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Learning Objective 1 - Plan Provisions
Medical Benefits in the US

1. Key dimensions of medical benefit plans

1. Definition of covered services and conditions under which those services will be covered

2. Degree to which the individual participates in the cost of the service

3. The breadth of the network and the degree to which the provider participates in the risk related to the cost of the service

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Learning Objective 1 - Plan Provisions
Medical Benefits in the US

2. Services covered by medical policies

1. Facility services - includes acute care hospitals, emergency rooms, outpatient facilities, psychiatric facilities, alcohol and drug treatment programs, skilled nursing facilities, and home health care

2. Professional services - includes surgeries, office visits, home visits, hospital visits, emergency room visits, and preventive care

3. Diagnostic services

4. X-ray and lab services

5. Prescription drugs

6. Durable medical equipment

7. Ambulance

8. Private duty nursing

9. Wellness benefits

10. Nurse help lines

11. Disease management benefits

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Learning Objective 1 - Plan Provisions
Medical Benefits in the US

3. Purposes for having the insured share in the cost of the medical plan

1. Control utilization - studies have shown drastic reductions in utilization when a plan is subject to deductibles, copays, or coinsurance

2. Control costs - requiring cost sharing lowers the premium and therefore leads to more affordable coverage

3. Control risk to the insurer - requiring cost sharing results in a benefit program that more truly represents an insurable risk

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Learning Objective 1 - Plan Provisions
Medical Benefits in the US

4. Types of provider reimbursement

1. Discount from billed charges

2. Fee schedules and maximums

3. Per diem reimbursements - a negotiated amount per day of hospital stay. Varies by level of care.

4. Hospital diagnosis related groups (DRGs) - a set payment based on patient's diagnosis, regardless of the length of stay or level of services

5. Ambulatory payment classifications - similar to DRGs. Used for outpatient charges.

6. Case rate or global payments - a single reimbursement is negotiated to cover all services associated with a given condition. Commonly used for maternity and transplant cases.

7. Bonus pools - pays the provider a bonus if utilization is below target or quality-of-care criteria are met. Funded through withholds.

8. Capitation - the provider performs a defined range of services in return for a monthly payment per enrollee. Variations include global and specialty capitation.

9. Integrated delivery system - the insurer employs the providers of care (common in staff model HMOs)

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Learning Objective 1 - Plan Provisions
Medical Benefits in the US

5. Provisions included in medical plans

Provisions included in medical plans in addition to provisions related to the key dimensions of medical plans (see separate list):

1. Overall exclusions (see separate list)

2. Mandated benefits (due to regulations)

3. Coordination of benefits - to determine the payment when a service is covered under multiple plans

4. Subrogation - assigns the carrier the right to recovery from any injuring party (commonly used for workers' comp claims)

5. COBRA (Consolidated Omnibus Budget Reconciliation Act) continuation - employers with at least 20 employees must offer continued coverage for 18 to 36 months beyond a person's normal termination date

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Learning Objective 1 - Plan Provisions
Medical Benefits in the US

6. Common exclusions for medical plans

1. Services deemed not to be medically necessary

2. Services deemed to be experimental

3. Services related to cosmetic surgery

4. Other specified services, such as hearing and vision services

5. Transplants

6. Services for which payment is not otherwise required

7. Services required due to an act of war

8. Services provided as a result of a work-related injury

9. Services provided by a provider related to the patient

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Learning Objective 1 - Plan Provisions
Dental Benefits in the US

7. Organizations that sell dental insurance

1. Insurance companies

2. Dental service corporations, such as Delta Dental

3. Blue Cross and Blue Shield plans

4. Dental HMOs

5. Dental referral plans (discount dental plans)

6. Third party administrators

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Learning Objective 1 - Plan Provisions
Dental Benefits in the US

8. Typical design for dental insurance

1. Benefits are divided into the following classes

a) Preventive and diagnostic (Class I) - oral exams, cleanings, fluoride, sealants, x-rays

b) Basic (Class II) - fillings, extractions, endodontics (root canals), periodontics (treatment of gum disease), and oral surgery

c) Major (Class III) - inlays, onlays, crowns, bridges, and dentures

d) Orthodontics (Class IV) - sometimes added to dental plans, with a lifetime maximum

2. Reimbursement varies by class, such as 100% for Class I, 80% for Class II, and 50% for Class III. Less cost sharing is required on preventive services to encourage their use.

3. Calendar year deductible - such as $50 or $100, often waived for Class I services

4. Annual plan benefit maximum - ranges from $1,000 to $2,500 per person

5. No annual out-of-pocket maximum. An exception is that ACA-compliant pediatric dental coverage must have an out-of-pocket maximum.

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Learning Objective 1 - Plan Provisions
Dental Benefits in the US

9. Dental plan cost containment provisions

Dental plan cost containment provisions. These are used to limit the antiselection risk resulting from the elective nature of benefits

1. Frequency limitations - such as two cleanings per year and one set of x-rays per year

2. Pre-existing condition limitations - prevent the plan from paying for charges incurred prior to the insurance effective date, such as replacement of a missing tooth

3. Least expensive alternative treatment - the insurer reimurses based on the least expensive clinically acceptable treatment plan

4. Waiting periods - must be satisfied before coverage begins. Are generally applied to Class III and Class IV services, and typically range from 3-12 months.

5. Exclusions - such as cosmetic services, experimental treatments, and services that are typically covered by a medical plan

6. Benefits after insurance ends - coverage for work started before termination only continues for 31 days

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Learning Objective 1 - Plan Provisions
Dental Benefits in the US

10. Underwriting and rating parameters for dental

1. Group size - minimum group size of 5 is usually enforced to avoid antiselection

2. Eligible individuals and groups - plans usually cover active employees and dependents. Some insurers don’t cover groups from certain industries.

3. Participation - many plans allow for participation as low as 25% of eligible employees

4. Employer contributions - most non-voluntary plans require a minimum employer contribution of 50% of the single employee premium

5. Other coverages - if dental is packaged with other insurance options it helps to prevent antiselection

6. New business - plans may charge higher rates to groups who are offering dental coverage for the first time, due to pent up demand for dental services by employees in those groups

7. Geographic location - area factors vary by state, service area, or zip code

8. Demographics - claim costs are higher for females and older ages. Common family structures are 2-tier, 3-tier, and 4-tier.

9. Waiting and deferral periods - may have a waiting period before a new employee can join the plan

10. Incentive coinsurance - may be used on plans with no prior coverage. Start with low coinsurance for classes II and III and raise the level each year as the individual utilizes preventive services.

11. Transferred business - if a plan is a replacement, then it may pay for claims incurred in the prior year

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Learning Objective 1 - Plan Provisions
Dental Benefits in the US

11. Dental reimbursement models and delivery systems

1. Indemnity - traditional FFS reimbursement. Plan members may use any dentist, but the dentist will bill the patient for the balance remaining after the plan makes its maximum payment.

a) Scheduled indemnity plans

b) UCR (usual, customary and reasonable) plans

2. PPO - a contracted network of dentists agree to discounted FFS reimbursement arrangements. Discounts are only available in network, and in-network providers may not balance bill the patient.

a) Managed indemnity plans (passive PPOs)

b) Exclusive provider organization (EPO) plans

3. Dental HMO - uses prepaid or capitated arrangements. Members must use the network.

a) Independent Provider Association (IPA) plans

b) Staff model dental HMO plans

4. Point of service - hybrid of the indemnity, PPO, and dental HMO concepts

5. Discount dental plans - members receive discounts from preferred providers (this is not insurance)

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Learning Objective 1 - Plan Provisions
Dental Benefits in the US

12. Comparison of dental reimbursement models

1. Premium - HMOs are the least expensive and indemnity plans are the most expensive

2. Patient access - any dentist can be used for indemnity plans and PPO plans, but members must use the network in an HMO

3. Benefit richness - HMOs typically cover the same benefits as PPOs and indemnity plans but with less out-of-pocket expense

4. Cost management - indemnity plans use some cost controls. PPOs use those controls and a credentialing process to find cost-effective providers. HMOs add a gatekeeper approach.

5. Utilization - indemnity plans and PPOs may overutilize due to FFS. HMOs may underutilize due to capitation.

6. Quality assurance - unlike indemnity plans, PPOs and HMOs have credentialing processes to help assure quality care

7. Fraud potential - detecting fraud will be based on the insurer's efforts, rather than the particular plan type

8. Provider contracting - PPOs and HMOs have contracts with dentists, who agree to accept discounted charges

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Learning Objective 1 - Plan Provisions
Dental Benefits in the US

13. Claim administration procedures used by dental plans

1. Predetermination of benefits - the plan wants members to submit expensive treatment plans for review before service

2. Least expensive alternative treatment (described in earlier list)

3. Coordination of benefits - done to avoid paying beenfits in excess of charges

4. Dental review - difficult claims should be reviewed by a dental consultant

5. Maximum allowable charge (aka UCR) - expenses are limited to the lesser of:

a) The dentist's usual fee for the procedure

b) The fee level set by the plan administrator based on charges submitted in the same geographical area

c) The reasonable fee charged for a service when unusual circumstances or complications exist

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Learning Objective 1 - Plan Provisions
Pharmacy Benefits in the US

14. Factors that influence prescription drug costs

1. Prescription drug pipeline - manufacturers want to recover their investments in research and development of new drugs

2. Brand patent protection - patents protect a drug's original manufacturer from competition for a period of time

3. Specialty drugs - have relatively higher cost than other brand name drugs

4. Biologics - these are very expensive ($2,000 to $500,000 per patient per month) and are not easily replicated, so generics will not be produced for most of them

5. Direct to consumer advertising - marketing of high-cost drugs has been effective, resulting in many patients requesting the new drugs

6. Member cost sharing offsets - many manufacturers offer to cover member out-of-pocket costs for expensive drugs. This removes the member's incentive to use preferred products and generics.

7. Faster approval process by the FDA - this has increased the number of high-cost drugs coming to the market

8. Aging population - leads to more demand for drug therapies

9. Increase in awareness of testing for disease - often results in drug therapies to avoid acute illnesses

10. Personalized medicine - generic testing sometimes leads to unnecessary medication use

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Learning Objective 1 - Plan Provisions
Pharmacy Benefits in the US

15. Entities in the pharmacy benefit system in the US

1. Pharmaceutical manufacturers - they research, obtain approval for, produce, and distribute prescription drugs. They sell drugs to wholesalers and also directly to pharmacies. They also negotiate with PBMs (pharmacy benefit managers), offering rebates in exchange for favorable formulary placement.

2. Pharmaceutical wholesalers - they purchase prescription drugs from manufacturers and distribute drugs to pharmacies

3. Pharmacies - they dispense prescription drugs directly to beneficiaries, and purchase drugs from either wholesalers or directly from manufacturers

4. Pharmacy benefit managers (PBMs) (see separate list of functions of PBMs)

5. Third-party payers (insurance companies, employers, or government programs) - they fund the prescription drug benefit and in some instances assume claims risk

6. Beneficiaries - they are the consumers of prescription drugs

7. Prescribing health care providers - they diagnose beneficiaries and prescribe drugs for them

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Learning Objective 1 - Plan Provisions
Pharmacy Benefits in the US

16. Function performed by PBMs

1. Administrator prescription drug benefit programs

2. Negotiate rebates with manufacturers

3. Negotiate discounts with pharmacies

4. Manage relationships with third-party payers

5. Performing utilization management

6. Run drug adherence programs

7. Integrate drug benefits with medical

8. Establish a formulary of drugs

9. Build a network of pharmacies

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Learning Objective 1 - Plan Provisions
Pharmacy Benefits in the US

17. Types of drugs

1. Generic - typically the lowest cost and most commonly dispensed. A generic equivalent drug is a generic version of a brand drug, created once a brand drug's patent expires.

2. Brand name - multi-source brand drugs have a generic equivalent while single-source brand drugs do not

3. Specialty - high-cost drugs, many of which require special treatment and delivery (e.g., temperature controlled and administered by a health care provider)

4. Biologic - derived from living organisms and are usually very expensive. Generally considered to be specialty drugs.

5. Biosimilars, or follow-on biologics - subsequent versions of biologic drugs developed by different manufacturers. May not be therapeutically equivalent to biologics.

6. Compound - drugs mixed by a pharmacist. Can deliver a customized strength and dosage to meet a beneficiary's specific needs.

7. Over-the-counter - do not require a prescription to purchase

8. Supplies - such as diabetic test strips and alcohol pads

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Learning Objective 1 - Plan Provisions
Pharmacy Benefits in the US

18. Stages of prescription drug lifecycle

1. Research and development by manufacturers - includes initial drug discovery, pre-clinical testing, clinical trials, and review by the FDA. Typically lasts 15 years.

2. Brand patent protection period - the manufacturer is awarded the exclusive right to produce the drug. Typically lasts 12 years.

3. Generic exclusivity period - immediately follows the patent protection period. Only the brand name manufacturer and one additional manufacturer are allowed to sell the generic equivalent. Typically lasts 6 months.

4. Generic drug lifespan - after the generic exclusivity period, all manufacturers may produce and sell the drug

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Learning Objective 1 - Plan Provisions
Pharmacy Benefits in the US

19. Methods of prescription drug distribution

1. Retail pharmacies - physical locations where beneficiaries can visit to pick up prescription drugs.

2. Mail order pharmacies - they send prescriptions through the mail, typically for a three-month supply of maintenance medications for treating chronic conditions.

3. Specialty pharmacies - they focus on delivering specialty drugs, which often require special storage and administration

4. Health care providers

5. LTC facilities

6. Hospice facilities

7. Home health professionals

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Learning Objective 1 - Plan Provisions
Pharmacy Benefits in the US

20. Types of cost sharing plans for pharmacy benefits

1. Copay plans - often seen with managed care plans. Copays typically vary by tier.

2. Coinsurance plans - coinsurance will increase by tier. Will typically include a deductible, either integrated with a medical plan or a separate deductible if the plan is not integrated.

3. Combination of copay and coinsurance - options include:

a) Cost sharing equal to the larger of a copay or a percentage coinsurance

b) A coinsurance percentage with a dollar maximum

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Learning Objective 1 - Plan Provisions
Pharmacy Benefits in the US

21. Types of formulary designs

Types of formulary designs. Formularies are lists of preferred drugs.

1. Closed - only formulary drugs are covered. But plans must have a process to cover non-formulary drugs for individual patients based on medical necessity.

2. Open - all eligible drugs are covered, but cost sharing may vary by tier.

3. Tiered (incentive) - separate formulary tiers are established, with copays or coinsurance varying by tier

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Learning Objective 1 - Plan Provisions
Pharmacy Benefits in the US

22. Most common pharmacy benefit tier designs

1. Two tier - generic and brand name drugs

2. Three tier - generics, preferred brands, and non-preferred drugs

3. Four tier - most common is to add specialty drugs to a three-tier design

4. Five tier - start with a four-tier design with specialty as tier 4, and then split one of those tiers:

a) Split the generic tier into preferred and non-preferred (a common design for Part D)

b) Or split the specialty tier into preferred and non-preferred

5. Six tier - options include:

a) Generic, preferred brand, non-preferred brand, biosimilars, preferred specialty, and non-preferred specialty

b) Preferred and non-preferred tiers for each of generic, brand, and specialty

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Learning Objective 1 - Plan Provisions
Pharmacy Benefits in the US

23. Factors that determine leverage when negotiating rebates from drug manufacturers

Factors that determine leverage when negotiating rebates from drug manufacturers. Rebates are payments from manufacturers in exchange for preferred status of their drugs on a formulary

1. Number of lives represented - successful contracting requires at least 500,000 lives over which the plan can exert formulary control

2. Control of market share - ability to move market share to preferred products

3. Consistency of behavior - the predictability of the plan's response to a manufacturer's actions

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Learning Objective 1 - Plan Provisions
Health Benefits in Canada

24. Criteria for provincial Medicare plans to qualify for federal contributions

Criteria for provincial Medicare plans to quantify for federal contributions. (These are principles from the Canada Health Act)

1. Comprehensiveness - all medically-required hospital and physician services must be covered under the plan

2. Universality - all legal residents of a province must be entitled to the plan's services on uniform terms and conditions

3. Accessibility - reasonable access by residents to hospital and physician services must not be impeded by charges made to those residents

4. Portability - the plan may not impose a waiting period in excess of 3 months for new residents, and coverage must be maintained when a resident moves or travels within Canada or is temporarily out of the country

5. Public administration - the plan must be administered on a non-profit basis by a public authority (Extra-billing and user charges are not prohibited. But they will result in reductions in the federal grants to the province.)

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Learning Objective 1 - Plan Provisions
Health Benefits in Canada

25. Benefits covered by most Canadian provincial Medicare plans

1. Hospital services - room and board in a public ward, physicians' services, laboratory and diagnostics, operating room and anesthetic facilities, nursing, drugs, supplies, outpatient services for emergencies, and radiotherapy and physiotherapy

2. Physician services - includes services of a general practitioner, specialist, psychiatrist, and others

3. Services of other professionals, such as optometrists, chiropractors, osteopaths, and podiatrists

4. Services of a physiotherapist if in a hospital facility

5. Prescription drugs for social assistance recipients and residents over age 65 in most provinces

6. Prostheses and therapeutic equipment

7. Other diagnostic services, such as laboratory tests and x-rays performed outside a hospital

8. Dental care - medically-required oral and dental surgery performed in a hospital and basic dental services for children

9. Out-of-province coverage - includes expenses incurred in other provinces and outside Canada

10. Vision care - an annual eye exam for children and seniors

(some information from Morneau Shepell chapter 15 was included in this list)

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Learning Objective 1 - Plan Provisions
Health Benefits in Canada

26. Concerns about the Canadian Medicare system, from recent reports

1. Waiting for months to see a specialist is common

2. Shortages of equipment, specialists, and technicians cause waiting for diagnostic procedures

3. Waiting for elective and non-emergency surgery is common, due to a lack of operating room time and a shortage of hospital beds

4. Emergency rooms are overcrowded, due in part to the unavailability of after-hours clinics

5. People who need LTC tend to wait in hospitals because of a shortage of beds in LTC facilities

6. Technology-intensive services are not available everywhere

7. The demand for services exceed the supply, resulting in rationing

8. Some essential services (such as prescription drugs for chronic illnesses) are not covered by Medicare

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Learning Objective 1 - Plan Provisions
Health Benefits in Canada

27. Categories of expenses commonly covered by private (supplemental) medical plans in Canada

1. Hospital charges - plans usually pay charges for room and board, up to the amount needed to upgrade to a semi-private or private room

2. Prescription drugs - these represents approximately 70-75% of the cost of private medical plans. Various plan designs exist, but they generally cover all drugs prescribed by a physician.

3. Health professional practitioners - eligible expenses are usually subject to inside limits (such as one treatment per day and a maximum number of treatments per year)

4. Miscellaneous expenses - these are usually eligible only if prescribed by a physician and included almost any insurable expense not otherwise covered, such as ambulance, x-rays, and prostheses

5. Vision care - eye examinations by an optometrist are usually included in the medical plan, while glasses or contact lenses may be included in either the medical plan or on a stand-alone basis

6. Out-of-country coverage - the most common coverage is for emergency care for short trips outside Canada

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Learning Objective 1 - Plan Provisions
Group Life Insurance Benefits

28. Types of group life insurance benefits

1. Basic group term life (most common) - provides employees a common level of basic insurance protection (see separate lists of plan designs and disability provisions)

2. Group supplemental (or optional) life - provides additional insurance beyond basic group term life. Typically employee-pay-all with unisex rates in 5-year age brackets.

3. Group accidental death and dismemberment (AD&D) - typically offered as a companion to group term life and with the same face amount. 100% of the face amount is paid upon death or loss of more than one member (hand, foot, sight of an eye). 50% is paid upon loss of one member.

4. Dependent group life - multiple coverage options are usually provided, offering coverage of up to $100,000 on the spouse and $10,000 on each child.

5. Survivor income benefits - provides a monthly payment in lieu of a lump sum death benefit. Benefit is typically a percentage of monthly earnings, such as 25% for a spouse and 15% for a child.

6. Group permanent life - plan types are single-premium group paid-up life, group ordinary life, and group term and paid-up

7. Group universal life (GUL) - consists of a term life component and a side fund that accumulates with interest to provide tax-favored savings and long-term insurance protection

8. Group variable universal life - same as GUL except several investment options (including equities) are available

9. Living benefits (described in separate list in Skwire Chapter 24)

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Learning Objective 1 - Plan Provisions
Group Life Insurance Benefits

29. Typical basic group term plan designs

Typical basic group term plan designs. To minimize adverse selection, none of these designs allow individual selection of insured amounts.

1. Flat dollar plans - such as $10,000 for all employees

2. Multiple of earnings plan (most common design) - such as 1 or 2 times earnings

3. Salary bracket plans - salary ranges are established and benefits vary by range

4. Position plans - benefits vary based on the employee's position in the company (e.g. hourly vs. non-officer management vs. officers)

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Learning Objective 1 - Plan Provisions
Group Life Insurance Benefits

30. Group term life disability provisions

Group term life disability provisions. Most plans contain one of the following:

1. Waiver of premium - coverage continues without premium payment when an employee becomes totally disabled, as long as he or she is less than a certain age, typically 60 or 65.

2. Total and permanent disability - a monthly benefit is paid when an insured becomes totally and permanently disabled. On death, the original death benefit is reduced by any disability payments made.

3. Extended death benefit - pays the death benefit if the insured's coverage terminates upon total disability prior to age 60 and the insured remains disabled and dies within one year