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Health Insurance


Health coverage consists of several different components. They are the following:


Deductibles: The number of covered expenses the insured must pay before the plan or insurance contract starts to pay claims for covered benefits.


Annual Coinsurance Maximum: Most policies require the insured to pay some portion of the health care bills. A typical arrangement is after the deductible is meant, the insurer pays 80% and the insured pays 20% up to a set maximum, for example, $2000 of covered expenses. After the maximum out of pocket limit is meant, the insurer pays 100% for covered services for the remainder of that calendar year up to the benefit amount or lifetime maximum.


Out of Pocket Maximum: The maximum amount of money the insured person is responsible for paying during a fixed period, normally one year. This includes the deductible, coinsurance, and any flat dollar copays, including prescription drug copays.


Office Visits for Primary Care and Specialists: A fixed-dollar amount or percentage an insured is required to pay for services at the time of the visit.


Prescription Drug Coverage: A fixed-dollar amount or percentage the insured is required to pay for all or certain prescriptions. Usually, there are tiers such as Generic, Brand and Non- Formulary Coverage.


Urgent Care Copay: Usually a fixed-dollar amount an insured is required to pay at an Urgent Care Facility to pay for services at the time of the visit.


Emergency Room Copay: A fixed-dollar amount an insured is required to pay at the time of an Emergency Room Visit to access the Emergency Room; deductible usually applies to the services received while at the facility.


Covered Expenses: An expense that will be reimbursed according to the terms of the plan or insurance contract.


Exclusions: A limitation contained in an insurance contract under which no benefits are payable.


Coordination of Benefits: Method of integrating benefits payable under more than one health insurance plan, so that the insured's benefits from all sources do not exceed 100 percent of allowable medical expenses.


Preventative Care: Wellness visits, some immunizations, health maintenance exams (routine physicals), well child, mammogram, prostate screening, gynecological exam, select female contraceptives, voluntary female sterilization.


Outpatient Surgery: Surgery performed on a patient who is able to return home afterwards without an overnight stay in a hospital or other inpatient facility.


Outpatient X-ray and Lab: Fees incurred as a result of X-rays or lab tests that are not inpatient hospital fees.


Preexisting Condition: A medical condition which existed before health insurance coverage began. Serious pre-existing conditions often lead to limited coverage (i.e., preexisting condition exclusion) or denial of coverage.


Metal Values and Actuarial Value: Four new metal levels will determine the type of insurance that you can offer to your small group customers: Platinum, Gold, Silver, and Bronze. The Affordable Care Act has aimed to standardize products in the individual and small group markets through “metal levels” both on and off “marketplaces.”


Actuarial Value: The percent of expenses a standard population would expect to pay for essential health benefits under a given plan. For example, a 70 percent AV plan would on average pay 70 percent of expenses for essential health benefits with the enrollee paying 30 percent through a combination of copayments, deductibles, and coinsurance.

Note: Premiums aren’t tied to actuarial values.


Metal Levels: Four “metal levels” are defined by actuarial targets that a qualified health plan must achieve plus or minus 2 percent (for example, 68 percent to 72 percent for silver plans). There are also catastrophic plans for individual members. Products can’t live above, below or between metals. Employer funding of HRA and HSA account impacts AV and must be defined for all CDH plans. The individual market only: “Catastrophic” plans are allowed for young adults (i.e. under age 30) or mandate-exempt individuals due to affordability or hardship.



Rating- All insurance companies are regulated by the Office of Financial and Insurance Services in the state they are writing business and or the Center for Medicare(CMS) and Health Human Services (HHS). All Insurance companies must file rates they intend to charge, with that, they must be approved by the entity in charge.


Insurance premiums are calculated by the following:


Restricted Rating Factors: All insurers are limited to only employing the following modified community rating factors in the individual and small group markets:


1. Age - In 2014, age rating is limited to a 3:1 maximum spread for adults age 21 to 64 (adults older than age 64 receive the age 64 rate). Age rating must be applied at a member level using age rating factors that are prescribed by Health and Human Services. Issuers must build rates for policyholders by applying age rating to each member on a policy (subject to family caps discussed below). But in the small group market, a small employer can still choose to charge its employees a “blended rate” so the premium an employee pays does not vary by age.

Family members under age 21 will have a single age band that will be approximately 60 percent of the rate of a 21-year-old.



2. Tobacco use - The ACA allows insurers to charge tobacco users up to 1.5 times the premium of non-tobacco users. However, in the small group market, if the tobacco surcharge is applied to a participant within the group, the ACA also requires plans to permit tobacco users to earn back the tobacco surcharge by enrolling in a tobacco cessation program. In other words, the tobacco user must have an opportunity to earn the same rate as a nontobacco user.



3. Geography - The State will determine rating regions for the individual and small group markets which will be consistent for each issuer in the state. Issuers have discretion regarding what geographic rating factors are applied within each rating region, as long as the factors are actuarially justified.



4. Family size


  • Issuers must vary rates at a member level, thus varying rates based on whether a plan covers an individual or a family.

  • The member level rating system caps the rate for a family at no more than three children under age 21. For example, if a family of six has four children under age 21, the family will be rated as a family of five, with the youngest child excluded. For the five “billable” members, the age rating factors would be applied at the member level as prescribed in the federal rules.


Member level rating: Rates will be set at a member level for both the individual and small group markets. All subscribers and dependents will be quoted their own rate based on their age. Policies will then be the sum of the individual member rates versus the current composite/ average method. However, in the small group market, a small employer may still choose to offer employees a blended rate such that the “employee share” of premium does not vary at a member level.



Product Types


Preferred Provider Organizations (PPO): An arrangement whereby an insurer offers patients more comprehensive medical benefits if they use a group of medical care providers who have agreed to accept the lower than usual fees from the insurer and to follow certain cost management provisions.


Health Maintenance Organizations (HMO): An arrangement whereby a designated group of medical care providers give care to a group of patients who have voluntarily elected to participate.


Traditional or Indemnity: An arrangement whereby an insurance company offers medical benefits which reimburse patients for medical costs above certain minimum amounts and up to a stated maximum amount.

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