Health Care 101
Understanding
the Basics
Marianne Monfils, CSEA
Bryce Van De Moere, Esq. TPA, SCEET
Health Care
Who Delivers the Package?
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Individual School Districts
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Jointly Managed Trust (JMT)
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Joint Powers Authority (JPA)
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Taft Hartley Trust
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Other risk pools (i.e. CALPERS, Medicare, etc.)
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What are the Main Plans?
• Health Maintenance Organization (HMO)
• Preferred Provider Organization (PPO)
• Point of Service (POS)
• Exclusive Provider Organization (EPO)
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How Do They Differ?
HMO
 A contract for prepaid medical services with medical
groups and hospitals to provide comprehensive
medical care according to a predetermined
summary of benefits
 Access is restricted to a prescribed set of providers
(aka “the Provider Network”)
 Requires that all services be authorized by a
“Primary Care Physician (PCP)” or “Gatekeeper”
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How Do They Differ?
HMO (continued)
 Access to non-HMO providers is restricted to “in
network” physicians with the exception of
emergency services (ER)
 When utilizing services you must follow the
instructions of your district’s “Summary of Benefits”
 Less costly as a portion of the physician
compensation is provided on a pre-paid, “capitation”
basis
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How Do They Differ?
PPO
 A managed care plan that contracts with physicians
and hospitals on a “fee for service (FFS)” basis.
Contract providers exchange discounted services for
increased volume
 No PCP or “Gatekeeper” required
 Access to all providers within the carrier’s network
allowed without prior authorization
 Reduced benefits for non-network utilization (i.e.
“Out of Network” (OON) and “Out of Area” (OOA))
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How Do They Differ?
POS
 A managed care plan that allows members to
choose, at the point where service begins, to
receive services from an HMO or PPO plan of
benefits
 Three levels of benefits available to participants:
1. HMO: in-network only
2. PPO: in-network
3. PPO: out-of-network
 POS plans are generally more costly than an HMO
but not as expensive (premium) as a PPO
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How Do They Differ?
EPO
 A managed care plan where services are covered
only if you go to physicians or hospitals in the
plan’s network (except for emergency services).
 Services are usually confined to one or two medical
groups in a specific geographic location.
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Prescription Drugs

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Generic
Brand
Non-Formulary
Mail Order
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How are the Plans Funded?
 Fully Insured
 Self Insured
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How Do They Differ?
Fully Insured Plans
 The Insurance Company takes the risk
 The Group may be pooled with others
 The Group is experienced rated
 All services come from the selected carrier, such as
the network, billing, claim payments, etc.
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How Do They Differ?
Self Insured Plans
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The Employer or Group assumes the full risk
Benefits are administered by the Employer or Group
The Employer or Group assumes the full risk
Benefits are administered by the Employer or Group,
or may be handled through an Administrative Service
Only (ASO) agreement with an Insurance Carrier or
Third party Administrator (TPA)
 Mixture of Specific & Aggregate Stop-Loss contracts
are purchased to cover the costs when claims reach
a certain level
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Components of Rates

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Medical Loss Ratio
Paid Claims
Incurred But Not Reported (IBNR)
Administrative Expense
Margin
Medical Trend
Profit
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Medical Loss Ratio
Dictates how much of the health
care premium dollar must be
spent on medical services for the
member.
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Paid Claims
Claims that result in a payment
during a specific period of time.
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IBNR
Claims that have not been reported
to the Insurer as of some specific
date for services that have been
provided.
The estimated value of these claims
is a component of an Insurer’s
current liabilities.
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Administrative Expense
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Billing/Eligibility
Claim Paying Services
Medical Network
Identification Cards
Communication Materials
Client services
Stop Loss Premium
Underwriting and Actuarial Services
State and Federal Compliance
(ex. HIPAA, COBRA, AFA)
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Margin
The amount necessary to ensure that the
Insurance Company will have a profit.
Sometimes this is referred to as the “fudge
factor”.
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Medical Trend
The calculation made which reflects
inflation in overall medical costs.
This
includes
providers, hospitals,
equipment and new technology to name a
few.
It is built into the renewal rate for a Group.
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Profit
In most plans, the profit margin is
in the range of…
4% - 6%
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What is the Basis for Rate Changes?
Hospital Costs
Utilization
Opt Outs
Demographics
Plan Design
Trend
Formularies
Wellness
Programs
Margin
Quality of
Health care
Disease
Management
Programs
Rx Plan
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For more Information on how Health Care Reform affects
you, please refer to
http://www.healthcare.gov
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