Variations In Plan Design

The preceding descriptions of benefit provisions are intended to acquaint the reader with standard types of medical plans. The reader should be aware that there is wide latitude in design alternatives within the frameworks described. For instance, with the traditional prepayment and indemnity products, which benefits are included in the medical/surgical component and which benefits are covered by supplemental major medical can dramatically alter the nature of a plan. Through the use of its fee schedule, an insurer might exert greater control over provider price escalation, including procedures in the medical/surgical component. An alternate design could include more items from the medical/surgical component in the supplemental major medical portion, subjecting these to deductibles and coinsurance, or the plan could characterize hospitalization benefits as the only form of basic benefits. Some supplemental major medical plans, called wraparounds, only supplement basic hospitalization benefits.

With a comprehensive plan, variation as to which benefits are subject to deductibles and coinsurance can lead to very different plan designs. Some comprehensive plans, the so-called "full-pay hospital" plans, waive deductibles and coinsurance on hospitalizations, making the comprehensive plan resemble a first-dollar plan. Even payments to providers can combine different reimbursement systems, with payment on a fee schedule up to a certain level and then above that on a reasonable and customary basis, with subscribers paying a deductible and coinsurance at the reasonable and customary level. Some flexible benefit programs offer plan participants various alternative comprehensive plans with different levels of deductibles and coinsurance.

Accordingly, a plan sponsor can use this flexibility in designing plans that best suit the organization's objectives. The sponsor should consider designs that balance human resource and organization goals with administrative, communication, and funding realities.