Module 7 - Managing Extended Health Care Benefits Flashcards
(36 cards)
Outline the common features of group EHC plans.
Group EHC plans commonly include these features:
(a) Expenses are limited to those that are medically necessary, which may include a requirement for a referral by a physician.
(b) Reimbursement is limited to the cost that is reasonable and customary for a specified service or product within a region.
(c) Eligible expenses may be subject to a limit or maximum, including the incorporation of cost-sharing measures such as deductibles and coinsurance.
(d) Covered expenses may include costs for hospital, drugs, private duty nursing, paramedical practitioners, professional licensed ambulance, out-of-country or out-of-province/territory services, travel assistance, vision care, hearing aids, accidental dental and miscellaneous medical supplies and services.
Explain why a benefits schedule for a group EHC plan differs from a benefits schedule for group life insurance and group disability benefits.
A benefits schedule for a group EHC plan differs from a benefits schedule for life insurance and disability benefits because an EHC plan includes a multitude of benefits, each with its own provisions. The benefits schedule may include deductibles, coinsurance and maximums per covered individual. Claims are adjudicated in accordance with the benefits schedule, and eligible claims expenses are limited to reasonable and customary charges. In contrast, in life and disability benefits schedules, the range of benefits payable is narrower, benefit amounts are predetermined, and provisions like deductibles and coinsurance are not included.
Contrast an annual deductible and a per prescription deductible.
An annual deductible can be applied on a calendar-year basis, from January 1 to December 31. Some plans administer an annual deductible based on plan year. For example, if the plan year begins on April 1, the deductible is applied during the period April 1 to March 31. A per prescription deductible applies to drug benefits and applies each time a prescription is filled. If the drug plan includes a pay-direct drug card, it is applied at the point of purchase. If the drug plan is on a reimbursement basis, the deductible reduces the reimbursement amount. A per prescription deductible can also be in the form of a dispensing fee deductible, with the amount of the dispensing fee deducted from the reimbursement amount.
Explain how split coinsurance (sliding coinsurance) is applied in group EHC plans.
The coinsurance percentage under group EHC plans typically ranges from 50% to 100%. For plans with less than 100% coinsurance, the plan member pays the balance. For example, in a plan with 80% coinsurance, the plan member pays 20%. With split coinsurance, eligible expenses are subject to a coinsurance below 100% until the plan member incurs and pays a certain amount of eligible expenses (referred to as the “out-of-pocket maximum”). After that, the plan pays 100% of all eligible expenses for the remainder of the contract year. Out-of-pocket maximums are added protection to covered individuals who incur significant claims due to serious medical conditions.
Describe the types of benefit maximums that may be included in group EHC plans and provide examples.
Two types of benefit maximums may be included in group EHC plans—internal limits (also known as “inside limits” or “internal maximums”) and overall maximums. Internal limits are benefit maximums applied annually, every two years, over the eligible individual’s lifetime, or some other frequency, depending on the type of expense. For example, vision care benefits may be subject to a two-year maximum, hearing aids to a five-year maximum and out-of-country benefits to a lifetime maximum. Internal limits protect the health care plan from overutilization or disregard for the cost of benefits. An overall maximum may apply to total benefits payable. The most common type of overall maximum is the lifetime benefit applicable to out-of-Canada emergency medical claims. For example, a lifetime maximum of $1,000,000 may apply to all eligible out-of-Canada expenses reimbursed from the time of the plan member’s entry into the plan until their coverage ends.
Explain how reasonable and customary charges are applied in group EHC plans.
Most group EHC plans pay eligible health care services on the basis of a reasonable and customary charge (or reasonable and customary maximum) for the specific service or procedure. Each insurer sets a schedule that lists this limit and uses it to determine the maximum eligible expense for a particular service or procedure. Generally, a reasonable and customary charge falls within the range of fees normally charged in a geographic location for a given service, treatment or procedure performed by eligible health care professionals who have similar education and experience. Insurers usually define a “reasonable and customary charge” to be the lowest of:
(a) A price that is common in the area where the treatment was provided
(b) A price published in a fee guide for a given professional association
(c) The maximum price established by law.
Identify how insurers generally define “hospital” in a group EHC plan.
The general definition of a hospital in a group EHC plan is a public facility that:
(a) Is licensed to provide care or treatment for sick or injured patients, primarily while they are acutely ill
(b) Has facilities for diagnostic treatment and major surgery
(c) Provides 24-hour nursing services.
Identify hospital expenses that may be covered in a group EHC plan.
For a Canadian resident, the provinces and territories cover basic hospital and surgical expenses including accommodation at the ward level, services of physicians and surgeons, diagnostic procedures and drugs administered while an inpatient. EHC plans cover only the additional cost of accommodation above ward accommodation (i.e., semiprivate room or private room). Plans that cover the difference between semiprivate (or private) and ward accommodation may apply a dollar maximum or maximum duration.
Plans exclude facilities that are custodial in nature, such as nursing homes, rest homes, and homes for the aged or chronically ill. Some EHC plans cover care in a convalescent hospital, nursing home or rehabilitation hospital, generally subject to a minimal daily dollar maximum and a maximum duration. Plans define a convalescent hospital, nursing home or rehabilitation hospital as a place that:
(a) Has a transfer arrangement with hospitals
(b) Provides nursing care for the convalescent period of an injury or illness in accordance with minimum provincial/territorial regulations.
Describe the conditions that drugs and medicines normally must meet to be covered in a group EHC plan.
EHC plans normally cover only drugs and medicines that:
(a) Are medically required
(b) Are prescribed by a physician or dentist. (More professions are being permitted to prescribe drugs, such as pharmacists, nurse practitioners, optometrists and midwives.)
(c) Have a drug identification number (DIN)
(d) Are dispensed by a registered pharmacist.
Contrast elements of a group EHC plan designed on a prescription drug basis and a group EHC plan designed on a prescribed drug basis.
A group EHC plan designed on a prescription drug basis generally only covers drugs that legally require a prescription. This coverage typically includes drugs prescribed by a physician or dentist (and increasingly other professions such as pharmacists, nurse practitioners, optometrists and midwives) and dispensed by pharmacist, if a prescription is normally required by convention. Examples of such drugs that a plan may consider eligible for coverage if prescribed by an approved professional include injectable drugs, serums and vaccines used to prevent diseases and administered by a qualified individual, oral contraceptives, and life-sustaining drugs for the treatment of specified ailments (e.g., diabetes). This is the most common approach.
While this is increasingly rare, some plan sponsors offer “prescribed drug” plans. A “prescribed drug” plan is more liberal than a “prescription drug” plan because it covers over-the-counter drugs that would not normally require a prescription, if they are prescribed by a physician or dentist and dispensed by a pharmacist.
Explain how generic substitution usually operates under a prescription drug plan, and contrast it with therapeutic substitution.
When plan members purchase a brand-name drug and a generic substitute is available, a generic substitution provision allows insurers to reimburse only up to the cost of the generic drug. A generic equivalent drug is a drug with the same active ingredients as the brand name, usually available at a lower cost. There are generally two types of generic plans available:
(1) Voluntary generic substitution. Payment is based on the generic equivalent unless the physician indicates “no substitution” on the prescription.
(2) Mandatory generic substitution. Payment is based on the generic equivalent even if the physician indicates “no substitution” on the prescription. In practice, this type of plan usually has an exception process built in for members who require the brand-name drug for medical reasons (such as adverse reaction to the generic), but reimbursement is subject to the insurer’s approval.
Therapeutic substitution programs cover only drugs within the same therapy class as the prescribed drug but that are less expensive. Drugs with different active ingredients but the same therapeutic classification as those prescribed are included in therapeutic substitution lists, and the actual prescribed drug is replaced with one from the substitution list. Typically, targeted drug classes are those with high utilization of brand-name drugs and at least one generic drug in the therapeutic class. Operating a therapeutic substitution program requires a managed formulary where the clinical teams of the insurer monitor drugs currently offered and those coming to market to maximize these substitution opportunities.
Describe case management programs, preferred pharmacy networks and specialty drug programs.
Case management programs are based on a disease management model and provide support for plan members or their dependents who are being treated for chronic diseases with high-cost medications. These programs are not drug specific; rather, they focus on the medical condition. They provide a single point of contact to each plan member to ensure that they are taking the right drug, they understand their treatment plan and expected results, and they adhere to their treatment.
A preferred pharmacy network (PPN) enables covered individuals to obtain prescription drugs from participating providers based on predetermined charges or discounts negotiated between the PPN and the insurer or plan sponsor. Insurers, advisors, third-party administrators (TPAs) and plan sponsors partner directly with pharmacies to offer preferred dispensing fees and/or drug ingredient costs to plan members.
Specialty drug programs are offered on either a mandatory or optional basis to plan members who have been prescribed high-cost specialty drugs (varies by insurer).
Describe the three methods of drug claim payment.
(1) Reimbursement: The plan member pays the pharmacist when the prescription is filled and then submits a claim to the insurer for reimbursement.
(2) Pay-direct drug card: The covered individual presents a drug card to a participating pharmacist at the point of purchase and pays for any deductible and/or coinsurance. A “participating pharmacist” is a pharmacist with whom an insurer and/or a drug network provider has a contractual agreement to provide drugs to covered individuals on specified terms. The pharmacist charges the insurer directly for the balance and the insurer pays the pharmacist directly. With electronic claims adjudication, a pay-direct drug claim can be paid in real time.
(3) Deferred drug card: This approach is similar to a pay-direct drug card, except that the plan member pays the entire cost at the point of purchase and is later reimbursed by the insurer (or other provider). The reimbursement process is simplified for plan members because they do not need to submit a form for reimbursement. Insurers generally reimburse after a certain dollar amount or time period threshold (e.g., $50 or 30 days).
Explain the purpose of a drug utilization review (DUR) and describe how it works.
Insurers can use a DUR to monitor the prescription drugs that plan members use. Prescription drug information is entered at the point of purchase and reviewed against prescription history and other data to identify potential drug therapy problems and pharmacies’ dispensing practices. A DUR can flag drug interactions, duplicate therapy, duplicate drugs, premature refills and potential adverse reactions. If a DUR reveals that filling a prescription may pose a health hazard, the pharmacist receives an online message and then contacts the plan member or their physician.
Describe private duty nursing care coverage that may be provided in a group EHC plan.
A group EHC plan may offer benefits for private duty nursing care or in-home nursing care (i.e., nursing care to a covered individual who is not in a hospital). Coverage generally only applies for nursing care that is recommended by a physician and performed by a registered nurse (RN) who is not related to the covered individual and does not live in that individual’s home. Plans may allow coverage for other types of less expensive nursing care by licensed or registered practical nurses, registered nursing assistants or members of the Victorian Order of Nurses, or they may cover RN services only if a less qualified nurse cannot provide the level of care required. There is usually a benefit maximum for a specified period (e.g., $5,000 to $25,000 per calendar year). This benefit is not usually subject to the plan deductible and coinsurance amounts.
Describe paramedical practitioners coverage that may be provided in a group EHC plan.
Paramedical practitioners include psychologists, physiotherapists, chiropractors, massage therapists, speech therapists, osteopaths, podiatrists and chiropodists. These benefits are generally subject to the plan’s deductible and coinsurance. Benefit maximums range from $300 to $1,000 per type of practitioner, with the most common maximum at $500. Plans can implement combined annual maximums in addition to or in place of these per practitioner maximums.
While plans traditionally covered some of these services (e.g., psychologist, physiotherapist, speech therapist and massage therapist) only if recommended by a physician (a “referral”), in most cases this requirement no longer applies.
Describe emergency out-of-country or out-of-province/territory coverage that may be provided in a group EHC plan.
Out-of-country or out-of-province/territory benefits in a group EHC plan cover expenses required when a medical emergency occurs while the covered person is temporarily travelling outside Canada or their province/territory of residence for any reason. There are usually limitations on the number of days plans cover, ranging from 60 to 180 days per trip and subject to a fixed dollar maximum. Some insurers do not impose a maximum time period, providing coverage as long as provincial/territorial coverage remains in place. Benefits are payable only if an individual has provincial/territorial health insurance plan coverage or equivalent coverage (e.g., the individual has coverage under an inpatriate benefits plan while waiting for provincial/territorial coverage). The definition of “medical emergency” varies by insurer, but generally involves a situation that results from an accidental injury or an unforeseen acute illness. The individual must have been medically stable, typically for a 90-day period before travel, for the plan to cover treatment.
Identify types of coverage that may be provided in a group EHC plan for emergency out-of-country or out-of-province/territory expenses.
Coverage for out-of-country or out-of-province/territory expenses may include:
(a) Treatment provided by a physician
(b) Diagnostic x-rays and laboratory services
(c) Hospital accommodation, usually in a standard ward or semiprivate room, or intensive care unit, if required
(d) Medical and paramedical supplies and services provided during hospitalization
(e) Hospital and nursing services and medical supplies provided on an outpatient basis
(f) Medical evacuation.
Identify coverage that may be provided in a group EHC plan for vision care and hearing aids.
Vision care benefits pay for eyeglasses, including frames and lenses, as well as contact lenses. Plans usually exclude safety glasses, prescription sunglasses and antireflective coatings. They may include coverage for laser eye treatment. Benefit maximums typically range from $200 to $300 every 24 months, with some plans providing coverage every 12 months for dependent children under age 18. Vision care benefits are not normally subject to deductible or coinsurance, given the low benefit maximums. Most vision care plans also cover eye exams once every 12 or 24 months when the provincial/territorial plan does not cover these expenses, subject to either a fixed dollar maximum or the reasonable and customary charge.
Plans may cover the cost of hearing aids, including repair when recommended by a general practitioner or an otolaryngologist, also called an ear, nose and throat (ENT) specialist. The benefit dollar maximum usually applies to a longer period of time than for other health benefits, for example, three to five years. This benefit is normally subject to deductible and coinsurance.
Identify coverage that may be provided in insured and self-insured group EHC plans for plan members who become totally disabled.
Insured group EHC plans may include a provision to continue coverage for an eligible plan member who becomes totally disabled, as defined in the group insurance contract. Coverage may continue with payment of premiums, although some insurers waive the premiums. If the plan sponsor terminates the group contract when an insured person is totally disabled, benefits usually continue to be paid for eligible health care expenses related to the total disability for a maximum period after the date of termination, usually from 90 days to one year, while the person remains totally disabled.
Self-funded administrative services only (ASO) plans can offer the disabled plan member provision at the plan sponsor’s discretion. The plan sponsor covers the cost to extend health coverage for disabled plan members.
Describe the types of exclusions and limitations typically included in a group EHC plan.
Group EHC plans are integrated with hospitalization and other medical services and supplies covered by government plans, and these plans do not pay for claims relating to benefits that Workers’ Compensation (WC) covers. Exclusions and limitations apply when the payment is:
(a) Prohibited by law
(b) For any services or supplies that a covered individual may obtain as a benefit under any provincial/territorial health insurance plan, or any other governmental plan such as Workers’ Compensation
(c) For any services or supplies that would have been provided at no charge in the absence of coverage
(d) For any services and supplies associated with a covered item but not specifically listed as eligible for coverage in the group contract
(e) For services and supplies received outside of Canada, except for those covered and provided under the out-of-country provision in a group contract
(f) For expenses resulting from intentional self-inflicted injury, the commission of a criminal act by the covered individual, an act of war, voluntary participation in an insurrection or riot, or injuries suffered while serving in the armed forces
(g) For experimental drugs and medical procedures or treatments.
Contrast the use of plan member premium contributions to the use of deductibles as a cost-containment approach for group EHC plans.
One example of cost sharing is a requirement that plan members contribute toward the premium cost of a plan. In this case, all plan members share in the cost of the plan regardless of whether or not they use it (i.e., whether or not they make a claim). Plan members make their contributions through payroll deductions. Contributions may be a percentage of the total insurance premium or a fixed dollar amount. The drawback to this approach is that plan members may view their contribution as an investment and use the plan more than they otherwise would have, so they get more back in reimbursed claims than they pay in premiums.
Deductibles mean plan members participate in the actual cost of an expense that they or their dependents incur; they apply only to insured individuals who make a claim. Deductibles may inhibit unnecessary use of plan benefits and the submission of claims for very small amounts. They reduce premiums for a given set of benefits because the plan pays less of the cost. Premium savings eventually pass to the plan sponsor (and plan members, to the extent they pay part of the premium cost), although the effect is really to shift some of the cost burden from the plan sponsor to the plan member. Deductibles are equitable in the sense that the amount that insured individuals pay is related to the health services they use (i.e., insured individuals who do not use the service do not pay).
Explain why a plan sponsor may choose coinsurance as a cost-containment approach over deductibles.
Deductibles tend to remain at original amounts for long periods; their impact erodes as inflation and utilization increase over time, thereby increasing the plan sponsor’s proportionate share of the cost and reducing plan members’ proportionate share of the cost. This is called deductible erosion. While plan sponsors can increase deductibles, this will be evident to plan members and they may see it as reducing the value of the plan.
Coinsurance builds in changes in inflation and utilization. For example, for a benefit reimbursed at 80%, the plan member must pay the additional 20% regardless of how much costs have increased. The plan sponsor benefits because part of the increased cost is passed to the plan members without the plan sponsor having to communicate an increase.
Outline the main methods available to plan sponsors for funding EHC plans.
The main methods used for funding EHC plans are:
(a) Insured nonrefund (also called “fully insured” or “nonrefund accounting”), either fully pooled or prospectively rated (the rating methodology used by insurers to set premium rates at the annual contract renewal)
(b) Insured refund (also called “refund accounting”)
(c) Self-insured with or without a pooling arrangement to limit financial exposure to higher-than-expected claims.
