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Textbook
1. General Insurance Concepts
2. Producer Roles and Receipt Types
3. Principles of Life Insurance
4. Underwriting
5. Term Life Insurance
6. Whole Life Insurance
7. Variable Insurance Products
8. Group Life Insurance
9. Life Insurance Provisions
10. Annuities
11. Taxation of Life Insurance Products
12. Qualified Retirement Plans
13. Health Insurance Basics
14. Required Policy Provisions
15. Optional Policy Provisions
16. Medical Expense Insurance
16.1 Classes of Coverage
16.2 Exclusions and Cost Containment
17. Group Health Insurance
18. Disability Income Insurance
19. Accidental Death and Dismemberment Insurance
20. Long Term Care Insurance
21. Dental Insurance
22. Section 125 Plans and Limited Policies
23. Federal Government Programs
24. Medigap and Medicaid
25. Health Insurance Taxation
26. Wrapping Up
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16.2 Exclusions and Cost Containment
Achievable Life & Health
16. Medical Expense Insurance
Our Insurance Life & Health course is in "early access"; the content on this page may be incomplete.

Exclusions and Cost Containment

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Exclusions

Exclusions that are common to most medical expense insurance policies include:

  • Custodial care in nursing homes

  • Dental care, unless required due to a covered accident

  • Vision care

  • Sickness or accident covered by workers’ compensation

  • Hearing aids

  • War-related injury

  • Intentionally self-inflicted injury

  • Injury sustained while committing a crime

  • Maternity care

    • Group health policies have been required to treat maternity care as any other form of medical treatment since 1979. Individual policies, however, do not have to cover routine maternity care and commonly exclude pregnancy if it is a pre-existing condition at the time of application. Complications arising from pregnancy or delivery, however, are covered, and a newborn child is covered from the moment of birth.
  • Cosmetic Surgery

    • Elective cosmetic surgery is not an insurable expense. The only exception is in rare cases where it is required under a physician’s orders.
  • Care in a Government Facility

    • Government facilities are operated as an expense of the government and treatment is provided at the government’s expense.
  • Pre-existing Conditions

    • These are health conditions that existed prior to the application for coverage. Insurers treat pre-existing conditions in several different ways. They can exclude the condition from coverage, charge a higher premium to cover the increased risk, or impose a probationary period during which the condition will not be covered.

Medical expense insurance exclusions

Cost Containment

Most medical expense policies contain a coordination of benefits provision, requiring that when an insured is covered by more than one policy, one policy is considered to be primary (pays first) and the other excess (pays after the benefit of the first policy is exhausted). Coordination of benefits reinforces the principle of indemnity and prevents the client from recovering more than the actual loss.

Sidenote
Know this...

If a married couple has a child who is covered as a dependent on both parents’ group plans, the parent whose birthday falls first in the calendar year will be the primary insurance.

As health care costs rise, more and more policies provide for some type of administrative control in an attempt to contain costs, commonly called utilization management provisions. Utilization management was established using certain criteria to review the appropriateness of care. A review may be performed on a prospective, concurrent, or retrospective basis.

Cost containment policies

Prospective Review

  • Also known as pre-certification, this includes the requirement that the insured obtain a second surgical opinion before having elective surgery or that a doctor verify, in advance, that hospitalization is necessary and recommend outpatient treatment if possible.

Concurrent Review

  • It involves consultation with the provider in an attempt to lower the costs of treatment as it is received. Some plans require the utilization of ambulatory services or require that insureds take advantage of outpatient services in lieu of hospitalization.

Retrospective Review

  • This is the review of the treatment previously provided, which determines whether or not the treatment was appropriate under the circumstances.

Lesson Summary

Exclusions common in medical expense insurance policies include:

  • Custodial care in nursing homes
  • Dental care, unless due to a covered accident
  • Vision care
  • War-related injuries
  • Intentionally self-inflicted injuries
  • Maternity care, unless a complication arises

Cost containment measures include coordination of benefits and utilization management provisions such as prospective, concurrent, and retrospective review to ensure appropriate care.

Chapter Vocabulary

Definitions
Ambulatory Services
Health services provided to members who are not confined to a health care institution. Ambulatory services are often referred to as “outpatient” services.
Probationary Period
A specified number of days after the date of the issuance of the policy, during which coverage is not afforded for sickness. Sickness protection does not become effective until after the end of such probationary period. This is a one time event, whereas an elimination period may occur upon each separate disability.

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