Medical Expense Insurance and Managed Care
Coverage Types
Medical expense insurance pays for the cost of care. Know basic medical expense coverage (hospital, surgical, physician) versus major medical coverage with higher limits and broader benefits. Understand deductibles, coinsurance (the insured's share, often 20%), copayments, out-of-pocket maximums, and internal limits. Know indemnity (fee-for-service) plans versus managed care models: HMO (closed panel, primary care gatekeeper, generally no out-of-network coverage except emergencies), PPO (network with out-of-network benefits at higher cost), and POS (point-of-service, a hybrid allowing out-of-network care with a referral).
Know utilization review (precertification, concurrent review, discharge planning), case management, and provider payment methods such as capitation, per diem, and discounted fee-for-service.
Traps in Questions
- Coinsurance vs. copay. Coinsurance is a percentage; a copay is a fixed dollar amount.
- Deductible application. The deductible generally applies before coinsurance; the out-of-pocket maximum caps the insured's total share.
- HMO vs. PPO. HMO generally requires a PCP referral and does not pay out-of-network non-emergency care; PPO pays out-of-network at reduced benefit.
- Precertification. Failure to precertify may reduce benefits, not necessarily void coverage.
Worked Example
A plan has a $1,000 deductible, 80/20 coinsurance, and a $5,000 out-of-pocket maximum. A $21,000 covered claim: insured pays $1,000 deductible, then 20% of the remaining $20,000 = $4,000, total $5,000-exactly at the out-of-pocket maximum, so the insurer pays $16,000.
Rule of Thumb
Compute deductible first, then coinsurance on the remainder, then apply the out-of-pocket cap.