9.3 Payment and Benefit Structure
Payment Structure Comparisons
Blanket Payment: A payment method in which a maximum dollar limit is established without itemizing individual costs. This type of payment structure is commonly used for groups covered under a blanket policy for a specific event or time period.
Scheduled Payment: A health plan that specifies fixed benefit limits for particular medical services or expenses. Benefits are typically paid according to a predetermined or flat dollar amount for each covered service. Scheduled benefit plans are generally intended to cover routine or minor medical expenses and are not designed to protect against catastrophic losses, as they usually include limited annual benefits.
Cash or Indemnity Payment (Hospital Income): This payment method provides a fixed daily benefit for each day an insured is confined in a hospital, up to a specified maximum number of days or, in some cases, for a lifetime limit. Benefits may increase, often doubling or tripling, when the insured is admitted to an intensive care unit (ICU).
Fee-for-Service: Under this arrangement, a health care provider is paid separately for each medical service performed. The total cost of care is based on the number and type of services received by the patient.
Prepaid Plan: In a prepaid system, medical services are provided to subscribers in exchange for a fixed premium that is paid in advance, usually on a monthly basis. The subscriber receives covered medical services without paying the full cost at the time of service.
Usual, Customary, and Reasonable (UCR): This payment structure determines benefits based on the average fee charged by providers for similar services within a specific geographic area. Insurers typically reimburse up to the UCR amount, and the insured is responsible for any charges that exceed this limit or for services that are not covered.
Lifetime Limit: The maximum total amount a health insurance policy will pay for covered expenses during the entire lifetime of the insured.
Annual Limit: The maximum amount a policy will pay for covered medical expenses within a single policy year.
Per-Cause Limit: The maximum benefit payable for a single illness, injury, or claim, regardless of the total number of expenses related to that specific cause.
| Fee for Service | Prepaid Plan |
|---|---|
| Pay benefits based on actual services provided. | Provide benefits based on a designated fee (capitation fee), regardless of any services provided. |
Quiz
1. Which payment structure establishes a maximum dollar amount for coverage without itemizing individual expenses?
A. Scheduled Payment
B. Blanket Payment
C. Fee-for-Service
D. Prepaid Plan
Correct Answer: B
Rationale: A blanket payment sets a single maximum benefit limit for coverage without listing specific services or costs. It is commonly used for groups covered under a blanket policy for a particular event or time period.
2. A health plan that pays a fixed dollar amount for each covered medical service according to a predetermined schedule is known as which type of plan?
A. Scheduled Payment Plan
B. UCR Plan
C. Fee-for-Service Plan
D. Prepaid Plan
Correct Answer: A
Rationale: A scheduled payment plan pays benefits according to a set schedule of benefits. Each service has a predetermined dollar amount, which makes these plans better suited for routine or minor medical expenses rather than catastrophic losses.
3. Which payment method provides a fixed daily benefit while an insured is hospitalized, sometimes increasing for time spent in an intensive care unit?
A. Fee-for-Service
B. Cash or Indemnity Payment (Hospital Income)
C. Scheduled Payment
D. Blanket Payment
Correct Answer: B
Rationale: A cash or indemnity payment plan provides a set daily payment for hospital confinement, regardless of the actual cost of medical services. Benefits may increase if the insured is admitted to an intensive care unit (ICU).
4. Under the Usual, Customary, and Reasonable (UCR) method, how are benefits typically determined?
A. Based on a fixed daily hospital benefit
B. Based on the maximum benefit for a single claim
C. Based on the average charges for similar services in a geographic area
D. Based on a predetermined monthly capitation fee
Correct Answer: C
Rationale: The UCR method determines reimbursement based on the average fee charged by providers for similar services in a specific geographic area. If a provider charges more than the UCR amount, the insured is responsible for the difference.
5. Which statement best describes the difference between fee-for-service and prepaid plans?
A. Fee-for-service pays a daily hospital benefit, while prepaid plans pay annual benefits.
B. Fee-for-service pays providers for each service performed, while prepaid plans provide services based on a fixed advance premium.
C. Fee-for-service limits coverage per claim, while prepaid plans have no limits.
D. Fee-for-service is only used for hospital coverage, while prepaid plans are only used for physician services.
Correct Answer: B
Rationale: In a fee-for-service system, providers are paid separately for each service performed. In a prepaid plan, subscribers pay a fixed premium in advance, and covered medical services are provided without paying the full cost at the time of service.