Private benefit programs

Indemnity Benefits

CCMC defines Indemnity Benefits as “benefits in the form of payments rather than services. In most cases after the provider has billed the patient, the insured person is reimbursed by the company”. Indemnity benefits are also know as fee-for-service. The advantage of this type of policy is that the patient is free to choose their provider with out restriction. The patient pays the provider and then is reimbursed by the insurance company based on their contract. These policies are more expensive than a managed care policy. 

Pharmacy Benefits Management

Pharmacy benefit management services use a number of strategies to control the cost of prescription medications. One way they can do this is by contracting with a network of retail pharmacies to provide discounted rates for members. They also may have mail order pharmacies where medications are mailed to the home at a savings over retail prices. They can use their large purchasing power to negotiate discounts from the manufacturer of the drugs. They are also responsible for developing and maintaining the formulary, which is a list of drugs approved for reimbursement, to encourage the use of lower cost drugs. Pharmacy benefit management services often have payment tiers, with generic drugs being the cheapest, followed by formulary medications and then non-formulary meds. 

Employer-Sponsored Health Coverage

Employer-sponsored health insurance is paid for by an employer on behalf of their employee. The employer typically contributes toward the cost of the coverage, with the employee paying the remainder of the cost. Some employers choose to self insure. To do this they must meet the state legal and financial requirements to assume all of the risk, and pay for the losses. Often these employers will contract with third party administrators (TPAs). These are organizations that handle only the administrative functions such as utilization review and processing claims. 

Cobra

In 1986 Congress passed the Consolidated Omnibus Budget Reconciliation Act (COBRA). Under this law, employees and their families, who might otherwise lose their health insurance due to job loss, decreased work hours, transition between jobs, death, divorce and other life events, may choose to keep their insurance. If they qualify, they may continue their group health benefits provided by their group health plan for a limited period of time. The duration of coverage under COBRA is usually 18 months, but can be up to 36 months based on certain circumstances. In the event of death of the employee or legal separation or divorce from the employee, the spouse and dependent children are eligible to receive COBRA  for 36 months. If the employee or eligible dependent is able to receive COBRA due to termination or reduction of hours, and is or becomes disabled on or prior to 60 days of COBRA, it is extended to 29 months.   

The eligible person must elect COBRA within 60 days after the plan coverage terminates. After the initial election, the first premium payment must be made within 45 days. After this, payments are due on the first of each month, subject to a 30 day grace period. If payments are not made as stated, coverage may be terminated.

The cost of COBRA is out of reach of many of the people who qualify for it. They may be required to pay the entire premium, of which the employer had been paying a portion of, as well as a 2% fee. This makes COBRA’s cost up to 102 percent of the cost to the plan. Employers with 20 or more employees offer COBRA.

CCMC Key Terms

Indemnity Benefits: Benefits in the form of payments rather than services. In most cases after the provider has billed the patient, the insured person is reimbursed by the company.

Third Party Administrator (TPA): An organization that is outside of the insuring organization that handles only administrative functions such as utilization review and processing claims. Third party administrators are used by organizations that actually fund the health benefits but do not find it cost effective to administer the plan themselves. 

Administrative Services Only (ASO): An insurance company or third party administrator (TPA) that delivers administrative services to an employer group. This usually requires the employer to be at risk for the cost of health care services provided, which the ASO processes and manages claims.  

Self-Insurer: An employer who can meet the state legal and financial requirements to assume by him or herself all of its risk and pay for the losses, although the employer may contract with an insurance carrier or others to provide certain essential services.