Indemnity plans vs the Blues vs managed care — HMO, PPO, POS, EPO — plus group health rules, COBRA, and HIPAA.
Before you read — prime your brain
Take a shot at these. Being wrong here is the point — it primes you for the answers, which are all in this lesson.
Under a traditional indemnity health plan, the insured
Noted — the answer comes up in this lesson.
Which is NOT one of the four general approaches to medical cost management?
Noted — the answer comes up in this lesson.
An HMO differs from a traditional insurer primarily because it:
Noted — the answer comes up in this lesson.
Primed. Read on — then finish the lesson to see how you did.
This chapter maps who actually sells and organizes health coverage. The exam loves its contrasts: reimbursement vs direct payment, prepaid vs fee-for-service, gatekeeper vs direct access, covered-out-of-network vs not. It's also where your missed utilization-review questions live — prospective, concurrent, retrospective. Learn each provider type by what makes it DIFFERENT from its neighbors.
Traditional Plans: Indemnity & the Blues
[2]–[2.2]
Commercial insurers write traditional indemnity (major medical) plans: see any provider nationally, pay, and be reimbursed subject to deductible, coinsurance, and usual-customary-reasonable limits — with a right of assignment to send benefits straight to the provider. Blue Cross and Blue Shield instead work on a service basis: participating providers bill the Blues directly at contracted rates (Cross = hospital, Shield = physician), subscribers pay small copays, and premiums were traditionally community-rated.
'Indemnity plan' in this chapter = traditional reimbursement coverage — NOT a hospital indemnity policy that pays a fixed daily amount.
Check yourself
Blue Cross covers ___ while Blue Shield covers ___.
How sure are you?
Cross = hospital · Shield = physician/surgical. They pay participating providers DIRECTLY, and members are called subscribers.
Check yourself
Under a traditional indemnity health plan, the insured
How sure are you?
Indemnity plans have no network — see any provider nationally, submit the claim, and get reimbursed subject to deductible, coinsurance, and UCR limits.
Medical cost management = mandatory second opinions, pre-certification, ambulatory surgery, and case management, layered on deductibles, coinsurance, and preventive care. Utilization review happens on three clocks: prospective (pre-certification before elective admission — skip it and benefits shrink), concurrent (a case manager monitors the stay and discharge planning as care happens), and retrospective (an after-the-fact audit used to refine guidelines, not deny claims). Preadmission testing's tested purpose: it shortens hospital stays.
Your missed questions all lived here: concurrent = DURING the stay · preadmission testing → shorter hospitalization · watching accident-prone PEOPLE is risk management, not UR.
Check yourself
Which is NOT one of the four general approaches to medical cost management?
How sure are you?
The four: second opinions, pre-certification, ambulatory surgery, case management. Raising premiums after the fact isn't cost containment.
Check yourself
In which of the following processes will the insurer oversee the insured's hospital stay to confirm everything is going according to schedule and that the insured will be released as planned?
How sure are you?
Concurrent = running together WITH the stay. Pre-certification happens before; 'pretense' and 'congruent' are fake terms.
An HMO finances AND delivers prepaid comprehensive care through a local network — preventive care with no deductible, a PCP gatekeeper controlling referrals, 24/7 access, a 30-day annual open enrollment, and historically capitation pay for providers. Its four structures: staff, group, and network (closed panels) vs the IPA (open panel, widest choice). A PPO finances only — discounted fee-for-service, no referrals needed, out-of-network covered at higher coinsurance. A POS plan is the HMO/indemnity hybrid; an EPO is PPO access with an HMO wall (no out-of-network except emergencies); a DMPO isn't insurance at all.
Sort them by two switches: Gatekeeper? (HMO/POS yes · PPO/EPO no) and Out-of-network covered? (PPO/POS yes · HMO/EPO emergencies only).
Check yourself
Which HMO model is an OPEN-panel network offering the broadest choice of physicians?
How sure are you?
IPA doctors practice part-time from their own offices — open panel. Staff, group, and network models are closed panels inside HMO facilities.
Check yourself
Unlike an HMO, a preferred provider organization
How sure are you?
PPOs: fee-for-service, finance-only, no gatekeeper, and out-of-network care IS covered — just at higher coinsurance.
75 / 100 participation, 51+ / 2–50 rating split, and 'the TRUST holds the MET master contract' are the three most-tested facts here.
Check yourself
Which concept does this describe? Premiums for small groups (2–50 employees) are based on the claims experience and costs of the surrounding community, not the group's own history. Also the traditional Blue Cross/Blue Shield approach and required for employer HMO plans.
How sure are you?
Check yourself
Which concept does this describe? Generally 2–50 full-time employees (30+ hrs/week). HIPAA/ACA make small-group plans guaranteed issue — no refusal based on members' health history — with guaranteed renewal unless nonpayment, fraud, or participation failure. Carriers must offer at least two plans (standard + basic).
COBRA (employers 20+): CONTINUATION of group coverage after qualifying events — 18 months job loss, 29 disability, 36 dependent events — at 102% of premium, elected within 60 days after the employer's 14-day notice. When coverage ends mid-claim, extension of benefits keeps paying the existing claim. HIPAA guarantees portability via creditable coverage (no 63-day break) and requires the Notice of Privacy Practices at enrollment + every 3 years. The Pregnancy Discrimination Act makes pregnancy equal to any other condition in employer benefit plans.
COBRA numbers ARE the exam: 20+ employees · 18/29/36 months · 102% · 60-day election · 14-day notice.
Check yourself
Under HIPAA, prior coverage counts as creditable coverage as long as any break in coverage is less than
How sure are you?
A gap of 63 or more days breaks the chain — under 63 and prior coverage wipes out new pre-existing-condition waiting periods.
Check yourself
Which concept does this describe? When coverage terminates mid-claim, benefits continue for the existing claim — a disability benefit continues until the disability ends; hospital benefits typically continue until discharge or a stated period (90 days–12 months). Covers only claims that began while insured — no new claims.
Close your eyes for a moment, then write everything you remember from this chapter — rules, numbers, traps. Recalling first is worth more than rereading.
Recall captured. Compare it against the summary below.
Your missed questions all lived here: concurrent = DURING the stay · preadmission testing → shorter hospitalization · watching accident-prone PEOPLE is risk management, not UR.