Exclusions and Cost Containment

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 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.

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 principal of indemnity and prevents the client from recovering more than the actual loss.

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.

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

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

Retrospective Review

This is the review of 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