Health Coverage Basics
As with other kinds of insurance, there are several types of health insurance policies and health care plans with many different features that are available to consumers in Michigan. Individual coverage can be purchased on your own, or group health coverage can be obtained through an employer. Additionally, there are government programs such as Medicare and Medicaid available to those who qualify.
Health carriers provide health coverage through several different entity types. The most common are health insurance companies, health maintenance organizations (HMOs), and non-profit health care corporations such as Blue Cross Blue Shield of Michigan. Throughout this web page, “health carrier” will mean any one of these entity types. When specific differences occur for a given entity, we will specify the type of health carrier.
TYPES OF COVERAGE
If an employer offers group health coverage to employees and dependents, the coverage must be made available to all eligible employees. The employer is the master policyholder and the employees are certificate holders. The master policyholder negotiates the terms of the group policy with the health carrier. The master policyholder can reduce or change the benefits and coverage, increase your share of the premium cost, switch health carriers or stop providing coverage entirely. However, if an employer provides health coverage, the contract must include certain minimum benefits required by Michigan law (see below).
Many large employers provide health coverage for employees by creating self-funded health care plans. The employers contract with entities such as Blue Cross Blue Shield of Michigan, insurance companies and third party administrators to administer the self-funded health care plan. The Department of Insurance and Financial Services (DIFS) does not have authority over the contracts for self-funded health care plans created by employers, but DIFS has authority over the administrators of such plans and, in some cases, DIFS handles external appeals for these plans.
Any health carrier may offer wellness coverage. Many employer group plans include wellness programs as an option. The health carrier may offer a reduction in premium, copayments, coinsurance, or deductibles, or a combination of these incentives, in exchange for employees’ participation in any health behavior wellness, maintenance or improvement program offered by the employer. The employer and health carrier must agree to certain indicators of employees’ health status. The employer must then provide the health carrier with evidence of improvement or maintenance of the employees’ health status and health behaviors under the program. Health carriers are not required to continue indefinitely any wellness programs or incentives associated with the program. See MCL 550.1414b and MCL 500.3426.
If you do not have access to group health coverage and are not eligible for Medicaid or Medicare, individual health coverage may be purchased through a licensed agent or directly from the health carrier. A list of individual health coverage carriers is available here. You are the policyholder on an individual policy. Your policy can cover you and your eligible dependents. Until January 1, 2014, an insurance company can decline your application for coverage on an individual insurance policy if you are over age 19 with a pre-existing medical condition. If you are accepted for coverage, for plans beginning prior to January 1, 2014, an insurance company may impose a waiting period for coverage on pre-existing conditions of up to 12 months or a Health Maintenance Organization (HMO) may impose a waiting period for coverage on preexisting conditions for up to six months.
If you are a Michigan resident with no have access to group coverage, if you apply for coverage prior to January 1, 2014 Blue Cross Blue Shield of Michigan cannot deny you coverage based on a medical condition. Until that date, Blue Cross Blue Shield of Michigan is the alternative mechanism to provide health coverage to individuals in Michigan, regardless of their health status. All Blue Cross Blue Shield of Michigan individual plans have a 180-day waiting period for coverage on pre-existing conditions for those over age 19 which can be waived if you meet certain criteria. For more information, click here.
Most HMOs are required to offer a 30 day open enrollment period each year to those seeking individual coverage. During the annual open enrollment period, HMOs cannot deny you coverage based on your medical condition, but they can deny you coverage if they have reached enrollment capacity. A list of HMOs and their annual open enrollment periods is available here. Individual contracts must include specific minimum health care benefits required by Michigan law. Individual plans can have varying copayments, coinsurance and deductibles including health plans used in conjunction with Health Savings Accounts with high deductibles. These deductibles are subject to limits set by the Internal Revenue Service.
MEDICARE AND MEDICAID
Medicare is a federal program providing health coverage for people age 65 or older, or under 65 with certain disabilities and any age with permanent kidney failure. For more information, please visit: MEDICARE.
Medicaid is a federal program administered by the states providing health coverage to those meeting certain income requirements: pregnant women, people with disabilities, people in need of nursing home care and others. For more information, please visit: www.michigan.gov/helpinghand.
STUDENT HEALTH PLANS
Student health plans are often purchased when family coverage is not available, or is unaffordable. Approximately 1,500-2,000 institutions of higher education across the country offer some type of health coverage; however, what benefits are covered by these plans, as well as how they’re regulated, vary widely. Under the Affordable Care Act, student health plans must eliminate lifetime limits; can no longer drop coverage when an enrollee gets sick or because of an unintentional mistake on an application; and cannot deny or exclude coverage for students under age 19 because of a pre-existing condition.
HOW YOUR BENEFITS ARE DELIVERED:
In the past, most individual health coverage consisted of “traditional” fee-for-service plans where the patient had a great deal of freedom in choosing their doctors and other providers and medical expenses were incurred and then reimbursed by the health carrier. “Traditional” fee-for-service plans are not managed care plans. Fewer traditional types of individual plans exist now as managed care has become more common.
Managed care is mostly seen in employer group health plans, but many individual plans now have varying elements of managed care. Features of managed care include carrier control of access to providers, risk sharing of providers, utilization and quality management, preventive care and high quality of care. Managed care can be seen in several types of plans and variations of plans including those explained below.
- HMOs - Health Maintenance Organizations: The HMO provides a comprehensive array of medical services on a prepaid basis to members who live or work within a specific geographic region. An HMO plan usually requires you to choose a primary care provider from a list of in-network providers. Your primary care provider manages most of your health care. Except for emergencies, if you need care from another provider or specialist, your primary care provider may need to give you a referral.
- HMO Point-of-Service Plan: These HMO plans are a hybrid arrangement that combines aspects of traditional insurance coverage, with HMO coverage. At the time of medical treatment, the HMO member or enrollee can elect whether to receive treatment for specified services within the HMO’s network of contracted health care providers or outside of the network. There may be higher member out-of-pocket costs for health care services received outside of the HMO network.
- PPO - Preferred Provider Organization: A PPO is not a specific type of health coverage, rather it is a contract between a health carrier and a PPO, or network of providers such as selected hospitals, physicians and others who agree to provide services at a discounted rate. PPOs may be less restrictive than an HMO in that it allows members or enrollees to receive benefits for services rendered by any provider (with increased benefits or lower out-of-pocket costs if a network provider is used). There is usually no specialist or service referral requirement, and utilization controls are less stringent.
- PPA - Preferred Provider Arrangement: A PPA is not a specific type of health coverage but rather an optional feature of a health benefit plan. The plan makes an identified network of participating providers or selected providers available to the insured in order to obtain cost-effective medical services. The providers may or may not bear a financial risk for the utilization and cost of health services that is reflected in the payments the providers receive under the plan.
MEDICAL AND HOSPITAL PLANS:
- MAJOR MEDICAL COVERAGE - Although not defined in Michigan law, major medical coverage usually pays the cost of inpatient hospital care and outpatient medical bills, such as lab tests, office visits, physical therapy, and x-rays and may include prescription coverage. You pay any appropriate copayments and deductibles. The policy covers only the eligible expenses listed in the contract or certificate of coverage. Make sure you read the contract carefully to determine your deductibles, copayments, covered benefits and exclusions.
- BASIC HOSPITAL-SURGICAL EXPENSE COVERAGE - This coverage usually pays only expenses directly related to inpatient hospital care as defined in the certificate of coverage or policy. Inpatient hospital care includes the cost of surgery, doctors’ services and treatments you receive after admittance to the hospital.
- SHORT-TERM COVERAGE - This coverage is limited to a specified period of time, but for no longer than 180 days. For example, you might buy a six-month policy with major medical coverage for the months that you are between jobs and therefore without group health coverage. These policies do not cover pre-existing conditions. See MCL 500.2213b.
- CATASTROPHIC HEALTH COVERAGE - A medical expense coverage that provides benefits after an extraordinary amount of medical expenses has been incurred, sometimes as high as $25,000. This type of coverage is sometimes called an excess major medical policy.
- HIGH DEDUCTIBLE PLANS - These plans are major medical expense plans, but are often sold in conjunction with Health Savings Accounts. They pay the cost of inpatient hospital care and outpatient medical bills but have high deductibles, currently more than $1,200 (or $2,400 for a family), that is paid from your federally tax exempt Health Savings Account. High deductible plans also have a maximum out-of-pocket amount that is paid in deductibles, copayments, and coinsurance. The maximum out-of-pocket amount for an individual is $6,500 or $12,250 for a family. See Health Savings Accounts.
LIMITED PURPOSE INDEMNITY PLANS :
ACCIDENT ONLY POLICY
This is a policy of limited medical coverage that provides cash payments in the event of injury or death resulting from a covered accident within a specified period. This type of policy pays only when you are treated for an accidental injury or if an accident causes death.
HOSPITAL INDEMNITY POLICY
This is a policy of limited medical coverage featuring cash benefits in the event of hospitalization and/or surgery resulting from an illness or injury. This type of plan pays you a flat cash amount, such as $100 per day when you are hospitalized.
SPECIFIED (DREAD) DISEASE POLICY
This policy provides per day, per service, expense-incurred, and/or lump-sum benefit payments upon the occurrence of medical events or diagnoses related to the treatment of a disease named in the policy. These are sometimes sold as Cancer Policies.
Individual policies for dental and vision benefits, pay for care not covered by typical major medical policies and may be available on a limited basis.
MICHIGAN’S MINIMUM COVERAGE REQUIREMENTS:
There are certain benefits that every health coverage contract issued in Michigan must include. There are other benefits that are not required to be included in a policy, but if the coverage is included in the policy, the health carrier has certain responsibilities concerning that coverage. The minimum coverage benefits are listed below. The information below only applies to policies that are written on an “expense incurred” basis. This type of policy pays for the actual expenses that were incurred for health care services received. The other type of policy is referred to as an “indemnity” based policy. This type of policy pays a pre-set amount for health care services received, regardless of the actual amount charged for those services. The information below does not apply to indemnity policies.
The health carrier must establish a program to prevent the onset of clinical diabetes and the contract must include coverage for equipment, supplies and educational training for the treatment of diabetes.
This mandate includes coverage for:
- Blood glucose monitors and blood glucose monitors for the legally blind
- Test strips for glucose monitors, visual reading and urine testing strips, lancets, and spring-powered lancet devices
- Insulin pumps and medical supplies required for the use of an insulin pump
- Diabetes self-management training
If the policy includes prescription coverage directly or by rider, the health carrier must include the following coverage for the treatment of diabetes, if determined to be medically necessary:
- Insulin, if prescribed by an allopathic or osteopathic physician
- Non-experimental medication for controlling blood sugar, if prescribed by an allopathic or osteopathic physician
- Medications used in the treatment of foot ailments, infections, and other medical conditions of the foot, ankle, or nails associated with diabetes, if prescribed by an allopathic, osteopathic, or podiatric physician
Diabetes includes: Gestational diabetes, insulin-dependent diabetes, and non-insulin-dependent diabetes. See MCL 500.3406p and MCL 550.1416b.
BREAST CANCER DIAGNOSTIC SERVICES
The health carrier must offer or include coverage for breast cancer diagnostic services, breast cancer outpatient treatment services, and breast cancer rehabilitative services.
Breast screening mammography must be allowed using the following schedule:
(a) A woman 35 years of age or older and under 40 years of age, coverage for 1 screening mammography examination during that 5-year period.
(b) A woman 40 years of age or older, coverage for 1 screening mammography examination every calendar year.
See MCL 500.3406d and MCL 550.1416.
The health carrier must offer benefits for prosthetic devices to maintain or replace the body parts of an individual who has undergone a mastectomy. This includes medical care for an individual who receives reconstructive surgery following a mastectomy or who is fitted with a prosthetic device.
See MCL 500.3406a and MCL 550.1416.
If the health carrier provides coverage for inpatient hospital care, it must also offer coverage for hospice care and include a description of the coverage in the contract.
See MCL 500.3406c and MCL 550.1417.
CHEMOTHERAPY (CANCER TREATMENT)
In Michigan, a health carrier must provide coverage for a drug used in antineoplastic therapy (cancer treatment) and the reasonable cost of its administration. Coverage must be provided for any FDA approved drug regardless of whether the specific cancer for which the drug is being used as treatment is the specific cancer for which the drug has received approval by the FDA if all of the following conditions are met:
(a) The drug is ordered by a physician for the treatment of a specific type of cancer.
(b) The drug is approved by the FDA for use in cancer treatment.
(c) The drug is used as part of any cancer drug regimen.
(d) Current medical literature substantiates its efficacy and recognized oncology organizations generally accept the treatment.
(e) The physician has obtained informed consent from the patient for the treatment regimen which includes FDA approved drugs for off-label indications.
See MCL 500.3406e and MCL 550.1416a.
EMERGENCY HEALTH SERVICES
If the policy provides coverage for emergency health services it must provide coverage for medically necessary services for the sudden onset of a medical condition with signs and symptoms of sufficient severity, including severe pain, such that the absence of immediate medical attention could reasonably be expected to result in serious jeopardy to the individual's health or to a pregnancy in the case of a pregnant woman, serious impairment to bodily functions, or serious dysfunction of any bodily organ or part.
A health carrier cannot deny payment for emergency health services because of the diagnosis or the fact that prior authorization was not given before the emergency services were provided.
See MCL 500.3406k and MCL 550.1418.
If the policy covers benefits for emergency services, it must provide coverage for ambulance services.
See Bulletin No. 2001-03-INS.
OBSTETRICIAN-GYNECOLOGIST AND MID-WIFE
If the health coverage requires you to designate a participating primary care provider and provides for annual well-woman examinations and routine obstetrical and gynecologic services, the woman must be allowed to have these treatments performed by an obstetrician-gynecologist or a nurse mid-wife, as long as these providers are acting within the scope of their license.
See MCL 500.3406m and MCL 550.1416d.
If a health carrier requires a designation of a primary care provider and provides coverage for dependents, the health carrier must allow the dependents to receive care from a pediatrician.
See MCL 500.3406n and MCL 550.1401g.
If the contract includes prescription drug coverage and the prescription drug coverage is limited to drugs included in a formulary, the health carrier must provide the formulary restrictions. It must also provide for exceptions when a non-formulary medication is medically necessary and an appropriate alternative.
OFF-LABEL USE OF APPROVED DRUG
If the contract provides prescription coverage the health carrier must provide coverage for an off-label use of an FDA approved drug and the reasonable cost of supplies medically necessary to administer the drug. “Off-label” means the use of a drug for clinical indications other than those stated in the labeling approved by the FDA.
The health carrier must include coverage for intermediate and outpatient care for substance abuse treatment. The contract must provide a minimum dollar amount for coverage of substance abuse. The minimum amount is adjusted each year based on the Consumer Price Index. To review the current substance abuse minimum benefit amount, see Substance Abuse Benefit Limit.
AUTISM SPECTRUM DISORDER (ASD)
Beginning October 15, 2012, most policies that are issued, amended or renewed must provide coverage for diagnosis and treatment of ASDs. Health carriers may not:
- limit the number of visits a member, insured, or enrollee may use for treatment of ASDs covered under the bills,
- deny or limit coverage on the basis that it is educational or habilitative in nature, or
- subject autism coverage to dollar limits, copays, deductibles, or coinsurance provisions that do not apply to physical illness generally.
Coverage for treatment of ASDs may be limited to an individual through age 18. Carriers may impose certain maximum annual benefits on ASD coverage, subject to federal mental health parity laws and the Affordable Care Act.
See MCL 500.3406s and MCL 550.1416e.
AFFORDABLE CARE ACT PROVISIONS:
Grandfathered plans are those that were in existence on March 23, 2010 and have stayed basically the same. But they can enroll people after that date and still maintain their grandfathered status. In other words, even if you joined a grandfathered plan after March 23, 2010, the plan may still be grandfathered. The status depends on when the plan was created, not when you joined it.
Check your plan’s materials or check with your employer to find out if your current plan is a grandfathered plan.
ESSENTIAL HEALTH BENEFITS
The ACA ensures that, as of January 1, 2014, health plans offered in the individual and small group markets, both inside and outside of the Health Insurance Marketplace, offer a comprehensive package of items and services, known as essential health benefits. Essential health benefits must include items and services within at least the following 10 categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.
Insurance policies must cover these benefits in order to be certified and offered in the Health Insurance Marketplace, and all Medicaid state plans must cover these services by 2014. For more information, click here.
ANNUAL AND LIFETIME LIMITS
The ACA prohibits insurance companies from limiting lifetime coverage for essential health benefits. In 2014, this applies to yearly limits too. Insurance companies can still set a yearly dollar limit of $2 million on what they spend for your coverage for plan years or policy years starting before January 1, 2014. No yearly dollar limits on essential health benefits are allowed for plan years starting January 1, 2014.
Protections against lifetime limits on coverage apply to all health plans, including grandfathered plans, whether you get coverage through your employer or buy it yourself. Protections against annual limits apply to most health plans, but they don’t apply to grandfathered individual health plans.
COVERAGE FOR YOUNG ADULTS:
Pursuant to the ACA, if a plan covers children, they can be added or kept on the health insurance policy until they turn 26 years old. Children can join or remain on a plan even if they are married, not living with their parents, attending school, not financially dependent on their parents, and/or eligible to enroll in their employer’s plan.
Individuals enrolled in retiree-only plans should be aware that those plans do NOT have to offer coverage for children up to age 26. Retiree-only plans are exempt from many of the ACA’s mandates.
Many health plans are required to cover certain preventive care services at no cost to you. You may be eligible for free preventive screenings, like blood pressure and cholesterol tests, mammograms, colonoscopies, and more. This includes coverage for vaccines and new preventive services for women.
The requirement to provide preventive services at no cost applies only to non-grandfathered health plans created or bought before March 23, 2010.
In Michigan, a health carrier, except for Blue Cross Blue Shield of Michigan or an HMO during its annual open enrollment, can refuse to issue an individual contract if you have a pre-existing condition. A pre-existing condition is a condition for which medical advice, diagnosis, care, or treatment was recommended prior to the application for health coverage. The health carrier can issue a policy with an exclusion or limitation for a pre-existing condition but the limitation or exclusion cannot be for more than 12 months (six months for Blue Cross Blue Shield of Michigan). With the implementation of the Affordable Care Act, children under 19 cannot be denied coverage for a pre-existing condition, but adults can still be denied coverage for pre-existing conditions until 2014.
COMMON POLICY TERMS:
A deductible is a specified dollar amount of medical expenses which the covered person must pay before a health care policy or plan will pay. Usually the deductible is an annual amount. For example, if your deductible is $1,000, your plan won’t pay anything until you’ve met your $1,000 deductible for covered health care services that are subject to that deductible.
A copayment or copay is a fixed dollar amount paid for a covered health care service, usually when services are received.
The percentage of covered expenses under a health care plan that will be paid once the deductible is satisfied.
The maximum sum paid by the insured on an annual basis after paying the coinsurance amounts for the allowable expenses of covered health services.
PRE-EXISTING MEDICAL CONDITION
A pre-existing condition is a condition for which medical advice, diagnosis, care, or treatment was recommended prior to the application for health coverage. For coverage options see “Pre-Existing Conditions,” above.
MAXIMUM BENEFIT LIMITS
In general as a result of the Affordable Care Act, there are no longer any lifetime dollar limits on essential health benefits in any health plans. Essential health benefits are a set of health care service categories that must be covered by certain plans, starting in 2014, including items and services within at least the following 10 categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.
The following links contain definitions of some of the most common health coverage terms:
NAIC Glossary of Insurance Terms
Glossary of Health Coverage and Medical Terms