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.

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

Coordination of benefits

Deductible

Participation (co-insurance)

Internal limits

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

Coordination of benefits

Participation (co-insurance)

Deductible

Internal limits

Kyoko 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

Deductible

Participation (co-insurance)

Coordination of benefits

Musashi suffered a profound knee injury. Musashi lives in a remote part of the country and depends on being in excellent physical condition to work. Musashi 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. Musashi is willing to pay extra for the peace of mind of knowing he received extraordinary care.

Participation (co-insurance)

Deductible

Coordination of benefits

Internal limits

Rina, an accountant, is 24 years old and has owned a major medical insurance policy for three years. The policy, which she purchased through her employer, provides the following coverage:

	a $1,000,000 lifetime limit
	a $2,500 deductible and 80% coinsurance clause
	internal limits of $250 per day for a semi-private room and board, $4,500 per occurrence for x-rays, prescription drugs, and other medical expenses, and a $45,000 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, Rina was injured when she was struck by a car while riding her bike to work. She spent 5 days in the hospital in a room that cost $350 per day, incurred $3,850 for other medical expenses, and $32,000 in surgical expenses.

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

	Policy Limit	Total Claim
Hospital charges	$250 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 Rina is

.How much did Rina 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 ($350 per day versus $250 per day). By how much would Rinas out-of-pocket cost for her hospital room change due in hospital billing ?

Rinas costs would increase by $500.

Rinas costs would increase by $150.

Rinas costs would decrease by $500.