EBS BULL #2441 5/94 CHAPTER 4/ SM 1992 MEDICAL DENTAL & VISION CARE HEALTH Chapter 4. Medical, Dental, and Vision Care Medical Care Medical care benefits were provided to 71 percent of full-time employees in small private establishments in 1992. Among the three occupational groups, professional technical and related employees were the most likely to participate in medical plans (83 percent), while blue-collar and service employees were the least likely (61 percent). Of those workers with medical care insurance: * Just under one-half were required to pay a plan premium for individual coverage; approximately seven-tenths paid part of the cost for family coverage; * One-third were covered by non-traditional medical care plans, that is, health maintenance organizations (HMO's) or preferred provider organizations (PPO's); * Virtually all participants in traditional fee-for-service plans were subject to an annual deductible; the average annual deductible was $220; * Nearly nine-tenths of participants in fee-for-service plans had an annual limit on individual out-of-pocket expenses; the average limit was $1,108; * Mental health coverage, and alcohol and drug abuse treatment, though available to nearly all participants, had more restrictive provisions than other ailments; * Seven-tenths of workers covered by non-HMO plans were required to get preadmission certification before entering the hospital. Coverage of selected categories of medical care All of the participants in medical care plans had coverage for hospital room and board, physicians' visits in the hospital, surgery, and x-ray and laboratory services. With few exceptions, coverage was provided for physicians' office visits, mental health conditions, and out-of-hospital prescription drugs (table 34). Virtually all participants were covered by inpatient alcohol and drug detoxification benefits. Coverage was somewhat less extensive for inpatient and outpatient substance abuse rehabilitation benefits. Among benefits less frequently provided were hearing care (18 percent of participants), routine physical exams (28 percent), well-baby care (37 percent), and immunizations and inoculations (26 percent). Funding arrangements In 1992, two-thirds of full-time medical plan participants in small private establishments were covered by a fee-for-service medical plan (table 35). These plans pay for specific medical procedures as expenses are incurred. There are generally three arrangements for financing plan benefits: Self-insured plans, commercially insured plans, and Blue Cross/Blue Shield plans. Self-insured plans (where the plan sponsor--typically the employer--bore the financial risk for making plan payments) covered two-fifths of fee-for-service participants. Commercially insured plans covered just over one-third of the fee-for-service participants, while Blue Cross/Blue Shield plans covered slightly more than one-fifth of the participants. In addition, a small proportion of fee-for-service participants had their benefits financed by more than one source. Preferred provider organizations (PPO's) covered 18 percent of medical care participants in small private establishments in 1992. PPO's offer a higher benefit for services rendered by designated health care providers (such as hospitals and physicians), although participants are free to choose any provider. Designated providers agree in advance to a given fee schedule. Fourteen percent of medical care participants covered by the survey were enrolled in health maintenance organizations (HMO's). HMO's provide a prescribed set of benefits to enrollees for a fixed payment. The HMO thus bears the risk associated with delivering care.1 HMO's are classified in this survey as either group/staff, with services provided in central facilities, or as individual practice associations (IPA's), with providers working from their own offices. The following tabulation shows the percent of HMO participants by type of plan in 1992: Plan type Percent of participants Group/staff 37 Individual Practice Association 54 Combination 9 Payment arrangements Medical plan provisions were examined to determine the extent of coverage for each type of medical service. In this survey, each category of medical care is classified under one of four payment arrangements: Full coverage, coverage with internal (separate) limitations only, coverage with overall limitations only, or coverage with internal and overall limitations (table 34). Full coverage for HMO's indicates no restrictions on the number of days of care, no dollar maximums on benefits, and no required payments by the covered individual. In a fee-for- service plan, when a benefit is covered in full, all expenses up to the usual, reasonable, and customary charges, or the prevailing hospital semiprivate rate, are borne by the plan. Internal or separate limitations restrict the level of coverage for a particular type of medical service, independent of other plan provisions. An example of a separate limit is a maximum of 45 days of hospitalization per year for mental health care. Overall limitations are deductibles, coinsurance requirements, maximum benefit levels, or other provisions that apply to many, if not all, types of medical care provided under the plan. Examples of overall limits include a requirement that the employee pay the first $100 of expenses in a year, regardless of the source of the expense, before the plan will begin payments (deductible); a requirement that the employee pay 20 percent of covered expenses beyond the deductible (coinsurance); a $1,000 limit on the amount the employee must pay, after which the plan pays 100 percent of covered expenses (maximum out-of-pocket expense); and a lifetime ceiling on plan payments of $1 million (maximum). HMO's generally do not impose any overall limits on the benefits they provide. Traditional fee-for-service plans, on the other hand, almost always impose overall limitations on their benefits. (PPO's also impose overall limits, but may alter or reduce those limits if services are received from designated providers.) The most common type of payment arrangement in fee-for-service plans is coverage subject to overall limitations only. Under such an arrangement, the employee must satisfy the deductible and meet the coinsurance requirement before any benefits are paid. Nearly three- fifths of all participants in plans with hospital room and board benefits had coverage subject to overall limitations only. Services for which at least three-fifths of plan participants had coverage subject to overall limits only were physicians' office visits, in-hospital physician services, diagnostic x-rays and laboratory services, outpatient prescription drugs, inpatient surgery, and outpatient surgery. Separate and overall limitations may apply to the same category of care. For example, a plan may impose a separate limit of 365 days per confinement on fully paid hospital room and board coverage, with protection beyond that point subject to overall plan coinsurance rates and maximum dollar limitations. Overall limitations Plans with overall limitations nearly always require a participant to meet a specified deductible before eligibility for benefit payments. This approach is designed to discourage unnecessary use of medical services. In 1992, 88 percent of full-time participants were in plans with overall limits (tables 36-40). Ninety percent of the participants in plans with overall limitations had coverage subject to an annual flat-dollar deductible. Of the participants with overall limitations, however, 13 percent were in plans where the deductible did not apply to hospital room and board expenses. The most prevalent individual annual deductible was $100, applying to three-tenths of the participants subject to overall limits. Deductibles of $200 and $250 were the next most commonly observed deductibles. The average annual deductible in 1992 was $220 for all workers. The amount of the average deductible showed some variation between occupational groups. It was highest ($236) for professional, technical and related participants and lowest ($210) for blue-collar and service participants. When a medical care plan covered an employee and family, a family deductible was often specified in addition to individual deductibles. After the family deductible is met, no additional individual deductibles apply during that year. Four out of 5 participants with overall limitations were in plans that specified limits on the number of persons in the family required to satisfy an annual deductible. Most commonly, family deductibles were equal to two or three times the individual deductibles. Once the deductible has been met, the plan almost always pays a specified percentage of covered medical expenses, with the employee paying the remainder (coinsurance). The percentage of expenses paid by the plan varied greatly between traditional fee-for-service plans and PPO's. PPO's offer a higher benefit for services rendered by designated health care providers (such as hospitals and physicians), although participants retain the option of choosing any provider. Ninety percent of participants in traditional fee-for-service plans with overall limitations had their expenses paid at 80 percent. In contrast, PPO enrollees were most likely to have their expenses paid at 90 percent or more, including 14 percent of PPO participants with overall limitations who had their expenses paid at 100 percent. Workers who had their coverage paid at 100 percent, however, were generally subject to a yearly deductible and a lifetime plan maximum. Fewer than 1 out of 10 participants were in plans where the coinsurance rate was different for hospital room and board expenses than for other expenses. In such cases, the percent of hospital expenses paid by the plan was generally higher, often 100 percent. Nine-tenths of full-time participants in plans with overall limitations had their coinsurance increase to 100 percent after they paid out a specified dollar amount for covered expenses (maximum out-of-pocket expense). Slightly more than three-fifths of participants in plans with overall limits had an annual maximum individual out-of-pocket expense of $1,000 or less. Maximum out-of-pocket ceilings were also specified for family expenses in plans covering just under three-fifths of participants with overall limitations. The annual maximum for out-of-pocket expenses for plan participants averaged $1,108 for an individual and $2,262 for a family. Plans that both required an annual deductible and placed a maximum on out-of-pocket expenses covered 81 percent of the participants subject to overall limitations. The sum of these two items represents the total that the plan requires an individual to pay for covered medical expenses in a calendar year. In 1992, the annual deductible plus the annual maximum out-of- pocket expense averaged $1,317 per individual.2 Plans with overall limitations often place a ceiling on the amount payable by the plan, usually a lifetime maximum. In 1992, three-fourths of the participants in plans with overall limitations had a lifetime maximum apply to their benefits. A maximum of $1 million applied to seven-tenths of these participants. Just under one-tenth of participants were in plans with a lifetime maximum of greater than $1,000,000; the average of all maximums was $1,027,411. There were small variations in the average lifetime maximums between occupational groups. Professional, technical, and related participants had the highest average lifetime maximum ($1,063,431), while clerical and sales workers had the lowest ($1,003,467). Plans that did not impose a maximum on plan payments covered one-fourth of the participants subject to overall limitations. Hospital coverage All medical plan enrollees covered by the survey had benefit provisions for hospital room and board charges (tables 41-42). Fifty-nine percent of full-time participants were in plans where hospital room and board expenses were covered at a percentage of the semiprivate room rate, generally at 80 percent. In these types of plans, the individual was typically subject to a yearly deductible before the percentage rate would go into effect. Fifteen percent of participants had hospital room and board expenses covered at the full semiprivate room rate for a limited period, followed by a percentage of the semiprivate room rate, almost always 80 percent. Sixteen percent of participants with hospital room and board coverage were in plans in which expenses were reimbursed for the full semiprivate room rate for an unlimited number of days without being subject to either a separate deductible or separate dollar maximum. Such full service hospital benefits were commonly provided by HMO's. Significant differences in hospital room and board coverage were evident by type of medical care provider. While just under seven-tenths of HMO participants had hospital room and board covered in full without any limitations, full coverage was virtually non-existent for hospitalization in non-HMO's. Increasingly, medical care participants are being required to pay a separate copayment for hospital care, to discourage unnecessary hospitalization. Fourteen percent of participants with hospital room and board coverage were subject to a separate copayment. It was somewhat more likely for HMO participants to be subject to a hospital copayment (18 percent) than for non-HMO participants (13 percent). When copayments were required for hospitalization, it was most likely on a per admission basis. For non-HMO participants, these copayments usually ranged up to $200; HMO participants were usually required to pay copayments between $200-$300. Alternatives to hospitalization To help hold down the costs of medical care, a number of plans provide coverage for less expensive alternatives to a hospital stay. These alternatives include extended care facilities, home health care, and hospices (table 34). Coverage patterns typically differed between HMO and non-HMO participants. Coverage for stays in an extended care facility was available to just over four-fifths of full-time participants. Extended care facilities provide skilled nursing care, rehabilitation, and convalescent services to patients requiring less intensive treatment than would otherwise be provided in a hospital. Seven-eighths of HMO participants had coverage for stays in an extended care facility; one-fifth were in plans that provided unlimited coverage. In comparison, although 8 of 10 non-HMO participants were in plans that provided coverage for extended care benefits, very few had full coverage. Home health care, providing skilled nursing and related care to patients in their own homes, was available to 80 percent of participants. Home health care benefits were provided to virtually all HMO participants (99 percent); these benefits were provided less extensively to non-HMO participants (77 percent). The higher incidence of coverage for home health care benefits in HMO's occurs because federally qualified HMO's are required to provide this benefit. The vast majority of HMO participants in the survey belong to federally qualified plans. When home health care benefits were provided in HMO's, coverage was typically unlimited. Unlimited coverage was quite rare in non-HMO's. Plans, especially non-HMO's, often limited the duration of stays in an extended care facility and the number of visits of home health care services. Coverage in an extended care facility is commonly limited to 60 days per confinement, while home health care services are frequently restricted to 100 visits per year. Coverage for hospice care, another alternative to hospitalization, was provided to 57 percent of full-time participants. A hospice offers nursing care and psychological support to terminally ill patients, usually defined as having 6 months or less to live. Plans often placed ceilings on maximum dollar amounts payable during a hospice stay.3Surgical coverage Virtually all participants had medical plans that based payments for in-hospital surgery on the "usual, customary, and reasonable" (UCR) charges for the particular procedure performed.4 As was true with hospitalization, in-hospital surgical benefits were most likely to be covered at a specified percentage rate, usually after any required overall plan deductible. Fifty-two percent of participants were covered at 80 percent of the UCR charges. Twenty-four percent of participants were covered for the full UCR charges (tables 43-44). In-hospital surgery was covered according to a schedule establishing a maximum amount payable for each procedure for 4 percent of full-time enrollees. Charges exceeding the scheduled maximums, however, were generally covered, subject to the plan's overall deductible and coinsurance. Four-fifths of participants were in plans where outpatient surgery was covered in an identical manner to in-hospital surgery, whether in full, a percent of UCR charges, or subject to a schedule of maximum payments. For HMO enrollees, both inpatient and outpatient surgery were almost always covered in full. With the steady rise in costs of medical care, health care insurers are encouraging enrollees to substitute less expensive outpatient services, such as outpatient surgery, for inpatient hospital services. Non-HMO health care providers have increasingly begun to provide higher reimbursement rates for outpatient surgery to encourage its use over inpatient surgery.5 Twenty-three percent of participants in non-HMO's had coverage for outpatient surgery treated differently (generally with a higher reimbursement) than for inpatient surgery. Two-thirds of medical care participants with coverage for inpatient surgery had to satisfy either a separate deductible or were subject to the overall plan deductible prior to receiving benefits. When outpatient surgery was provided in those plans, just under one-fifth of participants were not required to pay any deductible before receiving benefits. Generally, when deductibles are not applicable for in-hospital surgery, neither are they applicable for outpatient procedures. Cost containment In addition to data on the extent of coverage for specific medical services, the survey looked at the availability of medical plans with either benefit management programs, managed care plans, or review boards. The goal of these programs is to make sure that the services rendered are medically necessary and provided in the most appropriate health setting. These programs were developed to some extent in response to the rapid rise in medical care costs during the 1980's. Eighty-nine percent of medical care participants had some "managed care" provision available to them (table 45). This includes all participants in HMO's and PPO's, where care is managed by directing patients to specific providers or services. In addition, 84 percent of fee- for-service participants were in plans that had at least one managed care feature, such as hospital pre-admission certification, pre-admission testing, and second surgical opinion. Some advanced managed care programs can consist of four or more features such as: Pre-admission review of all hospital admissions for non-emergency or non-maternity care, concurrent review to monitor care while hospitalized, discharge planning to coordinate a continued course of treatment in more appropriate health care settings, and mandatory second surgical opinions for certain selected procedures. Among the plan features studied in 1992 was the finding that 71 percent of the non- HMO participants were required to get authorization before being admitted to a hospital (table 46). When precertification was required prior to hospitalization, a deductible per hospital admission or a reduction in the coinsurance paid by the plan were the most prevalent penalties for non-compliance. It was most common for the deductibles to range between $200-$500. When the coinsurance rate paid by the plan was reduced for participants who did not seek approval before being hospitalized, it was most likely to 50 percent of charges. Less prevalent cost containment features in non-HMO plans included incentives for the employee to audit hospital bills (8 percent) and more restrictive benefits for nonemergency weekend admissions (15 percent). In plans where there were penalties imposed for nonemergency weekend admissions, it was nearly universal for no benefits to be provided. Thirty-seven percent of participants had their care subject to utilization review. Utilization review is the process of reviewing the appropriateness and quality of care provided to patients. Benefit provisions for prehospitalization testing, a means of decreasing the length of hospitalization, covered 53 percent of the non-HMO participants. Most plans covered 100 percent of charges for preadmission testing. In non-HMO plans, second surgical opinion provisions were applicable to just over seven-tenths of participants with inpatient surgical benefits (table 47). The majority of these plan enrollees were assessed penalties for not obtaining second opinions, generally applying only to selected procedures. The most common penalty was to reduce the coinsurance rate if a second opinion was not sought. Second surgical opinion provisions are rare in HMO's which, by their very nature, emphasize preventive, cost- efficient medical care. As such, built-in forms of utilization review, including second surgical opinions, are automatically provided. Preferred provider organizations The previous section concentrated on managed care features within traditional fee-for- service plans. This section will discuss PPO's, that is, where care is managed by directing patients to specific providers or services. PPO's include incentives for receiving medical services and supplies from designated providers, with certain medical services more likely to be subject to these incentives than others. For example, virtually all PPO participants had hospital room and board coverage treated more generously if care was received at specified hospitals (table 48). In contrast, surgery, physicians services and outpatient prescription drugs were less likely to be subject to an incentive for using preferred providers. When a PPO option was available, it was nearly universal for the plan to pay a higher percentage of expenses if the participant received care from the designated providers. In such plans, it was most prevalent for the plan to pay 90 percent of covered charges if the individual used the PPO provider and 80 percent if the individual chose a non-PPO provider. Another common arrangement was for plans to pay 100 percent of covered expenses if the participants stayed within the PPO network and 80 percent if they went outside of the network. About 1 in 3 workers covered by a PPO had an annual deductible based on who provided care.6 Enrollees in PPO's may be subject to a yearly deductible of $100; however, if they go outside of the network, the deductible might be $200. There are also some plans where participants in PPO's are not subject to a deductible for network services, but are required to pay one if they do not go to the designated providers. Finally, 38 percent of the PPO participants were in plans subject to a modest copayment for physicians' office visits, for example, $10 per visit. For these same workers, visits to non-preferred doctors were usually covered under overall limits, requiring satisfaction of an annual deductible and a 20-percent coinsurance paid by the enrollee. Prescription drug benefits Virtually all participants had medical plans that provided coverage for outpatient prescription drugs (table 34). Inpatient prescription drugs are always covered under hospital miscellaneous services, generally in the same fashion as room and board charges. Outpatient prescription drugs, when provided are covered under a separate provision of the medical plan or a separate outpatient prescription drug plan. Coverage for outpatient prescription drugs differed by type of medical plan. Usually in non-HMO plans, outpatient prescription drugs were covered under overall limitations only; that is, before any benefits were provided, the participant was subject to a yearly deductible or a coinsurance requirement. However, in HMO's, prescriptions were usually subject to a minimal copayment, commonly $5 per prescription. It is more likely for non-HMO participants to have prescription drug coverage than HMO participants, and rare for both HMO and non-HMO participants to have prescription drugs covered in full. Sixteen percent of HMO participants were not covered for prescription drug benefits, compared with 3 percent of non-HMO participants. A prescription can often be filled using either a brand name drug or a generic drug; generic drugs are often less expensive than their brand name counterparts. Eighteen percent of the participants with prescription drug coverage received a higher reimbursement for obtaining generic rather than brand name prescription drugs. Mail order drug programs were available to 10 percent of employees with prescription drug coverage. These programs provided drugs for maintenance purposes, that is, drugs required on a continuous basis. In such arrangements, participants often receive a higher reimbursement or are charged less for mail order drugs than for drugs purchased directly from a pharmacy.7Mental health coverage Mental health coverage, though available to nearly all participants, was frequently subject to more restrictive limitations than other illnesses (table 49). Of the medical care participants with mental health benefits, 83 percent had more restrictive hospital coverage for mental illness than for other ailments. Plans commonly limited the duration of hospital stays to 30 or 60 days per year for mental health care, compared to 120, 365, or unlimited days for other illnesses.8 They also frequently imposed a separate, lower, dollar maximum on all mental health expenses, such as a lifetime maximum of $50,000. Even more restrictive was coverage for mental health care outside the hospital (psychiatric office visits). Virtually all participants with mental health care coverage were subject to special limits for outpatient care in 1992. Outpatient mental health care was commonly covered for fewer visits per year than other outpatient services, subject to special maximum dollar limits on annual payments, and covered at a coinsurance rate of 50 percent rather than the usual 80 percent paid by the plan for other illnesses. Also, outpatient mental health care expenses often could not be used to meet the employee's maximum out-of-pocket expense limitation. Therefore, reimbursement for these expenses did not increase to 100 percent even when the out-of-pocket expense limitation was met.9Alcohol and drug abuse treatment Alcohol and drug abuse treatment benefits covered nearly all full-time medical participants (tables 50-52). Nine out of 10 participants with alcohol abuse treatment benefits had their coverage treated the same as those for drug abuse treatment. Benefits provided under substance abuse care included both detoxification and rehabilitation. Detoxification involves supervised care by medical personnel designed to reduce or eliminate the symptoms of chemical dependency. Rehabilitation is designed to provide a variety of services intended to alter the behavior of substance abusers. Such services are generally provided once detoxification has been completed. Virtually all participants covered by alcohol abuse treatment benefits were eligible for inpatient (in-hospital) detoxification, but only 73 percent received inpatient rehabilitation coverage. (Detoxification is generally considered medically necessary, and thus it is included in nearly all medical plans. There is a greater tendency to exclude inpatient rehabilitation, because it requires less constant and less immediate care.) Outpatient alcohol abuse treatment, generally rehabilitative care, was available to 75 percent of participants with alcoholism coverage. Coverage patterns were similar for drug abuse treatment benefits. As was true with mental health care, plans were more restrictive in covering substance abuse treatment than other illnesses.10 Participants were four times more likely to have inpatient detoxification treated the same as any other inpatient confinement than to have inpatient rehabilitation covered the same as any other illness (36 percent and 9 percent, respectively). Eight percent of the participants with alcoholism treatment coverage had outpatient care treated the same as other conditions. Specific limitations for substance abuse treatment most commonly included restrictions on the number of days of inpatient hospital care per year, the number of outpatient visits per year, reduced coinsurance levels for outpatient treatment, ceilings on out-of-pocket limits not applying to outpatient care, and maximum dollar amounts per year or per lifetime. A typical limitation on inpatient care was 30 days per year. Similarly, outpatient care might be restricted to 20 or 30 visits per year at a coinsurance rate of 50 percent. Dollar maximums were often combined between inpatient and outpatient care, with $50,000 per lifetime a common limit.11 Finally, limitations on days and dollars were often combined for alcohol and drug abuse care. For example, plans often limit coverage to 30 days per year and to $50,000 per lifetime for both alcohol and drug abuse treatment. Days and dollar limits for alcohol and drug abuse treatment may also apply to mental health care. For example, it is not uncommon for mental health care and alcohol and drug abuse treatment to be subject to the same lifetime dollar maximum. Health maintenance organizations Health maintenance organizations provide a fixed set of medical benefits for a prepaid fee. The survey tabulated the details of three categories of medical care provided by HMO's-- physicians' office visits, out-of-hospital prescription drugs, and extended care facilities. For physicians' office visits, 78 percent of HMO participants were required to pay a copayment, typically $5 or $10 per visit, before treatment was received. Virtually all of the remaining participants received coverage in full. In general, HMO's did not limit the number of physicians' visits. Out-of-hospital prescription drug benefits were available to 84 percent of HMO participants. Most of these workers had to pay a copayment per prescription of $5 or more. Finally, extended care treatment facility benefits were provided to 87 percent of HMO participants. Most commonly, the number of days of coverage was limited; typical limits were 100 days per year. Other medical benefits The 1992 survey measured the incidence of several other services provided through medical care plans (table 53). For example, 28 percent of medical care participants were in plans that covered at least some of the costs for routine physical examinations, 37 percent had coverage for well-baby care, and 22 percent had incentives for child deliveries in lower cost birthing centers rather than in hospitals. HMO's nearly always included coverage for hearing care, physical examinations, well-baby care, and immunizations and inoculations. The main reason for such a high incidence of these services is that HMO's are required to include these benefits to qualify under the Health Maintenance Organization Act of 1973, as amended.12Employee contributions Just under one-half of full-time participants were required to pay part of the cost for their individual medical coverage in 1992. Seven-tenths of participants shared in the cost for family coverage (tables 54-56). Blue-collar workers were more likely to have family coverage fully employer financed than white-collar workers. One-third of blue-collar workers had family coverage totally employer paid compared to one-fifth for white-collar workers. There was very little difference among occupational groups in the percentage of workers provided fully employer financed individual medical coverage. Data on the amount of an employee's contributions for medical benefits occasionally were not available because a single payroll deduction applied to both medical care and one or more other benefits. Where the amount was reported, employee premiums for individual and family coverage averaged $37 and $151 a month, respectively. Employee medical care premiums for individual coverage showed considerable variation by type of plan. Sixty-two percent of full-time participants in HMO's were required to contribute for single coverage compared to 44 percent for non-HMO's. Differences were less pronounced for family coverage. Under HMO's, 77 percent of the participants were required to contribute towards family coverage, compared to 71 percent for non-HMO's. The average premiums for individual and family coverage were higher for participants in HMO's than for those in non-HMO's; in fact, average employee contributions for family coverage in HMO's were $21 per month higher than in non-HMO's. Individual premiums were almost $4 higher per month for HMO participants than for non-HMO participants. Of employees required to contribute toward the cost of their medical care coverage in 1992, one-fifth could do so with pretax dollars. These employees had the advantage of reducing their taxable income while purchasing medical coverage. Pretax contributions may be required or optional, and also may be offered as part of a flexible benefits arrangement. Participation requirements Medical care plans typically required that only a short eligibility period, if any, be served by new employees before coverage began. One-fourth of medical care plan participants were allowed to join a plan immediately upon being hired. For participants required to complete a minimum length of service, the required period was usually 3 months or less. Coverage for retired workers Although the Consolidated Omnibus Budget Reconciliation Act of 1985 requires employers to offer continued health care benefits for employees who are retired, laid off, or otherwise separated from employment, workers may be charged all of the premium costs at group rates. In addition, the continuation period stipulated by the law is limited.13 The survey of small private establishments focused on coverage for retired employees that was financed wholly or partly by the employer (table 57). Of the medical care participants in the survey, 18 percent worked for employers who financed, at least in part, medical care protection after retirement. The vast majority of workers were in plans that provided post retirement coverage regardless of their age. It was quite common to impose an eligibility requirement for retiree coverage; this requirement was usually either a stated length of service or qualification for the company pension plan. The level of medical care coverage for retirees under age 65 was generally the same as for active workers. Although benefit provisions were reduced for some retirees upon reaching age 65, more commonly there was no change in benefit levels apart from coordination with Medicare. Finally, it was more likely for the coverage to be partly paid by the retiree than to be wholly employer financed. This was true both for retirees under age 65 and those age 65 and over. Employee and plan payments The preceeding sections of this chapter have focused on various benefit provisions found in employer-provided health care plans. These data have been used by the Bureau of Labor Statistics to create a model of employee expenses for selected health care services.14 The model incorporates benefit provisions and selected scenarios of health care expenses, designed to represent different levels of health care usage and different types of health care services. The results of the model are estimates of what the employee and the plan would pay over the course of a year for specified medical services. There are several factors that affect what percentage of total medical care expenses are paid by the employee and the plan during the course of the year. Two of the factors which will be discussed in this section are the amount of expenses and the type of health care provider. Amount of expenses. In scenario 1, the employee had $673 in total health care expenses (table 58). As described earlier in this chapter, the majority of medical care participants are in plans subject to overall limits only. In these types of plans, the employee must satisfy an annual deductible and meet the coinsurance requirement before any benefits are paid. In 1992, the annual deductible averaged $220 and the individual usually had to meet a 20-percent coinsurance requirement. With annual expenses of $673 in scenario 1, the deductible and coinsurance requirements significantly affect what the employee and the plan pay for health care expenses. In this scenario, the employee and the plan share equally in the cost of total health care expenses. In scenario 2, the employee incurred $7,085 in total health care expenses. In this scenario, the plan paid 83 percent of total expenses. Because total charges in this scenario were much higher than in scenario 1, the deductible had much less of an effect on the employee's cost. In addition, many health care plans limit an employee's liability for catastrophic expenses which holds down out-of-pocket costs. Individuals with large expenses are more likely to reach the catastrophic expense limit (most frequently $1,000) than individuals with lower expenses. After this limit is reached, plans typically pay 100 percent of covered charges. Type of health plan. The percentage of the cost paid by the employee and the plan varied by type of health care plan. Table 58 shows that, in both scenarios, the employee paid a much lower percentage of total expenses in HMO's than in non-HMO's. In HMO's, it was rare for enrollees to be subject to an annual deductible or to be required to pay a portion of expenses (coinsurance requirement) for health care services. Doctor's office visits frequently required a copayment, most frequently $5 or $10 per visit. Most other services were generally covered in full. In contrast, non-HMO participants frequently had expenses covered subject to an annual deductible and a coinsurance requirement. Thus, participants in HMO's typically paid a lower percentage of total expenses than those in non-HMO's. Dental Care Dental care benefits were available to 33 percent of full-time employees in small private establishments in 1992 (tables 59-64).15 Among the three occupational groups, professional, technical, and related employees had the highest percentage of employees participating in dental plans (43 percent), and blue-collar and service employees had the lowest percentage of employees participating in dental plans (27 percent). Dental care may be offered as a part of a comprehensive medical and dental plan, or as a separate plan in addition to medical coverage. Often, employers offer a series of medical plans from which employees may choose, as well as a separate dental plan that can accompany any medical plan. Of the participants in dental plans: * The overwhelming majority were reimbursed by a percent of the usual, customary, and reasonable charge for all dental procedures; * Two-fifths were required to contribute toward the cost of their individual coverage, and seven-tenths were required to contribute toward the cost of family coverage; * Nearly two-thirds were in plans that specified a yearly deductible amount before any benefits were paid by the plan; * Just over four-fifths were covered by plans that limited the amount of payment each year by specifying an annual maximum benefit. Where dental benefits are included in a single plan with medical care benefits, it was not possible to distinguish which portion of the employee's contribution, if applicable, went toward dental coverage. Employee contribution data were examined in stand-alone dental plans, that is, those offered separately from medical plans. When such plans required an employee contribution, that contribution was typically under $15 per month for individual coverage and under $25 per month for family coverage. Eighty-five percent of participants covered by dental care plans received benefits through a fee-for-service plan, which reimburses patients or providers only after services are received (table 35). Such plans were most commonly self-insured or obtained through a commercial insurer. The remaining participants had their dental benefits provided through either a health maintenance organization or a preferred provider organization. Dental plans nearly always covered preventive and restorative services, and three-fifths of participants were in plans that also covered orthodontic expenses, at least for children. Preventive care typically includes dental examinations, prophylaxis (cleaning), and x rays. Restorative procedures include such basic services as fillings, periodontal care, and endodontic care, and such major services as inlays, crowns, and prosthetics.16 Dental payments were generally based on a proportion of the usual, customary, and reasonable charge for a procedure. The proportion covered by a plan often depended on the type of procedure performed. Less costly procedures such as examinations and x rays were usually covered at 100 percent. Fillings, surgery, endodontics, and periodontics were more likely to be covered at 80 percent. The most expensive procedures--inlays, crowns, prosthetics, and orthodontia-- were often covered at 50 percent of the usual, customary, and reasonable charge. Less than 1 out of 10 dental plan participants were offered reimbursement based on a schedule of cash allowances for restorative services, such as fillings, crowns, and endodontics. In this type of arrangement, each procedure is subject to a specified maximum dollar amount that can be paid to the participant or dentist. Orthodontic care was rarely subject to this type of schedule. Incentive schedules were rarely found in the survey. Under this arrangement, the percent of dental expenses paid by the plan increases each year if the participant is examined regularly by a dentist. Finally, a small number of participants were in plans requiring a copayment, after which benefits were paid in full. Copayments were commonly $5 or $10 per procedure for preventive care, while higher copayments often applied to major dental services. Sixty-five percent of dental participants were in plans that specified a deductible amount before any benefits were paid by the plan. The most frequently observed individual deductible was $50 per year. Dental plans often placed a limit on the amount of deductibles for each family (usually three times the individual deductibles). A few plans required the participant to pay a one-time deductible (usually $50) rather than a deductible every year. Plans that limited the amount of payment each year by specifying an annual maximum benefit covered 84 percent of dental plan participants. The most common limit was $1,000 per year, and the average was $1,105. Among participants in plans with orthodontic services, 85 percent had orthodontic benefits subject to a separate lifetime maximum. These orthodontic maximums which were usually either $1,000 or $1,500, averaged $1,078.17 Professional technical, and related employees had the highest average lifetime orthodontic maximum ($1,154) and blue-collar and service participants had the lowest average ($995). Preauthorization clauses require participants to obtain authorization from the plan before undergoing expensive treatment. Fifty-seven percent of dental participants were in plans with this cost containment technique. Commonly, procedures costing $200 or more were subject to advance authorization. Finally, a small percentage of participants were covered by plans with only preventive dental care, which includes dental examinations, prophylaxis (cleaning), and x rays (table 53). These participants with only preventive dental care almost always had their benefits provided under HMO's. Vision Care Vision care coverage was available to 10 percent of full-time employees in small private establishments in 1992 (table 65).18 Sixty-six percent of participants covered by vision care provisions received benefits through a fee-for-service plan (table 35). All participants eligible for vision benefits had coverage for eyeglasses; with few exceptions vision care participants had coverage for eye examinations. Three out of 4 vision care participants had coverage for contact lenses. Participants with vision care coverage generally had limits placed on their benefits. Typically, vision care participants had their coverage for eyeglasses and contact lenses subject to a scheduled dollar allowance per benefit. Other plans often required an employee copayment or offered a discount on the purchase of eyeglasses and contact lenses. Eye examinations were commonly subject to either a dollar maximum per visit, or the participant was required to pay a small copayment per visit. Finally, 14 percent of the medical participants were covered for eye examinations only (table 53). This coverage was not part of a regular vision care plan. Such limited benefits covered 69 percent of all participants enrolled in an HMO.19 Notes: 1 For a more detailed discussion on HMO's, see Thomas P. Burke and Rita S. Jain, "Trends in Employer-provided Health Care Benefits," Monthly Labor Review, February 1991, pp. 24-30. 2 This average is slightly different from the sum of the individual averages because some participants have only an annual deductible or only an annual maximum out-of- pocket expense limitation. The combined average includes only those participants with both provisions. 3 For a more detailed discussion on alternatives to hospitalization, see Thomas P. Burke, "Alternatives to Hospital Care under Employee Benefit Plans," Monthly Labor Review, December 1991, pp. 9-15. 4 The "usual, customary, and reasonable" charge is defined as being not more than the physician's usual charge; within the customary range of fees charged in the locality; and reasonable, based on the medical circumstances. 5 For more information on incentives for outpatient surgery, see Robert B. Grant, "Outpatient Surgery: Helping to Contain Health Care Costs," Monthly Labor Review, November 1992, pp. 33-36. 6 This figure differs from that published in the January 27, 1994 news release, USDL 94-42. 7 For a more comprehensive discussion on prescription drug coverage, see Cathy Baker and Natalie Kramer, "Employer-sponsored Prescription Drug Benefits," Monthly Labor Review, February 1991, pp. 31-35. 8 In some plans, a limited number of days of mental health care in the hospital were covered at the full semiprivate rate. After these limits were reached, mental health care was then subject to overall plan limits such as deductibles and coinsurance payments. 9 A detailed examination of mental health care provisions in employer-provided health care plans is provided by Allan P. Blostin in "Mental Health Benefits Financed By Employers," Monthly Labor Review, July 1987, pp. 23-27. 10 The designation of substance abuse coverage as more restrictive than that for other illnesses results from a comparison of types of coverage. For instance, if a plan limits inpatient substance abuse care to 30 days per year but the limit on inpatient care of any other type of illness is greater than 30 days per year, that plan contains separate, more restrictive, limits. 11 For more detailed discussion of employer-provided substance abuse coverage, see Marc E. Kronson, "Substance Abuse Coverage Provided by Employer Medical Plans," Monthly Labor Review, April 1991, pp. 3-10. In addition, see Substance Abuse Provisions in Employee Benefit Plans, Bulletin 2412 (Bureau of Labor Statistics, August 1992). 12 Under this act, an HMO must provide certain coverage, such as home health care, physical examinations, and children's eye and ear examinations. Under certain circumstances, employers may be required to offer employees medical care coverage through federally qualified HMO's. 13 The act requires employers who maintain health insurance plans to continue coverage to terminated workers for up to 18 months. Workers may be charged up to 102 percent of the premium cost. Based on a 1989 change to this law, employees disabled at the time of termination can have benefits continued for up to 29 months, and can be charged up to 150 percent of the premium cost after 18 months. 14 For more information regarding out-of-pocket expenses for medical services, see Allan P. Blostin, Robert B. Grant and William J. Wiatrowski, "Employee Payments for Health Care Services," Monthly Labor Review, November 1992, pp. 17-32. 15 For tabulation purposes, plans that provided only preventive dental care benefits were not included as having full dental care coverage. Data for preventive dental care benefits are found in table 53. 16 Periodontal care is the treatment of tissues and bones supporting the teeth. Endodontics involves the treatment of the tooth pulp, such as root canal work. Prosthetics deals with the construction and fitting of bridges and dentures. 17 For more details on dental care benefits, see Rita S. Jain, "Employer-sponsored Dental Insurance Eases The Pain," Monthly Labor Review, October 1988, pp. 18-23. 18 Eyeware (eyeglasses and/or contact lenses) must be included for there to be vision care coverage. If a plan provided only eye examinations, for tabulation purposes, the plan was not considered as providing vision care coverage. 19 For more details on vision care benefits, see Rita S. Jain, "Employer-sponsored Vision Care Brought Into Focus," Monthly Labor Review, September 1988, pp. 19-23.