Health Insurance Providers

MR. WATSON: Let's talk about who provides health insurance.

1. Commercial Insurance Companies
2. Service Providers
3. Government Insurance
4. Self-Insurance

Commercial Insurance Companies

MR. WATSON: Commercial Insurance Companies, including life companies, casualty companies or mono-line companies, industrial companies, these all sell health insurance. Health insurance used to be sold "door-to-door" similar to industrial life insurance, but not anymore.

MR. WATSON: Surety companies do not sell health insurance. Surety companies bond those that deal in money. For instance, bankers and tellers. If the tellers run off with the money, then the surety company replaces it. They do not sell insurance.

MR. WATSON: Commercial companies operate on the

• reimbursement approach and
• right of assignment. It has
• deductibles and
• co-insurance.

You can use any doctor you want. You pay the doctor, the insurance company reimburses you. The most common reimbursement is 80/20 or 75/25. The right of assignment means that when you go into the hospital, you assign benefit payments over to the doctor or hospital. The hospital & the insurance company deal directly with each other.

Service Providers

MR. WATSON: A service provider offers "services", or health care to "subscribers". These are offered by health insurance companies as well.

1. Blue Cross & Blue Shield are the most dominant. They operate by providing a "service" rather than operating on a reimbursement approach. They pay the doctors directly, instead of reimbursing the insured. They have contractual arrangements for set services with doctors and hospitals. Members are known as "subscribers". These plans are also called "prepaid" plans. The insured can use any doctor that is approved. He chooses a doctor when he needs him. With an HMO, he chose when he signed up.
2. Health maintenance organizations (HMO's) - They finance the health care services for their subscribers and organize and deliver the health care services as well, through a network of physicians and hospitals. Health maintenance organizations have a capitation arrangement with the doctors. This is the monthly amount the doctor receives from the HMO whether of not the doctor ever sees the insured. He gets paid "per head". Every month. They are known for stressing "preventive care". The idea being that the insured is more likely to go to the doctor to catch the problem early. The insured pays a fixed periodic fee every month to the HMO and when they go to the doctor, all they pay is a small office visit, a co-pay. The insured chooses the doctor in the beginning. That is the doc he will see. He can change doctors, but that is his primary care giver. He will need a referral to go to a specialist. There is no out-of-network coverage.
3. Preferred Provider Organizations (PPO's) The PPO has worked out price discounts with doctors & hospitals and call them "preferred providers". The docs agree to charge a lower price. They are paid on a "fee for service" arrangement, being paid a certain amount for each time they see a patient. They make it up in volume. If someone uses a preferred provider, in-network, he has a lower deductible and smaller co-insurance. If he goes out-of-network he can use any doctor but it will cost him more. Can't do this with an HMO. PPOs have Out-of-network coverage, HMOs do not.
4. Point-of-Service Plans This is a combination of an HMO and a PPO. Like an HMO it provides a network of doctors and hospitals. You choose a Primary Care doctor. He is the quarterback. He refers to specialists if needed. If you stay in the network, the plan generally pays for most of the services and you don't have to submit claim forms. Out of network care would mean you must submit claim forms and the coverage will be less than if you stayed in-network. With a PPO, there is no Primary Care physician that you choose in advance.

Open panel vs. Closed panel HMOs

MR. WATSON: A closed-panel HMO is an HMO where the doctor works as a salaried employee, not very common. An open-panel HMO is one where the doctor has arrangements with many different HMOs, most common.

MR. WATSON: HMOs finance health care for their subscribers on a pre-payment basis. Subscribers pay a fixed periodic fee to the HMO in advance. HMOs stress preventive medicine. They have no deductibles or co-insurance. But, there usually is a co-payment or office visit charge to the doctor.

The HMO Act of 1973

MR. WATSON: The HMO Act of 1973: If

• a company has 25 or more employees, and
• if the company provides health insurance,

they've got to offer enrollment in an HMO. Everybody all right?

ALL: Yep

MR. WATSON: PPOs are simply doctors & hospitals who have agreed to cut their rates. This gets them volume. They operate on a fee for service basis. HMO doctors get paid whether you show up or not.

MR. WATSON: The last one is Medicare, Social Security, and Medicaid, government insurance.

Government Insurance

Medicare -

MR. WATSON: Medicare. Its purpose is to provide hospitalization, "hospital and medical expense." For those

1. age 65, or
2. those of any age who have chronic kidney problems, or
3. those who are receiving social security disability benefits.

Social Security

MR. WATSON: Social security disability benefits are tough to qualify for. In order to qualify for Social Security benefits the disability

• has to last at least 12 months, and
• a five-month waiting period is required before you can apply for the benefit.
• retroactive for 12 months, excluding that five-month waiting period

MR. WATSON: So, you can't even apply until you are disabled for five consecutive months. So let's say you became disabled in January. When could you apply? June. Let's say they turned you down. Social security disability benefits are retroactive for 12 months, excluding that five-month waiting period. So if they turned you down in June, turned you down, turned you down, and finally in December they acquiesced, they gave in and said, yeah, you were really disabled when you first applied. How far back will they go? June. Social security disability benefits are retroactive for 12 months, excluding that 5-month waiting period. We've already talked about this.

MR. WATSON: You have to meet their definition of being disabled, which means the inability to perform the duties of any substantial gainful work. That's tough! It must result in a medically determinable mental or physical impairment that can be expected to last at least 12 months.

MR. WATSON: If your doctors say it's not going to last 12 months, you are not even eligible.