policies.

The broad definition of basic medical expense insurance in most states includes hospital, medical and surgical expenses. The purpose of this type of insurance is to cover a broad range of medical, hospital and surgical expenses as well as separate categories of medical expenses.

Let’s explore individual versus group coverage.

No matter how a policy is written, narrowly or broadly, medical expense insurance is designed to reimburse for the cost of care whether it results from injury or illness.

Both individual and group policies are available to consumers. Normally individual policies are more costly along with having limited benefits but generally speaking, both types cover the same medical services.

Hospital expense benefits provide for expenses incurred during hospitalization. Indemnities usually fall under two broad groups:
• Room and board – including nursing care and special dietary requirements
• Miscellaneous medical expenses – including x-rays, lab work, medications, medical supplies and operating and special treatment rooms

In some cases, benefits might be included for certain surgeries and related costs like pain killers given during a hospital stay.

Room and board benefits may be paid based on indemnity or reimbursement depending upon the particular policy. When paid on an indemnity basis, the insurer pays a specified rate per day that has been pre-determined and is laid out in a schedule within the policy.
The schedule will spell out the details of the benefit coverage as it pertains to length of stay. Once the length of stay has been exhausted, no more benefits are available. These are sometimes called dollar amount plans and typically the number of days is from 90 up to 365.

More commonly used is a reimbursement basis, also known as an expenses-incurred basis. With this type of coverage the policy will pay in one of two ways – the actual charges for a semi-private room or a percentage of the actual charges. There are no specific dollar amounts but a maximum number of days will still be specified.

Surgical Expense Benefits fall under two plans, scheduled and non-scheduled.
In the scheduled plan, surgical expense policies pay the fees incurred from the surgeons services and related costs incurred when the insured has an operation. Typical related costs include fees for an assistant surgeon, anesthesiologist and can even include the operating room when it is not covered as a miscellaneous item.

Basic surgical coverage can be included in the same policy as basic hospital and medical expense and are normally included in a schedule listing major commonly performed operations and the benefits payable for each.

This gets a bit tricky and you need to be aware of how the insurance company determines the benefit. Just because a specific surgery is not listed in the schedule does not necessarily mean that there is no benefit for it available. It might mean that the insurer indemnifies that surgery based on absolute value and the relative value of each procedure.

In other words, let’s say that the insurer determines that a certain surgical procedure has a prevailing value of $1500 and indicates that in the schedule included in your policy.

That is considered the absolute value. Now, let’s say that there is another procedure not listed in the schedule that is say 50% less complicated as the $1500 procedure. In this case, the relative value would be $750 and that is the benefit amount that will be paid for the less complicated procedure.

Using a non-scheduled scenario, when surgical benefits are not listed by a specific dollar amount in a schedule, the policy will pay based on what is considered usual, customary and reasonable in a certain geographical area and is also known as UCR.

This non-scheduled type of indemnity is found most often in major medical and comprehensive policies which we will discuss further along.

As you might imagine, under this type of arrangement the UCR is determined by the amount that physicians in the local area usually charge for the same procedure.

Regular medical expense benefit is another category that is sometimes known as physician’s non-surgical expense. This coverage is for non-surgical services a physician provides and can sometimes be narrowly applied to physician visits while the patient is in the hospital.

If this is the case the benefit will most likely pay for a specified maximum number of visits per day, a specified maximum dollar amount per visit and a specified number of days coverage applies.

In other policies this benefit could be for non-surgical services performed by a physician whether the patient is in or out of the hospital. Once again there are limits such as $100 per visit up to 50 visits per year depending on the policy.

Other medical expense benefits fall into a category in addition to the hospital, surgical and medical benefits previously discussed. These optional benefits vary from insurer to insurer and may or may not include as part of their standard policies. Separate policies can sometimes be written to include these benefits. Some of them are:
• Maternity
• Convalescent – Nursing home
• Emergency first-aid
• Home health care
• Mental infirmity
• Hospice care
• Prescription drugs
• Dread disease
• Outpatient treatment
• Dental
• Private duty nursing
• Vision