Introduction to general HealthCare System – Domain Knowledge

This blog helps you to get some domain knowledge in the general healthcare system.

You will get to know Common terminologies and Enrollment Terminologies of the health care system and various types of plans.

General Healthcare

The health care system used to be simple. The players were patients, physicians, nurses, hospitals, and one type of insurance.

Today the system is much more complex and involves integrated systems of healthcare organizations, expanding government regulation, a growing uninsured population, advancing technology, pharmaceutical companies, and a wide range of financing mechanisms.

Annual spending in healthcare nearly touches $2.8 trillion, which sums up the industry’s complexity and importance.

In this document, we will introduce the major entities that are involved in the industry and the enrollment concepts & keywords.

The overall system looks like below:

General Healthcare

Common terminologies of health care system

Here are few common terminologies of health care system.

Employer

The employer is the one who pays the premium for its employees based on an accepted policy contract document.

Member

A member will be the person who gets employment from the employer and he will be getting benefits as per the policy contract document.

Payer

Payer/Insurer is an entity other than the patient that finance or reimburse the cost of health services. In most cases, this term refers to insurance companies, other third-party payers, or health plan sponsors (employers or unions).

Provider

Referring to anyone rendering medical care, including physicians, nurse practitioners, physician assistants, and others.

EOB

An explanation of benefits (commonly referred to as an EOB form) is a statement sent by a health insurance company to members explaining what medical treatments and/or services were paid for on their behalf.

Enrollment Terminologies of Healthcare System

Underwriting

Health insurance underwriting is the process that a payer uses to weigh potential health risks in its pool of insured people against potential costs of providing coverage.

To conduct medical underwriting, an insurer asks people who apply for coverage (typically people applying for individual or family coverage) about pre-existing medical conditions.

In most U.S. states, insurance companies are allowed to ask questions about a person’s medical history in order to decide whom to offer coverage, whom to deny and if additional charges should apply to individually purchased coverage.

While most discussions of medical underwriting in health insurance center around medical expense insurance, similar considerations apply for other forms of individually purchased health insurance, such as disability income and long-term care insurance.

Types of Providers

Primary Care Physicians (PCP)

A physician-usually a family or general practitioner, internist or pediatrician-who provides a broad range of routine medical services and refers patients to specialists, hospitals and other health care professionals, as necessary.

Under some coverage plans, a referral by the PCP is required to obtain services from other health care professionals. Each covered family member chooses his or her own PCP from the network’s physicians.

In-Network Providers

Network refers to providers or health care facilities that are part of a health plan’s network of providers with which it has negotiated a discount.

Insured individuals usually pay less when using an in-network provider, because those networks provide services at a lower cost to the insurance companies with which they have contracts.

Out-of-network providers

This phrase usually refers to physicians, hospitals or other health care providers who are considered nonparticipants in an insurance plan.

Depending on an individual’s health insurance plan, expenses incurred by services provided by out-of-plan health professionals may not be covered, or covered only in part by an individual’s insurance company.

Out-Of-Pocket Expenses

The yearly out-of-pocket maximum is the highest or total amount health insurance company requires a member to pay towards the cost of health care.

Out-of-pocket expenses are what a member pays for health-related services above and beyond the monthly premiums. Depending on the health plan, these expenses may include an annual deductible, coinsurance, and copayments for doctor visits and prescription drugs.

Out-of-pocket limit may and may not include deductible depending on insurers’ definition of the term. The maximum amount of money members may spend for health care services also may vary whether they are receiving in or out-of-network.

Deductible

A deductible is the amount you pay for health care services before your health insurance begins to pay.

Let’s say your plan’s deductible is $1,500. That means for most services, you’ll pay 100 percent of your medical and pharmacy bills until the amount you pay reaches $1,500.

After that, you share the cost with your plan by paying coinsurance and copays.

Co-insurance

Coinsurance is your share of the costs of a health care service. It’s usually figured as a percentage of the amount we allow to be charged for services. You start paying coinsurance after you’ve paid your plan’s deductible.

Here’s how it works. Lisa has allergies, so she sees a doctor regularly. She just paid her $1,500 deductible. Now her plan will cover 70 percent of the cost of her allergy shots. Lisa pays the other 30 percent; that’s her coinsurance.

Co-pay

A copay is a fixed amount you pay for a health care service, usually when you receive the service. The amount can vary by the type of service. You may also have a copay when you get a prescription filled.

For example, a doctor’s office visit might have a copay of $30. The copay for an emergency room visit will usually cost more, such as $250. For some services, you may have both a copay and coinsurance.

Pre-Existing Condition

A pre-existing condition is a medical condition that started before a person’s health insurance went into effect. Before 2014 some insurance policies would not cover expenses due to pre-existing conditions.

These exclusions by the insurance industry were meant to cope with adverse selection by potential customers. Such exclusions are no longer allowed after January 1, 2014.

Pre-Authorization

A decision by health insurer or plan that a health care service, treatment plan, prescription drug or durable medical equipment is medically necessary. Sometimes called prior authorization, prior approval or precertification.

Health insurance or plan may require preauthorization for certain services before receiving them, except in an emergency. Preauthorization isn’t a promise health insurance or plan will cover the cost.

Types of healthcare plans

There are three major categories of plans available in healthcare market. Namely, Government plans, Managed care plans and Indemnity plans

Government plans

Medicaid and Medicare are two governmental programs that provide medical and health-related services to specific groups of people in the United States. Although the two programs are very different, they are both managed by the Centers for Medicare and Medicaid Services (CMS), a division of the U.S. Department of Health and Human Services.

Both Medicaid and Medicare were created when President Lyndon B. Johnson signed amendments to the Social Security Act on July 30, 1965.

Medicare

Medicare is a Federal health insurance program that pays for hospital and medical care for elderly and certain disabled Americans.

The program consists of two main parts for hospital and medical insurance (Part A and Part B) and two additional parts that provide flexibility and prescription drugs (Part C and Part D).

Medicare Part A, or Hospital Insurance (HI), helps pay for hospital stays, which includes meals, supplies, testing, and a semi-private room. This part also pays for home health care such as physical, occupational, and speech therapy that is provided on a part-time basis and deemed medically necessary.

Care in a skilled nursing facility as well as certain medical equipment for the aged and disabled such as walkers and wheelchairs are also covered by Part A. Part A is generally available without having to pay a monthly premium since payroll taxes are used to cover these costs.

Medicare Part B is also called Supplementary Medical Insurance (SMI). It helps pay for medically necessary physician visits, outpatient hospital visits, home health care costs, and other services for the aged and disabled.

Medicare Advantage Plans (sometimes known as Medicare Part C, or Medicare + Choice) allow users to design a custom plan that can be more closely aligned with their medical needs.

These plans enlist private insurance companies to provide some of the coverage, but details vary based on the program and eligibility of the patient.

In 2006, Medicare expanded to include a prescription drug plan known as Medicare Part D. Part D is administered by one of several private insurance companies, each offering a plan with different costs and lists of drugs that are covered. Participation in Part D requires payment of a premium and a deductible.

Medicaid

Medicaid is a means-tested health and medical services program for certain individuals and families with low incomes and few resources. Primary oversight of the program is handled at the federal level, but each state:

  • 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 Medicaid program.

Each state sets its own Medicaid eligibility guidelines. The program is geared towards people with low incomes, but eligibility also depends on meeting other requirements based on age, pregnancy status, disability status, other assets, and citizenship.

States must provide Medicaid services for individuals who fall under certain categories of need in order for the state to receive federal matching funds.

Managed Care Plans

Managed care plans are a type of health insurance. Payers have contracts with health care providers and medical facilities to provide care for members at reduced costs.

These providers make up the plan’s network. Plans that restrict choices usually cost less. If someone wants a flexible plan, it will probably cost more. There are four types of managed care plans:

  • Health Maintenance Organization (HMO)
  • Preferred Provider Organization (PPO)
  • Point of Service (POS)
  • Exclusive Provider Organization (EPO)

PPO (Preferred Provider Organization)

PPO plans give you flexibility. You don’t need a primary care physician. You can go to any health care professional you want without a referral—inside or outside of your network.

Staying inside your network means smaller copays and full coverage. If you choose to go outside your network, you’ll have higher out-of-pocket costs, and not all services may be covered.

HMO (Health Maintenance Organization)

With an HMO plan, you pick one primary care physician. All your health care services go through that doctor.

That means that you need a referral before you can see any other health care professional, except in an emergency. Visits to health care professionals outside of your network typically aren’t covered by your insurance.

For example, if you get a skin rash, you wouldn’t go straight to a dermatologist. You would first go to your primary care physician, who‘d examine you. If your primary care physician can’t help you, he or she will give you a referral to a trusted dermatologist in your network that will.

One exception to this is that women don’t need a referral to see an obstetrician/gynecologist, or OB/GYN, in their network for routine services such as Pap tests, annual well-woman visits and obstetrical care.

Coordinating all your health care through your primary care physician means less paperwork and lower health care costs for everyone.

POS (Point of Service)

A Point of Service (POS) plan has some of the qualities of HMO and PPO plans with benefit levels varying depending on whether you receive your care in or out of the health insurance company’s network of providers.

POS plans combine elements of both HMO and PPO plans. Like an HMO plan, you may be required to designate a primary care physician who will then make referrals to network specialists when needed.

Depending upon the plan, services rendered by your PCP are typically not subject to a deductible and preventive care benefits are usually included.

Like a PPO plan, you may receive care from non-network providers but with greater out-of-pocket costs.

You may also be responsible for co-payments, coinsurance, and an annual deductible.

EPO (Exclusive Provider Organization)

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EPO is similar to an HMO in that it is a health care plan that covers eligible services from providers and facilities inside a network.

Generally, an EPO does not pay for any services from out-of-network providers and facilities except in emergency or urgent care situations, which is similar to an HMO.

People using an EPO generally are not required to have a primary care physician nor referrals, as HMO members are.

Indemnity Plans

Indemnity health insurance plans are also called fee-for-service. These are the types of plans that primarily existed before the rise of HMOs, EPOs, and PPOs.

With indemnity plans, the individual pays a pre-determined percentage of the cost of health care services, and the insurance company (or self-insured employer) pays the other percentage.

For example, an individual might pay 20 percent for services and the insurance company pays 80 percent. The fees for services are defined by the providers and vary from physician to physician. Indemnity health plans offer individuals the freedom to choose their healthcare professionals.

Co-ordination of Benefits (COB)

The Coordination of Benefits (COB) rules allows medical care plans to coordinate benefits when you are covered by more than one group medical care plan.

COB ensures that the level of payment, when added to the benefits payable under another group plan, will cover up to 100% of the eligible expenses as determined between the carriers but will not exceed the actual cost approved for your care.

If you are covered by more than one group plan, COB guidelines determine which carrier pays for covered services first.

The plan that pays first is your primary plan. This plan must provide you with the maximum benefits available to you under the plan.

The plan that pays second is your secondary plan. This plan provides payments toward the balance of the cost of covered services, up to the total allowable amount determined by the carriers.

Sample case

If a child is covered under both the mother’s and father’s plans, the plan of the parent (or legal guardian) whose birthday is earlier in the year is the primary plan.

  • For children of divorced or separated parents, benefits are determined in the following order unless a court order places financial responsibility on one parent:
  • plan of the custodial parent;
  • plan of the custodial parent’s new spouse (if remarried);
  • plan of the noncustodial parent;
  • plan of the noncustodial parent’s new spouse (if remarried).
    • If the primary plan cannot be determined by using the guidelines above, then the plan covering the child the longest is primary.

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