Chapter 10-

1.Compare Blue Cross and Blue Shield organizations and private insurance companies with respect to each of the following features:
i. Regulation and taxation:
i. in most states the blues are not-for-profit organizations and are regulated under special legislation. ii. The blues are also accorded favorable tax treatment under federal income tax laws

b. Form of benefits provided
Traditionally the Blues offered benefits in the form of services, and insurance companies offered benefits on an indemnity basis. Under the service benefit concept, benefits are expressed in terms of the services provided by the hospitals or physicians participating in the plan rather than in terms of dollar maximums.

c. Types of benefits provided:
Over the years, Blues have specialized in providing basic medical benefits, with Blue Cross providing coverage for hospital expenses and blue Shield providing coverage for surgical expenses and physicians visits. Major medical benefits were rarely available.

d. Reimbursement of providers:
The method by which the blues reimburse providers often gives them a competitive advantage over insurance companies. Most blue cross plans pay participating hospitals on a per diem basis for each day a member is hospitalized. Periodic negotiations with blue cross determine the amount of this payment.

e. Rating
With community rating, each plan uses the same rate structure for all members, regardless of their past or potential loss experience and regardless of whether coverage is written on an individual or group basis.

f. Marketing
The blues tend to have lower acquisition expenses than insurance companies and salaried employees market most coverage. However, more than half of the plans also market coverage through agents and or brokers in addition to their own sales forces.

3. a. What is the difference between a supplemental major medical contact and a comprehensive major medical contract?
Supplemental major medical coverage coordinates major coverage with various basic medical expense coverages. With comprehensive major medical coverage, a single major medical contract covers all medical expenses.

b.Why are supplemental major medical contracts still used?
Supplemental plans continue to cover a large percentage of employees insured under traditional medical expense plans, even though most newly written plans are of the comprehensive type.

5. a. How does the Newborns’ and Mothers’ health Protection Act affect coverage for maternity under medical expense plans?
The act affects maternity benefits if they are provided. It does not mandate that such benefits be included in benefit plans. The act prohibits a group medical expense plan or insurer from restricting hospital benefits to less than 48 hours for both the mother and the new born following a normal vaginal delivery and 96 hours following a cesarean section.

b. How does the Women’s Health and Cancer Rights Act affect exclusions under medical expense plans?
Before the act took effect, such coverage was often not available because of the exclusions, particularly exclusions that applied to cosmetic surgery. This coverage can be subject to deductibles and coinsurance provisions.

7.Why are benefits for mental illness, alcoholism, and drug addictions often carved out of major medical plans?
Under Mental Health Parity Act, employers with more than 50 employees cannot have plans that have dollar limits on mental health benefits less than those applying to other health benefits; the act allows other types of limitations and does not apply to benefits for alcoholism or drug addiction

9. What types of deductibles are found in major medical contracts?
There are two types of deductibles in major medical. The first is the Initial deductible, which is the first amount of dollars; and the second is the corridor deductible, which is the money amount in excess of basic coverages before major medical pays.

11.Describe the method used to place a limit