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22.3: Individual Health Insurance Contracts, Cancer and Critical Illness Policies, and Dental Insurance

  • Page ID
    34247
  • Learning Objectives

    In this section we elaborate on the following:

    • Individual health coverage
    • Cancer and critical illness policies
    • Individual and group dental insurance

    Individual Health Insurance Contracts

    The individual health insurance products closely mirror the group market products. Because most of these policies are very close to the structure of the group health, we provide here examples of individual health policies available to twenty-two-year-old male and female college students in Richmond, Virginia. Table 22.3 shows examples of the plans available to the male student from some insurers using the Web site eHealthInsurance; the plans were retrieved for a start date in April 2009. Table 22.4 shows the equivalent information for the female student.

    Table 22.3 Individual Health Insurance Option for a Full-Time Male Student, Age Twenty-Two, Residing in Richmond, Virginia, Starting April 1, 2009
    Company/Plan Monthly Premium Plan Type Deductible Office Visit Coinsurance
    Anthem Individual KeyCare Preferred $188.00 PPO $300 $20 20%
    UnitedHealthOne Saver 80 $71.43 Network $1,000 Not covered 20%
    Anthem Individual KeyCare HSA $77.00 PPO $1,200 $20 20% after deductible

    Source: eHealthInsurance.com, http://www.ehealthinsurance.com, accessed March 17, 2009 (a registered trademark of ehealthinsurance.com).

    Table 22.4 Individual Health Insurance Option for a Full-Time Female Student, Age Twenty-Two, Residing in Richmond, Virginia, Starting April 1, 2009
    Company/Plan Monthly Premium Plan Type Deductible Office Visit Coinsurance
    Anthem Individual KeyCare Preferred $227.00 PPO $300 $20 20%
    UnitedHealthOne Saver 80 $74.99 Network $1,000 Not covered 20%
    Anthem Individual KeyCare HSA $93.00 PPO $1,200 $20 20% after deductible

    Source: eHealthInsurance.com, http://www.ehealthinsurance.com, accessed March 17, 2009 (a registered trademark of ehealthinsurance.com).

    As you can see, one of the offers includes an HSA. Despite the high deductible of Saver 80, the plan is not HSA-compatible. While the above figures provide merely an overview, eHealthInsurance allows detailed comparisons among all available plans, and the reader is invited to take advantage of this feature. It is important to compare the policies based on the benefit package; cost sharing (such as copays, coinsurance, and deductibles); and other factors, including gender. Most of all, the comparison should include what the student assumes his or her needs may be.

    In Case 2 of "23: Cases in Holistic Risk Management", the most noticeable difference between the individual plan and the group plan regards maternity benefits. Maternity benefits are available as a rider, or optional coverage, in the individual policy, but they cannot be optional in group insurance because of the Civil Rights Act described in "20: Employment-Based Risk Management (General)". The act requires employers to treat pregnancies as any other medical condition.

    Cancer and Critical Illness Policies

    Some health policies reimburse only for specific illnesses (such as cancer), pay only a per diem amount for medical expenses, or are otherwise very limited in coverage. The consumer needs to read individual policies carefully. These policies are not for reimbursement of medical services.

    “Critical illness insurance is one of those product areas that is almost guaranteed to spark a spirited debate when insurance folks get together and talk about sales,” said National Underwriter reporter Linda Koco in “Critical Illness Insurance: Real or Gimmick?”Linda Koco, “Critical Illness Insurance: Real or Gimmick?” National Underwriter, Life & Health/Financial Services Edition, January 1, 2002. “Some producers call it a brand-new kind of policy—the fourth leg of the living benefits stool (life, health, and disability insurance being the other three). But others aren’t so kind. They sniff at it and walk away baffled about why it’s even here. Some dismiss it outright, as a gimmick or some sort of warmed-over cancer insurance.” A cancer or critical illness policy is designed to pay for the extra expenses incurred during the period of medical treatment. It does not pay the doctors or any of the medical bills that are paid by health insurance. It is not a disability income policy for lost time at work (discussed later in this chapter) or accelerated benefits available in a life insurance policy. It is meant to cover the travel expenses associated with the illness, such as parents staying at a hotel next to the hospital of the child if the hospital is far away from home. It will also pay for adaptive equipment expenses such as reconfiguration of a bathroom. One of the attributes that makes this coverage interesting to buyers is the critical illness policy’s lump-sum payment upon diagnosis of a dread or critical illness. Insureds believe that the coverage helps them cope with the health crisis and recovery.Patrick D. Lusk, “Critical Illness Insurance Ideal for Worksite,” National Underwriter, Life & Health/Financial Services Edition, August 31, 1998. But, like all coverages, a detailed need analysis should accompany the decision to buy such coverage.

    Critical illness policies were introduced in the United States in the mid-1990s. Numerous insurance companies offer the product. One that you may be familiar with is AFLAC. The products are vastly different across the states because of varying regulations, but typically the policy pays a lump sum when the insured is diagnosed with a qualified illness. Individual contracts usually require insurability evidence. Several important questions should be asked when evaluating a critical illness policy, including how many illnesses it covers and whether the definitions of illness are precise. The American Cancer Society regards these policies as supplementing medical coverage. The coinsurance and deductibles of a major medical policy are a major source of financial burden to families inflicted with a critical illness because such policies have no limits on out-of-pocket expenses.IEEE Financial Advantage Program, insurance articles of interest at http://www.ieeeinsurance.com (accessed April 22, 2009). The supplemental expense policies are available to ease this hardship. They are not to replace the health insurance but rather to help with catastrophic out-of-pocket costs. The policy also provides an initial sum of money to help cope with a critical illness. The reader is advised not to use such a policy in lieu of health insurance because a critical illness policy does not provide medical insurance, and the debate about the real need for such policies has never subsided.

    Dental Insurance

    Group Dental Insurance

    Most medical insurance policies do not cover dental expenses. Dental insurance policies, available in both the individual and group market, typically pay for normal diagnostic, preventive, restorative, and orthodontic services, as well as services required because of accidents. Diagnostic and preventive services include checkups and X-rays. Restorative services include procedures such as fillings, crowns, and bridges, and orthodontia includes braces and realignment of teeth.

    Group dental insurance is available from insurance companies (under fee-for-service plans); dental service plans; Blue Cross and Blue Shield; and managed-care dental plans such as dental HMOs, dental PPOs, and dental POSs. The rules under these plans are similar to that of medical expense plans. Most of the dental plans cover all types of treatment, with a schedule of maximum benefits for each procedure, such as no more than $2,000 for orthodontic treatment. Benefits are subject to coinsurance and deductibles, and the limitation may be for a calendar year maximum ($500 to $2,000) or a lifetime maximum ($1,000 to $5,000), or both. Teeth cleaning may be paid for once every six months. COBRA rules apply to dental plans. An example of a dental plan is available in Case 2 of "23: Cases in Holistic Risk Management".

    Individual Dental Insurance

    Most individual medical insurance policies do not cover dental expenses. Dental plans are offered on an individual basis as separate policies, although they can be offered as an option attached to individual health policies, too. Table 22.5 shows the dental plans offered to our twenty-two-year-old male and female students residing in Richmond, Virginia, close to school. Gender made no difference in the cost of coverage for these individual policies. In many ways, there is no difference between the individual dental plans featured here and the group dental plan featured in Case 2 of "23: Cases in Holistic Risk Management".

    Table 22.5 Dental Plans for a Full-Time Male or Female Student, Age Twenty-Two, Residing in Richmond, Virginia, as of April 1, 2009
    Company/Plan Monthly Premium Plan Type Deductible Annual Maximum Benefit Coinsurance
    Anthem Individual and Family Dental Plan $32.25 PPO $50 $1,000 per person 0% to 50%
    Security Life Plan I $18.64 Indemnity $50 $750 per person 30% to 80%

    Source: eHealthInsurance.com, http://www.ehealthinsurance.com, accessed March 17, 2009 (a registered trademark of ehealthinsurance.com).

    Dental insurance policies encourage better dental health by not applying a deductible or coinsurance to charges for checkups and cleaning. By having first-dollar coverage, insureds are more likely to seek routine diagnostic care, which enables early detection of problems and may reduce total expenditures. Dental policies not only cover routine care but also protect insureds against more expensive procedures such as restorative services. For restorative and orthodontic services, insureds usually pay a deductible or coinsurance amount. A fee schedule limits the amount paid per procedure, so the insured may also pay out-of-pocket for the cost of services above the scheduled amount. Policy maximums are specified on an annual and lifetime basis, such as $2,000 per year and $50,000 during a lifetime.

    Many dentists consult with the insured in advance of the procedure to determine what will be paid by insurance. The dentist lists what needs to be done and then the dentist or the insured checks with the insurer to determine coverage. Most policies exclude coverage for purely cosmetic purposes, losses caused by war, and occupational injuries or sickness.

    Key Takeaways

    In this section you studied individual health policies, cancer and critical illness policies, and dental insurance:

    • The features of individual health policies closely mirror those of group policies
    • Special health policies called cancer and critical illness policies cover expenses related to specific illnesses and pay a lump sum upon diagnosis of a covered disease to cope with high out-of-pocket expenses (unlimited in the case of major medical coverage)
    • Group dental insurance is available under fee-for-service arrangements, Blue Cross and Blue Shield plans, and managed-care options, and rules (coverage limits, coinsurance, deductibles, etc.) are very similar to health plans
    • Individual dental plans can be purchased separately or as part of individual health coverage

    Discussion Questions

    1. How do individual and group medical insurance policies differ regarding maternity benefits?
    2. What kinds of expenses are cancer and critical illness policies intended to cover?
    3. How does cancer and critical illness coverage differ from health insurance, disability income, or accelerated benefits from life insurance?
    4. Why are cancer and critical illness policies viewed as supplementing medical coverage?
    5. What types of services are covered by dental insurance contracts?
    6. Why are individuals given first-dollar coverage for some dental services but not for others?