Insurance Overview
Type of Insurance
There are many types of insurance plans available to consumers today. The most common are commercial, Medicaid, and Medicare plans.
Commercial Health Insurers1
Most commercial health plan members are enrolled in managed care plans. These plans differ from standard indemnity plans. Indemnity plans offer coverage for named services without significant preconditions. Managed care plans establish specific conditions under which members may receive benefits; for example, a given medication may be covered only for patients with a certain diagnosis. Most commercial health insurers offer many versions of the same plan; each version has differing benefit structures, covered services, and patient cost-sharing expense. An HMO and a PPO are examples of plan types (Health Maintenance Organization and Preferred Provider Organization).
- Health Maintenance Organizations (HMOs). An HMO provides care through a defined network of physicians, hospitals, and other healthcare providers. Individuals enrolled in an HMO generally cannot receive covered services outside the provider network. They typically select a primary care physician, who makes referrals to specialists when necessary. The HMO usually does not pay for visits to specialists without a referral, or for nonemergency care received from providers that are not designated by the HMOs
- Preferred Provider Organizations (PPOs). PPOs are similar to HMOs but will generally provide coverage for services provided outside the network. Individuals who go out of network for care typically are responsible for higher cost sharing than they would otherwise be if they received the care in-network. Unlike an HMO, an individual enrolled in a PPO generally may see a specialist without first obtaining a referral from a primary care physician
Medicaid1
Medicaid is a program for low-income and medically needy individuals, which is administered by each state's Medicaid agency. Medicaid programs are operated with both federal and state funding. Each state defines its own benefit structure and payment rates, which can vary from year to year. Covered services, program eligibility requirements, and reimbursement rates vary from state to state.
Like Medicare, Medicaid assistance is provided via traditional Medicaid fee-for-service plans or through one or more types of managed care plans.
Medicare1
Medicare is the federal health benefits program that is available to the aged and disabled. Most people over the age of 65 are eligible to join; people with permanent disabilities and end-stage renal disease may also qualify.
Who is eligible for Medicare?2
An individual who may be covered by Medicare:
- Is age 65 or older and eligible for Social Security
- Is under age 65 and permanently disabled and has received Social Security disability benefits for at least two years
- Has permanent kidney failure and is receiving continuing dialysis or needs a kidney transplant
- Has amyotrophic lateral sclerosis (ALS, or Lou Gehrig's disease)
What does Medicare cover?
Traditional Medicare
There are four types of traditional Medicare coverage: Part A, Part B, Part C, and Part D.
Medicare Part A1:
This is part of the fee-for-service program. The following services are covered subject to medical necessity and other terms of coverage:
- Hospital inpatient care
- Some skilled nursing facility care
- Home healthcare
- Hospice care
Individuals receiving Social Security benefits receive Medicare Part A automatically. Although there is a Part A deductible and coinsurance, there is no premium.2
Medicare Part B1:
This is part of the fee-for-service program. The following services are covered subject to medical necessity and other terms of coverage:
- Doctors' services
- Outpatient hospital care
- Home health visits not covered under Part A
- Drugs administered incident to a physician's professional services (eg, chemotherapy drugs, other infused or injected drugs, and certain oral chemotherapy and antiemetic drugs)
- Laboratory tests
- Radiology services
- Durable medical equipment (eg, portable oxygen and wheelchairs)
- Prosthetic devices (eg, enteral or parenteral nutrition or artificial limbs)
- Preventive services (eg, colorectal cancer screening, mammograms, and prostate cancer screening)
- Outpatient therapy
- Mental healthcare
- Ambulance services
Individuals entitled to Medicare must enroll in Part B to receive these optional benefits. There is a Part B premium, as well as an annual deductible and coinsurance.1
In 2009, the premium is determined by an individual's income and can range from $96.40 to $308.30 per month. The annual deductible is $135, and coinsurance is 20% of the allowable amount for most items and services. An individual may purchase a separate Medigap plan from a private insurance company that will cover some or all of the Part B deductible and coinsurance.1
Medicare Part C1:
The Medicare program provides for the creation of Medicare Advantage Plans. These are Medicare plans operated by private contractors that replace the beneficiary's Part A and Part B fee-for-service coverage. Once the beneficiary joins a Medicare Advantage plan, the member is subject to the coverage provision and policies of that plan, which may differ from the fee-for-service program.
A Medicare Advantage plan may offer replacement coverage for Part A and Part B only, or Parts A, B, and D. If the plan does not offer to replace Medicare Part D, then the member may enroll in a separate Medicare Part D plan.
There are also some specific Part C plans designed to address special needs:
- Special Needs Plans. Medicare Special Needs Plans are designed to meet the needs of people with certain chronic diseases and other specialized health needs. These plans are required to provide all healthcare and services available under Medicare Part A and Part B and for patients who have both Medicare and Medicaid. These plans are also required to provide Medicare prescription coverage (replace Part D). Unlike the fee-for-service Medicare plan, these plans offer supplemental benefits and may have lower cost-sharing expense
- Medicare Medical Savings Accounts (MSAs). MSAs are a new option beginning in 2007. An MSA is a consumer-driven plan that combines a high-deductible plan with a medical savings account that beneficiaries can use to manage their health care costs. These plans provide increased freedom over healthcare utilization but higher initial costs
Medicare Part D:
The part of the Medicare program covers prescription drugs not covered by Medicare Part B.1 Very few prescription drugs are covered by the Medicare Part B program, only those drugs that are designated for coverage by Congress.
Medicare beneficiaries must enroll with a Part D plan to receive this optional benefit. The only exception is beneficiaries enrolled in a Medicare Advantage (Part C) plan that replaces a separate Part D plan; these beneficiaries will receive their Part D benefits from the Medicare Advantage plan.
Premiums, deductibles, coinsurance, formularies, and coverage requirements vary significantly from one Medicare Part D plan to another. After a person who is enrolled in Part D spends $4350 out-of-pocket for Part D covered prescription drugs (in 2009), Medicare Part D will pay 95% of covered drug costs.
Individuals with income and assets below a preset threshold are entitled to a low-income subsidy, which covers some or almost all of the beneficiary's out-of-pocket expense.1,3