Types of Insurance Plans

Major Medical (Traditional Health Plans)
A policy designed to reimburse the insured for excess medical expenses in and out of the hospital. The policy usually includes a deductible, a coinsurance clause and an aggregate limit.

Managed Care Plans (HMOs and PPOs)

Health Maintenance Organizations (HMOs)

An entity with four essential characteristics:
an organized system for providing health care in a geographic area,
delivering an agreed upon set of basic and supplemental health maintenance and treatment services mental health maintenance and treatment services
to a voluntarily enrolled group of persons
for which services the HMO is reimbursed through a predetermined and periodic prepayment made by or on behalf of each person or family unit enrolled in the HMO, without regard to the amounts of actual services provided.

What is Managed Care?
The term "managed care" refers to a variety of techniques used by health plans to manage both the cost and the quality of health care services for their members: Delivering the right care at the right time, in the most cost-effective setting.

HMOs and PPOs are referred to as managed care plans because they use the broadest array of techniques to manage costs and medical services. While HMOs and PPOs differ, these are some of the most common techniques they both use to manage cost and quality:
HMOs and PPOs contract with doctors, hospitals and other health care providers, using specific criteria to determine which providers will participate in their network.
HMOs and PPOs design their benefits to encourage plan members to use the plan provider network.
HMOs and PPOs use a utilization review program to manage the care provided and control the plan's total medical expenditures.
Some HMOs and PPOs have a drug formulary that limits coverage to those drugs in the formulary.

How Do HMO and PPO Plans Differ?
If you have the option of choosing from two or more plans, you should consider some of the differences between them. Aside from the obvious differences in covered benefits, benefit levels (how much the plan pays), and premiums, the following are some points on how plans may differ from one another.

Utilization Review (UR) Programs
Both HMOs and PPOs manage their members' use of medical services to make sure that only necessary treatments are received and services are provided in a medically appropriate and cost-effective manner. UR programs use established medical review criteria to determine whether the plan will "certify" (authorize) a requested services, continue to provide coverage for on-going treatment or pay for a service that has already been received.
Plans differ in how they approach UR. Some plans' UR program requires providers to contact the plan for most approvals, other plans leave some of the individual UR decisions to the provider.
Plans also differ in the medical information and criteria used to guide approval decisions.

Provider Network Requirements
Requiring or encouraging members to use network providers enables plans to negotiate discounts on behalf of members, thus keeping costs down.
Member cost is greater for care received outside of the plan network, but the difference between benefits in and out of network varies by plan.
Traditional HMO plans require use of network providers in order for benefits to be paid.
HMO Point-of Service (POS) plans must cover certain services (defined by the plan) when received out of network.
PPO plans must cover all services when received out of network.
No health plan may require use of a network provider in an emergency situation.

Referrals to Specialists
Managed care plans may require members to see their PCP before seeing a specialist, so that the PCP may decide whether they can treat the condition themselves or whether specialty care is needed. A PCP can also make sure that the referral is made to a network specialist and make a recommendation for a particular physician.

Referral requirements are more common in HMOs than in PPOs. Most HMOs in North Carolina require PCP referrals

Preferred Provider Organizations (PPOs)

A group of health care providers, each of whom agrees to offer services to a given employer or insurer at a lower cost in return for a stable volume of patients or other incentive(s)

Group (Contact employer to determine your status)

Insured
Group insurance programs designed to offer affordable health coverage to a natural group, such as employees of an employer or members of an association and their families. A single contract is provided for the entire group which outlines the standard benefits, terms and provisions that apply to all members of the group. Individual certificates are usually issued to the members to verify that they are covered.

ERISA
When an employer decides to fund and administer his/her own employee benefit plan instead of using outside sources. Employee benefit plans are regulated by the U.S. Government by means of the Employees' Retirement Income Security Act (ERISA) of 1974.

Small Group and Self-Employed

North Carolina's Small Employer Group Health Coverage Reform Act was enacted in 1992. The purposes of the Act were to promote the availability of accident and health insurance to small employers, to eliminate abusive rating and underwriting practices, and to improve the fairness of this marketplace.

Insurers are required to offer without regard to health status the Standard and Basic health plans to small groups and self employed individuals in order to sell coverage in the small group market. This includes coverage for all eligible employees and their dependents. The Department has designed and requires all insurers to offer the same benefits in the Standard and Basic health plans according to the type of the insurer. Therefore, benefits will be the same within each insurer type regardless of the insurance carrier.

All insurers who are actively marketing small group health insurance in North Carolina must quote a small group rate on all plans that the insurer offers in the small group market, if the small employer is within the insurer's service area. Further, the insurer may not refuse to issue the coverage to a small employer except for stated reasons, including when the group is outside the insurer's service area or when the group fails the insurer's participation or contribution requirements. This requirement does not apply to self employed individuals who have guaranteed access to the Standard and Basic plans only.. Please remember that although a self employed individual may not be offered all plans an insurer is marketing in the small group market, he must at least be offered the Standard and Basic health plans.

The definition of small employer in North Carolina is any individual actively engaged in business that, on at least 50% of its working days during the preceding calendar, employed no more than 50 eligible employees, the majority of whom are employed within this State and is not formed primarily for insurance purposes.

The definition of a self employed individual is an individual or sole proprietor who derives a majority of his or her income from a trade or business carried on by the individual or sole proprietor which results in taxable income as indicated in IRS form 1040, Schedule C or F and which generated taxable income in one of the two previous years.

An insurer must confirm that an applicant is a small employer and/or a self-employed individual. Therefore, an insurer will most likely request appropriate tax forms and other information which will identify the number of eligible employees, where they are employed, and any affiliated employers during the application process and may refuse to issue coverage if proper proof is not provided.

Limited or Supplemental Health Insurance

Health Insurance designed to provide coverage for medical expenses not covered by the primary policy or by Medicare.

Dental
A type of health insurance sold on an individual or group basis that will provide benefits for care and treatment of the teeth and gums. Benefits vary from policy to policy as some may cover 100% of preventative care (such as semi-annual check-ups, fluoride treatments, etc.) while others may only cover a portion of preventative care. There is normally an annual benefit maximum for preventative care services. However, benefits for orthodontic procedures (e.g. braces, retainers, etc.) are normally extremely limited and have a lifetime benefit maximum.

Cancer
A form of health insurance that will only pay when the insured person is diagnosed with a covered cancer. The benefits may be paid as an indemnity amount (scheduled benefit rate) or based on the actual expenses incurred for the treatment. Benefits under these types of insurance plans are normally paid directly to the insured person in lieu of the medical provider. Insurance may be sold on an individual or group basis.

Accidental Death and Dismemberment
This type of insurance will provide benefits in the event death results from a covered accident. Further, benefits are paid if there is a loss of two limbs, or sight of both eyes. Reduced benefits are normally payable for loss of one limb or of sight in one eye as well as loss of a foot or hand.