Practice

Basic Medical Expense policies

Basic Medical Expense policies

Provide coverage for Hospital, Surgical and Physicians Medical Expense.

-Purchased as a individual or group policy.

-provide first dollar coverage (no deductibles).

-limited benefit periods and low coverage limits.

Major Medical Expense Policy

-A supplement (in addition) to Basic Medical or as a stand-alone policy.

-individual or group policy.

-Take over when the Basic Policy runs out

Hospital Expenses

-Pay for covered expenses incurred during a hospital stay.

1. Daily hospital benefit - Room and Board

2. Miscellaneous expenses - Other Medical Expenses (X-Rays, MRI, Prescriptions, Doctor Visits)

Daily Hospital Benefit

-Cost of a hospital room, up to a daily $ limit. The limit may be expressed either as a dollar amount, e.g. $500 per day, or it may be expressed as the Usual, Customary and Reasonable (UCR) and Charge

Usual, Customary and Reasonable (UCR)

Insurance company will pay an amount for a given procedure based upon the average charge for that procedure in that specific geographic area. The coverage is subject to a maximum amount or number of days.

Benefit Schedule

-Specifically states what is covered in the plan and for how much. The coverage is subject to a maximum amount or number of days.

Indemnity

Insured pays the bill and is reimbursed by the insurance company up to a specified limit amount. Medical expense policies that pay a fixed rate provide the insured with a stated benefit amount for each day of hospital confinement.

Reimbursement

Policyowners obtain medical treatment from whatever source they want and submit their charges to their insurer for reimbursement (actual amount).

Service Based Contracts

-Pay doctors and hospitals directly according to the # of days of coverage that is provided in the contract for each event and are prepayment plans. Once a claim is settled, the insured will receive an Explanation of Benefit (EOB), which is a written confirmation that the claim was paid. Blue Cross and Blue Shield, Health Service Corporations and Medicare coverage are all provided on a Service Basis.

Miscellaneous Expense Benefits

-Secondary benefits (inside benefits) because they occur inside the hospital for charges related to the stay. X-rays, prescriptions, MRI's, anesthesia and lab fees are usually separate fees incurred during a stay. Miscellaneous Expense Benefits have separate limits, referred to as Inside Limits. The are expressed usually as a multiple of the daily amount (UCR)

Surgical Expense

A schedule of procedures lists the amount allowable for each procedure. If a surgical procedure is not found in the schedule, it will still be payable. The amount payable for a procedure not listed is based on its relative value to a procedure of similar difficulty. There are usually no deductibles.

Surgical Schedule

Is simply a price list. Each procedure is listed and a dollar amount assigned and if a procedure is not listed in the schedule it is still paid.

Relative Value

scientific method of paying different benefits based on the region of the country an insured lives. It is based on assigning a value to each procedure and using a conversion factor. A schedule of assigned points for each procedure must be included in the policy.

Physicians Medical Expense

Pays for visits to the doctor (office hospital) plus post operation care. There may be a per-visit benefit, or the coverage is based on UCR.

-May or may not be a deductible . This policy is usually written as an indemnity plan and has first dollar coverage (no deductible).

-usually written as an indemnity plan and has first dollar coverage

Major Medical Expense

-Cover "catastrophic" or huge loss. A Catastrophic loss is defined as whenever Basic coverage runs out and not a specific dollar amount.

-High Maximum Limits ($2,000,000)

-Deductibles (per person or per family ea yr))

-Co- insurance (Usually 80/20%)

-Stop Loss

-Miscellaneous Expense Benefits - x-rays, MRI, lab tests, etc.

Coinsurance

• Once the deductible is met the insured and the insurance company share in the expenses in what is called coinsurance. It is written as 80/20, 70/30, etc. Also called percentage participation requirement.

Flat Deductible

-Portion of medical expenses that are paid by the insured each year before benefits start. The higher the deductible the lower the annual premium will be.

-If a medical incident occurs in the last three months of any plan year and the annual deductible has met the yearly requirement then the medical treatment for that incident only would be covered in the new plan year. Thus a "carryover" into the next year of the paid deductible has occurred.

Per Cause Deductible

A separate deductible for each separate illness or accident.

Stop Loss

Max amount the insured is required to pay out of pocket: After the stop loss amount is reached by the insured, in a calendar year, the company will pay 100% of the remaining covered expenses.

-calculated by adding both deductibles and coinsurance amounts.

Comprehensive major medical

Major Medical and Basic Medical are written together.

Corridor deductible

Occurs in the middle of the hospital stay, and bridges the gap from the basic to the major medical plan.

Pre-Existing Condition

-To Prevent avoid adverse selection.

-A is a medical condition for which an insured sought medical attention, treatment, or advice for symptoms or for which should have sought medical advice/treatment in the previous 6 months.

-For individual policies, the exclusion can not exceed 24 months, for group policies 12 months, and for late enrollees in group plans, 18 months.

Exclusions found in Basic and Major Medical

-Injuries due to war or military conflict

-Elective cosmetic surgery

-Routine Dental Care

-Eye Exams & Glasses Treatment in a Veterans Hospital or other Gov Facility

-Workers Compensation Accidents

-Claims Occurring Outside the U.S.

-Intentionally Self-Inflicted Injury

Limited Coverage

Specified Coverage policies, or Limited Coverage, are insurance policies that limit coverage to one illness or one limiting group of coverage.

Dread Dieses (Limited Risk)

Policies provide a variety of benefits for a specific disease such as a cancer policy or a heart disease policy. Benefits are usually paid as a scheduled amount of indemnity for specified events or medical procedures, such as hospital confinement or chemotherapy.

Critical Illness Plans

-Pays a lump sum to the insured upon the diagnosis (& survival) of a critical illness. The insured must survive the illness for a certain time period (Ex 30 days).

Hospital Indemnity

-Provides a specific amount on a daily, weekly or monthly basis while the insured is confined to a hospital. The benefit payments are sent directly to the insured and can be used for any purpose.

Travel Insurance

Covers most kinds of travel accidents, but only for a specified period of time.

Workers Compensation

A benefit required by the state and benefits will vary to some degree from state to state. This coverage is made available through government programs, private insurers, or by self-insuring. To be eligible the employee must work in an occupation covered by Workers Compensation insurance, and have had an accident or sickness that is work related.

Disability Income Insurance

-Designed to replace income lost due to a disability or illness of the insured wage earner. It never pays for the medical expenses; it only replaces lost income and must be paid no less frequently than monthly. Its to avoid Economic Death.

-Can be group of individual policy

Malingering

Making the loss last longer than it has to.

DI Position Schedule

Used in employer sponsored group plans because it bases the benefit on the position held in the company.

DI Flat Dollar Amount

In the event the insured becomes disabled the policy might pay a flat $1,000 per month, regardless of any other income benefits.

DI Taxation

. If an individual buys Disability Insurance with his/her after-tax dollars, the benefits will be tax-free. On the other hand, when employers pay for Group Disability Income benefits, the benefits are taxable to the employee.

Morbidity Tables

-Based on the law of large numbers.

-Predict how many people are going to be disabled in a given year and the severity the disability.

-Tables are important to an insurer because some insureds become more disabled than others.

Total Disability

The inability to perform the duties of one's own occupation for which a person is suited by reason of education, training or experience.

Partial Disability

May be related to loss of Time, Function or Compensation. Partial disability is defined as the inability to perform one or more of the regular duties of one's own occupation or the inability to work on a full time basis, which results in a decrease in income.

Permanent Total Disability

The most severe of the classes. The insured will never work again. Examples might be paralysis or coma.

Temporary Total Disability

Insured is rendered unable to work for a period of time, but recovery can be anticipated. Maternity leave or traction for a bad back are examples.

Permanent Partial Disability

refers to a type of injury, which is permanent, but the insured can still work. A loss of a finger is an example of this type of injury

Temporary Partial Disability

The least severe of the classifications and usually refers to a disability which lasts a very short period of time. A sprained ankle which takes seven or eight days to recover would be an example

Probationary Period

is used to describe the period of time from the date the policy is issued during which no claims will be paid for Sickness Only. Usually this period of time is from 15 to 30 days. Used to avoid Adverse Selection (pre-existing conditions). This helps to protect the insurer against individuals who would purchase a disability policy shortly AFTER developing a health condition that requires immediate attention.

Waiting Period or Elimination Period

-Refer to a period of time from the date of the claim (not date of issue) during which no benefit is paid. This provision can be viewed as a deductible of days. The premium on a DI policy is adjusted depending on the selection of the elimination period. Longer elimination periods result in lower premiums.

Benefit Period

Range from a six month period to policies that provide coverage to age 65. Disability payments cannot go beyond age 65 because the purpose of Disability is to replace lost income, and at age 65 you are presumed to be retired.

Short Term Vs Long Term

benefit period of up to two years (24 months) are considered short term. Policies which have a Benefit Period of more than two years are considered long term.

Accidental bodily injury

means the DAMAGE to the body is unexpected and unintended. A policy that uses the accidental bodily injury provision will provide more coverage than a policy that uses the accidental means provision.

Accidental means

means the CAUSE of the accident must be unexpected and unintended. Employ the use of "reasonable judgment" on the part of the insured to determine whether or not it would be accidental and covered by the policy

Sickness or illness

Defined as either a sickness or disease contracted after the policy has been in force for at least 30 days, or a sickness or disease that first manifests itself after the policy is in force

Occupations or Non-occupational

Disability Income policies are classified as Occupational or Non-occupational, depending on whether or not they will pay for accidents occurring on the job. In most cases, Group Disability Insurance is written on a Non-occupational basis because accidents occurring on the job are covered by Workers Comp. There are many people, who are not eligible for Workers Comp, such as self- employed individuals and Principals of Partnerships.

Group Short Term Disability (STD)

-Some Disability policies pay in conjunction with Workers Comp, such as STD

-The benefit period for STD cannot be longer than 2 years.

Group Long Term Disability (LTD)

Reserved for management or higher paid employees. The Elimination Period will coincide with the benefit period of the STD Period so they don't overlap. The Benefit Period may be up to age 65. Lower paid employees are limited to 66 2/3% of their monthly wage.

Disability Income (DI)

Written specifically to cover accidents only or sickness only. These are usually short term policies designed to provide income on a per diem basis. Any policy that provides a flat dollar income benefit for each day of hospital confinement is referred to as a Hospital Indemnity Plan.

Presumptive Disability

Provision that is found in most DI policies which specifies the conditions that will automatically qualify the insured for full disability benefits. Some disability policies provide a benefit when people simply meet certain qualifications, regardless of their disability to work.

The Cost of Living Adjustment (COLA)

Rider will help protect against inflation.

Insured's monthly benefit will be increased automatically once payments have begun. Generally, the first increase would be at the end of one year, and it would be followed by annual increases for as long as the insured remains on the claim. Some of these Riders provide for compound interest adjustments, while others provide simple interest adjustments.

Future Increase Option, (FIO)

-Allows an insured to increase the benefit level up to a specific predetermined amount at certain times or on certain occasions, without proof of insurability.

-An increase may also be taken at one's marriage or birth of a child.

-In order to exercise this rider, the insured must qualify from an income standpoint to prevent over insurance.

Garmented Insurability Rider

Future Increase Option or Guaranteed Purchase Option. This option is also available on the life policies which allow the insured to purchase additional amounts of Disability Income coverage without evidence of insurability (no medical exam).

Exclusions

-War and Military Service

-Intentionally self-inflicted injury, including attempted Suicide

-Standard Aviation Exclusions

-Losses occurring during the commission of a felony

-Private Pilot Exclusions and Exclusions related to hazardous hobbies (sky diving, Race Car Driving etc.)

-Pre-existing condition limitations

-Impairment Riders (used to exclude specific named conditions from coverage)

Own Occupation

States that a disability occurs when a person cannot perform any of the regular duties a person's own occupation is the most liberal to the insured. After 24 months it goes to Any Occupation

Any Occupation

Insured is qualified by reason of education, training or experience, is less liberal and may be used when the policy provides for Total and Partial Disability coverage. Most policies are any occupation because it is easier to justify the "any occupation" definition when agreeing to issue a policy

Recurrent Disability

-Provision that specifies a period of time (usually 6 months) during which the reoccurrence of a disability is considered to be a continuation of the prior claim. It addresses situations when a claimant returns to work and is again disabled by the same cause.

Residual Disability

Occurs when a person is disabled then returns to work under the "Any Occupation" provision and earns less than was promised by the Disability Income Policy.

Claim Settlement

DI claims must be paid no less frequently than on a monthly basis. Lump sum settlements may be offered to a client, but a company may not coerce a client into accepting a lump sum settlement.

Guaranteed Renewable (Class or Rate)

The policy must be renewed and may not be canceled or modified by the insurance company to a stated date, usually age 65. The premium may not be increased unless all members of the same class are increased.