What are some types of health insurance benefits?

The type of protection afforded employees depends on the kinds of benefits being provided and the way in which they are paid. Payment may be through insurance premiums, via a trust or fund, or directly from the employer. Employees may or may not be required to contribute toward the cost of coverage or incur costs such as deductibles and coinsurance.

Health insurance. Health insurance may be an umbrella for medical, dental, vision, and hearing benefits, although each of these may also be separate plans or part of a cafeteria plan (see ¶42,310 ). In addition, specific benefits such as mental health, substance abuse management, and prescription drugs, although often part of the health plan, are receiving separate attention due to escalating costs and societal concerns.

• Medical. Medical coverage protects employees and their families from the total cost burden of the treatment of disease, illness, pregnancy and birth, or accidents and the prevention of disease. Medical plans cover care delivered in hospitals, physicians' offices, and outpatient settings. Increasingly, the cost of the coverage is shared between employers and employees through employee contributions, deductibles, and coinsurance.

• Dental. Dental plans cover treatment and preventive care of the teeth, gums, and mouth. Coverage normally is provided through insured plans, self-insured plans, and health maintenance organizations. Plan design varies for certain types of care, such as orthodontia, preventive maintenance, cosmetic and voluntary procedures, and for coinsurance percentages.

• Vision. A vision plan is not a common benefit, although certain injuries to eyes may be covered under most medical plans. A vision benefit plan could underwrite the cost of eye examinations, eyeglasses or contact lenses, and eye surgery. Some provide discounted prices for eyeglasses and examinations.

• Hearing. Separate hearing benefit plans occur in a few union plans, but are a rarity. The plans provide payment for the diagnosis, fitting, and purchase of hearing aids and the treatment of hearing loss.

Mental health. Mental health coverage is usually part of the medical plan, although some companies have provided employee assistance programs (EAPs), preferred provider networks (PPOs), and managed care counseling to facilitate treatment outside the traditional medical plan. The benefit plan generally covers a certain number of days per year in an inpatient setting or pays a portion of the cost of outpatient treatment for a specified number of visits to a licensed provider. Federal law mandates mental health parity for group health plans (or health insurance coverage offered in connection with such plans). See ¶41,112 for more information about the parity requirements.

Substance abuse management. Treatment for substance abuse has also become a growth industry and a problem for employers. Inpatient detoxification is normally part of the medical plan or health maintenance organization coverage. However, ongoing outpatient therapy often is arranged on an exception basis by the insurer and the employer, using a case manager as an intermediary. For plan years beginning after October 3, 2009, federal law mandates parity in substance use disorder benefits for group health plans (or health insurance coverage offered in connection with such plans). See ¶41,112 for more information about the parity requirements.

Prescription drugs. Prescription drug coverage is part of most medical plans. Independent drug plans, however, have become a popular alternative for larger companies as an adjunct to the medical plan. These offer generic drug substitution at prices lower than available over the counter and are often done on a mail-order basis. Prescription drug plans can produce cost savings for beneficiaries undergoing long-term therapies to treat illnesses such as diabetes or high blood pressure.

Long-term care insurance. Employers can offer long-term care insurance to employees on a tax-free basis unless provided through a cafeteria plan. Qualified long-term services include necessary diagnostic, preventive, therapeutic, and rehabilitative services and maintenance for chronically ill individuals.

Alternative medicine. Alternative medicine includes such treatments as chiropractic, acupuncture, massage therapy, and biofeedback. In general, alternative medicine is defined as those treatments and health care practices not taught widely in medical schools and not generally used in hospitals. More information about alternative medicine can be found beginning at ¶42,111 .

Post-mastectomy reconstructive surgery. Group health plans that provide coverage for mastectomies are required also to cover reconstructive surgery following the mastectomy under the Women's Health and Cancer Rights Act (WHCRA). (This provision does not require coverage of mastectomies, only coverage of reconstructive surgery if the plan already covers mastectomies.) For this purpose, the term reconstructive surgery includes reconstruction of the breast on which the mastectomy was performed, surgery and reconstruction of the other breast to produce a symmetrical appearance, and prostheses.

Under the WHCRA, a group health plan may not deny a patient eligibility or continued eligibility solely to avoid the requirements of this provision. Similarly, the plan may not impose financial penalties on or offer financial incentives to a health care provider to induce the provider to provide care that is inconsistent with this provision. This federally mandated coverage does not preempt any state law that requires coverage at least as generous as this provision.

Notice. Group health plans must provide written notice of the availability of this coverage to each participant and beneficiary upon enrollment and each year thereafter. The notice must be prominently positioned in any literature or correspondence distributed by the plan. When providing the notice, a plan must use measures reasonably calculated to ensure actual receipt of the annual notice by plan participants. For example, notices may be provided by first-class mail, e-mail, or any other means of delivery that is likely to result in full distribution. The annual notice may be sent by itself or it may be included in another plan mailing such as open enrollment materials, a union or benefits newsletter, or official plan documents. In order to avoid duplication of efforts, a group health plan can satisfy the annual notice requirements by contracting with another party, such as an insurance company or HMO, which provides the required notice.

A plan may satisfy the annual notice rule by using the enrollment notice and delivering it to participants annually. Instead of distributing the enrollment notice annually, however, a plan may choose to distribute a notice annually informing participants of the following:

1. the availability of benefits for the treatment of mastectomy-related services, including reconstructive surgery, prosthesis, and lymphedema under the plan; and

2. information (such as telephone number or web address) on how to obtain a detailed description of the mastectomy-related benefits available under the plan.

Sample model annual notice under WHCRA. Language such as the following may be used to alert employees annually to their rights under WHCRA.

IMPORTANT NOTICE ABOUT YOUR RIGHTS UNDER YOUR GROUP HEALTH PLAN

Did you know that your plan, as required by the Women's Health and Cancer Rights Act of 1998, provides benefits for mastectomy-related services including reconstruction and surgery to achieve symmetry between the breasts, prostheses, and complications resulting from a mastectomy (including lymphedema)? Keep this notice for your records and call your Plan Administrator [insert phone number] for more information.

Payment mechanisms. Benefits may be insured, partially insured, or self-insured. Further, they are funded, self-funded, or unfunded. This terminology refers to the manner in which an employer shares the risk of the cost of claims and pays for the coverage.

• Insured benefits. Medical, dental, vision, and hearing benefits may be fully insured through insurance companies, Blue Cross and Blue Shield organizations, health maintenance organizations, preferred provider networks, associations, or welfare funds.

• Fully insured benefits. When benefits are fully insured, the insurer estimates the total claim liability for all employees and beneficiaries and adds the projected cost for expenses such as administration, marketing, accounting reserves and trend to develop a cost for the plan year. This estimate represents the total cost for the employer for the plan year. The insurer absorbs any charges above the amount and profit when the total costs are below the estimate. The employer remits a premium on a monthly basis to the insurer.

• Partially insured arrangement. Under a partially insured arrangement, a portion of estimated claims is insured, usually under stop loss policies, while the rest of the claims are paid on a self-insured basis.

• Self-insured benefits. An employer that self-insures reimburses the claim payer for claims as they come due or on a delayed basis under agreement with the claim payer. In a self-insured arrangement, the employer assumes the responsibility for the entire cost of paying and processing the claims. A company contracting with an outside provider, such as a managed care vendor or mail-order drug supplier, may negotiate a contract involving minimal risk on either party and pay a charge based on the number of participants per month or on a formula representing the actual costs.

Funding. Regardless of whether benefits are provided through insurance or self-insurance, the employer may fully or partially fund the benefits. A fully funded plan involves setting aside anticipated claim costs on a regular basis, sometimes using a trust. An unfunded plan would deduct claim costs from the general assets of the employer on an as-needed basis, with no advance reserving or budgeting. Sometimes funding arrangements are negotiated that involve a delay in remitting payment, subject to an interest charge.

A smaller employer is more likely to fully insure and fully fund a welfare benefit program, while larger companies tend to self-insure and self-fund, often with some form of stop-loss insurance as protection against catastrophic claims.

Employee cost participation. More often than not, employees may be required to contribute toward the cost of insurance. In addition, employees often share in the cost of benefits through deductibles, coinsurance, and copayments.