Health Insurance

Traditional Fee-For-Service Coverage

Blue Cross-Blue Shield Plans

Health Maintenance Organizations

Preferred Provider Organizations

Point of Service Plans

Current Health Care Concerns

Traditional Fee-For-Service Coverage

BenefitsIndemnityServiceValued policy

Basic benefitsHospitalSurgicalMedical expenses

Traditional Fee-For-Service Coverage - continued

Major medical insurance

Maximum limits

Internal limits

Benefit period

Coinsurance

Stop loss provisions

Limited contracts

Accident of specified illness

Policy Provisions

Coordination of benefits

Continuation provisions

COBRA 1985

Blue Cross-Blue Shield Plans

Not-for-profit organizations

Hospitals and physicians formed these insurance plans

Tax favored organizations

Reimburse hospitals at a discounted rate

Competition for traditional health insurers

Health Maintenance Organizations (HMOs)

Prepaid health care coverage

Incentives of HMOs versus Fee-for-service plans

Advantages/disadvantages of HMOs

Choice of Doctor

Coverage for Checkups and Preventative Care

Out-of-Area Service

Filing Claims

Preferred Provider Organizations (PPOs)

Coverage provider negotiates discounts with doctors and hospitals

Insured can choose PPO for better coverage

Introduces competition into health care

Point of Service Plans (POS)

Hybrid arrangement combining a traditional fee-for-service plan with an HMO and/or a PPO

Whenever health care is required, participant can choose the managed care option or an alternative health care provider

Higher coverage for managed care

Reduced coverage for out-of-network treatment

Fastest growing health care plan for employees

Health Care Coverage - 1

What health care coverage do you have?

A) Own coverage through employer

B) Coverage through a parent’s policy

C) Coverage through the U of I Student Plan

D) Coverage through parent’s and U of I Plan

E) No coverage/I don’t know

Health Care Coverage - 2What type of health care coverage do you have?

A) Traditional fee-for-service or BCBS

B) HMO

C) PPO

D) POS

E) I don’t know

Current Problem Areas

Health care costs

Managed care problems

Physician compensation and control

Health Care Costs in US

• Total health care spending $1.9 trillion (2004)– Up 7.9%, 3 times rate of inflation

– $6,280 per person

– 16% of GDP• Higher than any other industrialized nation

• Other nations provide universal coverage

• 46 million uninsured (at least part of year)• Fastest rising cost for employers

– 11% annual increase 2001-2005

– $10,880 for family, $4,024 for individual (2005)

Managed Care Problems• Getting treatment for serious ailment

– Primary care provider may be reluctant to refer patient to a specialist– Plan may refuse to cover expensive treatment– No coverage for out-of-network care

• Under fee-for-service, physicians were paid only if they provided a service– Problem – over treatment

• Under managed care, physicians have an incentive to keep treatment costs down– Problem – under treatment– Potential conflict of interest for physicians

Physician Compensation and Control

• Starting compensation levels (2006)– General practitioners: $140,000 - 150,000– Specialists (Radiologists, Cardiologists, Orthopedic Surgeons):

$260,000 - 400,000– Financial incentive for physician to become a specialist

• Conflicts between physician and managed care plans– Delays in approving care– Denial of coverage

• Paperwork requirements

• Physician satisfaction levels declining