8. Terms of payment for medical expense plans

But I Paid My Premiums!

Besides possibly paying the premiums for a medical insurance plan, the insured is almost always responsible for making other, out-of-pocket payments. This practice helps keep overall costs down for both insureds and the insurance companies and ensures that insureds are informed about the costs of health care.

For each of the following scenarios, select which type of other cost or provision is illustrated.

Alex has had an illness and an accident during the year. His combined out-of-pocket expense for both incidents was $1,000. The insurance company will now start to pay some of his medical expenses. What does the $1,000 represent?

Coordination of benefits

Deductible

Participation (co-insurance)

Internal limits

Brians been hospitalized for an illness. His insurance company has started paying 90% of covered medical expenses. What does the 10% of expenses Brian will have to pay out of his pocket represent?

Coordination of benefits

Participation (co-insurance)

Deductible

Internal limits

Crystal has standard, personal medical insurance. After a recent accident, she visited the emergency room. One of the questions on the admission form asked if the accident occurred at work.

Internal limits

Participation (co-insurance)

Deductible

Coordination of benefits

Edison suffered a profound knee injury. Edison lives in a remote part of the country and depends on being in excellent physical condition to work. Edison has decided to be extra cautious when having his knee repaired. He is going to a major orthopedic hospital 2,000 miles away and having his surgery performed by one of the top 10 knee specialists in the country. He already knows that claims for the hospital services and the surgeon will exceed the reasonable and customary charges for his area. Edison is willing to pay extra for the peace of mind of knowing he received extraordinary care.

Participation (co-insurance)

Coordination of benefits

Deductible

Internal limits

Hilary, a veterinarian, is 24 years old and has owned a major medical insurance policy for three years. The policy, which she purchased through her trade association, provides the following coverage:

	a $2,000,000 lifetime limit
	a $500 deductible and 80% coinsurance clause
	internal limits of $500 per day for a semi-private room and board, $5,000 per occurrence for x-rays, prescription drugs, and other medical expenses, and a $25,000 maximum limit per occurrence on surgical procedures
	a $25,000 limit per occurrence on rehabilitation and physical therapy
	if a hospital charges a room rate that is greater than the policys stated internal limit, the hospital agrees to reduce the room rate to the policys internal limit.

Last month, Hilary was injured was injured by lightening while delivering a calf in a farmers field. She spent 5 days in the hospital in a room that cost $750 per day, incurred $4,000 for other medical expenses, and $22,000 in surgical expenses.

Given these claim costs, complete the following table and answer the related questions

	Policy Limit	Total Claim
Hospital charges	$500 per day
Surgery costs
Other medical costs
Rehabilitation and therapy costs
Deductible
Co-insurance percentage	%
Total cost of claim		Based on this data, the total cost to the insurance company is , while the out-of-pocket cost to Hilary is . How much did Hilary save by having her medical insurance policy? Assume that the hospital changed its payment policy to make the patient responsible for the difference between the hospitals room rate and the insurance companys responsibility ($750 per day versus $500 per day). By how much would Hilarys out-of-pocket cost for her hospital room change due in hospital billing ? Hilarys costs would increase by $750. Hilarys costs would increase by $1,250. Hilarys costs would increase by $500.