Frequently Asked Questions

Table of Contents

  1. What is COBRA?
  2. Should I COBRA my coverage from my previous employer, or buy a personal policy?
  3. What is The Health Insurance Portability Accountability Act of 1996
  4. What is a HMO (Health Maintenance Organization)?
  5. What is a PPO (Preferred Provider Organization)?
  6. What is a Traditional Indemnity Plan?
  7. How do deductible plans work? (Individual and Family Plans)
  8. How are pre-existing conditions covered? (Individual and Family Plans)
  9. What if I am declined coverage? (Individual and Family Plans)
  10. can I see any doctor I want? (Individual and Family Plans)
  11. How long does it take to get coverage approved? (Individual and Family Plans)
  12. What is Georgia Major Risk Medical Insurance Program (MRMIP)?
  13. Are my premium payments tax deductible? (Individual and Family Plans)
  14. What is a Health Savings Account (Individual and Family Plans)

What is COBRA?



What is the Continuation Health Law?
Who is entitled to benefits?
Plan Coverage
Beneficiary Coverage
Qualifying Events
Chart: Periods of Coverage
Your Rights: Notice and Election Procedures
How COBRA coverage works
Covered Benefits
Duration of Coverage
Paying for COBRA coverage
Claims Procedures
Role of the Federal Government


Health insurance programs allow workers and their families to takecare of essential medical needs. These programs can be one of the most important benefitsprovided by your employer. There was a time when group health coverage was available onlyto full-time workers and their families. That changed in 1985 with the passage of healthbenefit provisions in the Consolidated Omnibus Budget Reconciliation Act (COBRA). Now,terminated employees or those who lose coverage because of reduced work hours may be ableto buy group coverage for themselves and their families for limited periods of time. Ifyou are entitled to COBRA benefits, your health plan must give you a notice stating yourright to choose to continue benefits provided by the plan. You have 60 days to acceptcoverage or lose all rights to benefits. Once COBRA coverage is chosen, you are requiredto pay for the coverage. This booklet is designed to:

  • Outline the rules that apply to health plans for employees in theprivate sector
  • Provide a general explanation of COBRA requirements
  • Spotlight your rights to benefits under this law


Congress passed the landmark Consolidated Omnibus BudgetReconciliation Act (COBRA){1} health benefit provisions in 1985. The law amends theEmployee Retirement Income Security Act (ERISA), the Internal Revenue Code and the PublicHealth Service Act to provide continuation of group health coverage that otherwise wouldbe terminated.

COBRA contains provisions giving certain former employees, retirees,spouses and dependent children the right to temporary continuation of health coverage atgroup rates. This coverage, however, is only available in specific instances. Group healthcoverage for COBRA participants is usually more expensive than health coverage for activeemployees, since usually the employer formerly paid a part of the premium. It isordinarily less expensive, though, than individual health coverage.

The law generally covers group health plans maintained by employerswith 20 or more employees in the prior year. It applies to plans in the private sector andthose sponsored by state and local governments.{2} The law does not, however, apply toplans sponsored by the Federal government and certain church- related organizations.

Group health plans sponsored by private sector employers generallyare welfare benefit plans governed by ERISA and subject to its requirements for reportingand disclosure, fiduciary standards and enforcement. ERISA neither establishes minimumstandards or benefit eligibility for welfare plans nor mandates the type or level ofbenefits offered to plan participants. It does, though, require that these plans haverules outlining how workers become entitled to benefits.

For COBRA purposes, a group health plan ordinarily is defined as aplan that provides medical benefits for the employer's own employees and their dependentsthrough insurance or otherwise (such as a trust, health maintenance organization,self-funded pay-as-you-go basis, reimbursement or combination of these). Medical benefitsprovided under the terms of the plan and available to COBRA beneficiaries may include:

  • Inpatient and outpatient hospital care
  • Physician care
  • Surgery and other major medical benefits
  • Prescription drugs
  • Any other medical benefits, such as dental and vision care

Life insurance, however, is not a benefit that must be offered toindividuals for purposes of health continuation coverage.

{1} The original continuation health provisions were contained inTitle X of COBRA, which was signed into law (Public Law 99-272) on April 7, 1986.

{2} Provisions of COBRA covering state and local government plansare administered by the U.S. Public Health Service within the Department of Health andHuman Services.


There are three elements to qualifying for COBRA benefits. COBRAestablishes specific criteria for plans, beneficiaries and events which initiate thecoverage.


Group health plans for employers with 20 or more employees on atleast 50 percent of the working days in the previous calendar year are subject to COBRA."Employees" include full-time and part-time workers, agents, independentcontractors and directors, and certain self-employed individuals eligible to participatein a group health plan.

A qualified beneficiary generally is any individual covered by agroup health plan on the day before a qualifying event. A qualified beneficiary may be anemployee, the employee's spouse and dependent children, and in certain cases, a retiredemployee, the retired employee's spouse and dependent children.


"Qualifying events" are certain types of events that wouldcause, except for COBRA continuation coverage, an individual to lose health coverage. Thetype of qualifying event will determine who the qualified beneficiaries are and therequired amount of time that a plan must offer the health coverage to them under COBRA. Aplan, at its discretion, may provide longer periods of continuation coverage.

The types of qualifying events for employees are :

  • Voluntary or involuntary termination of employment for reasonsother than "gross misconduct"
  • Reduction in the number of hours of employment

The types of qualifying events for spouses are :

  • Termination of the covered employee's employment for any reasonother than "gross misconduct"
  • Reduction in the hours worked by the covered employee
  • Covered employee's becoming entitled to Medicare
  • Divorce or legal separation of the covered employee
  • Death of the covered employee

The types of qualifying events for dependent childrenare:

  • Termination of covered employee's employment for any reason otherthan "gross misconduct"
  • Reduction in the hours worked by the covered employee
  • Loss of "dependent child" status under the plan rules
  • Covered employee's becoming entitled to Medicare
  • Divorce or legal separation of the covered employee
  • Death of the covered employee


Qualifying Events Beneficiary Coverage
Termination Employee 18 month{4}
Reduced hours Spouse

Dependent child

18 month{4}
Employee entitled to Medicare Spouse

Dependent child

36 months
Divorce or legal separation Spouse

Dependent child

36 months
Death of covered employee Spouse

Dependent child

36 months
Loss of "dependent" status Spouse

Dependent child

36 months

{3} The Omnibus Budget Reconciliation Act of 1986 containedamendments to the Internal Revenue Code and ERISA affecting retirees and family memberswho receive post-retirement health coverage from employers involved in bankruptcyproceedings begun on or after July 1, 1986. This booklet does not address that group.

{4} In the case of individuals who qualify for Social Securitydisability benefits, special rules apply to extend coverage an additional 11 months.


COBRA outlines procedures for employees and family members to electcontinuation coverage and for employers and plans to notify beneficiaries. The qualifyingevents contained in the law create rights and obligations for employers, planadministrators and qualified beneficiaries.

Qualified beneficiaries have the right to elect to continue coveragethat is identical to the coverage provided under the plan. Employers and planadministrators have an obligation to determine the specific rights of beneficiaries withrespect to election, notification and type of coverage options.


General Notices

An initial general notice must be furnished to covered employees,their spouses and newly hired employees informing them of their rights under COBRA anddescribing provisions of the law. COBRA information also is required to be contained inthe summary plan description (SPD) which participants receive. ERISA requires that SPDscontaining certain plan information and summaries of material changes in plan requirementsbe furnished to participants in modified and updated SPDs. Plan administrators mustautomatically furnish the SPD booklet 90 days after a person becomes a participant orbeneficiary or within 120 days after the plan is subject to the reporting and disclosureprovisions of the law.

Specific Notices

Specific notice requirements are triggered for employers, qualifiedbeneficiaries and plan administrators when a qualifying event occurs. Employers mustnotify plan administrators within 30 days of an employee's death, termination, reducedhours of employment, entitlement to Medicare or a bankruptcy.

Multi employer plans may provide for a longer period of time. Theemployee, retiree or family member should notify the plan administrator within 60 days ofevents consisting of divorce or legal separation or a child's ceasing to be covered as adependent under plan rules.

Disabled beneficiaries must notify plan administrators of SocialSecurity disability determinations. A notice must be provided within 60 days of adisability determination and prior to expiration of the 18-month period of COBRA coverage.These beneficiaries also must notify the plan administrator within 30 days of a finaldetermination that they are no longer disabled.

Plan administrators, upon notification of a qualifying event, mustautomatically provide a notice to employees and family members of their election rights.The notice must be provided in person or by first class mail within 14 days of receivinginformation that a qualifying event has occurred.

There are two special exceptions to the notice requirements formulti employer plans. First, the time frame for providing notices may be extended beyondthe 14- and 30-day requirements if allowed by plan rules. Second, employers are relievedof the obligation to notify plan administrators when employees terminate or reduce theirwork hours. Plan administrators are responsible for determining whether these qualifyingevents have occurred.


The election period is the time frame during which each qualifiedbeneficiary may choose whether to continue health care coverage under an employer's grouphealth plan. Qualified beneficiaries have a 60-day period to elect whether to continuecoverage. This period is measured from the later of the coverage loss date or the date thenotice to elect COBRA coverage is sent. COBRA coverage is retroactive if elected and paidfor by the qualified beneficiary.

A covered employee or the covered employee's spouse may elect COBRAcoverage on behalf of any other qualified beneficiary. Each qualified beneficiary,however, may independently elect COBRA coverage. A parent or legal guardian may elect onbehalf of a minor child.

A waiver of coverage may be revoked by or on behalf of a qualifiedbeneficiary prior to the end of the election period. A beneficiary may then reinstatecoverage. Then, the plan need only provide continuation coverage beginning on the date thewaiver is revoked.


Example 1:

John Q. participates in the group health plan maintained by the ABCCo. John is fired reason other than gross misconduct and his health coverage isterminated. John may elect and pay for a maximum of 18 months of coverage by theemployer's group health plan at the group rate. (See Paying for COBRA Coverage.)

Example 2:

Day laborer David P. has health coverage through his wife's plansponsored by the XYZ Co. David loses his health coverage when he and his wife becomedivorced. David may purchase health coverage with the plan of his former wife's employer.Since in this case divorce is the qualifying event under COBRA, David is entitled to amaximum of 36 months of COBRA coverage.

Example 3:

Acme, Inc. is a small business which maintained an insured grouphealth plan for its 10 employees in 1987 and 1988. Mary H., a secretary with six years ofservice, leaves in June 1988 to take a position with a competing firm which has no healthplan. She is not entitled to COBRA coverage with the plan of care West, Inc. since the firm hadfewer than 20 employees in 1987 and is not subject to COBRA requirements.

Example 4:

Jane W., a stock broker, left a brokerage firm in May 2004to take aposition with a chemical company. She was five months pregnant at the time. The healthplan of the chemical company has a pre-existing condition clause for maternity benefits.Even though Jane signs up for the new employer's plan, she has the right to elect andreceive coverage under the old plan for COBRA purposes because the new plan limitsbenefits for preexisting conditions.


Qualified beneficiaries must be offered benefits identical to thosereceived immediately before qualifying for continuation coverage.

For example, a beneficiary may have had medical, hospitalization,dental, vision and prescription benefits under single or multiple plans maintained by theemployer. Assuming a qualified beneficiary had been covered by three separate health plansof his former employer on the day preceding the qualifying event, that individual has theright to elect to continue coverage in any of the three health plans.

If a plan provides both core and non-core benefits, individuals maygenerally elect either the entire package or just core benefits. Individuals do not haveto be given the option to elect just the non-core benefits unless those were the onlybenefits carried under that particular plan before a qualifying event.

Non-core benefits are vision and dental services, except where theyare mandated by law in which case they become core benefits. Core benefits include allother benefits received by a beneficiary immediately before qualifying for COBRA coverage.Beneficiaries may change coverage during periods of open enrollment by the plan.


COBRA establishes required periods of coverage for continuationhealth benefits. A plan, however, may provide longer periods of coverage beyond thoserequired by COBRA. COBRA beneficiaries generally are eligible to pay for group coverageduring a maximum of 18 months for qualifying events due to employment termination orreduction of hours of work. Certain qualifying events, or a second qualifying event duringthe initial period of coverage, may permit a beneficiary to receive a maximum of 36 monthsof coverage.

Coverage begins on the date that coverage would otherwise have beenlost by reason of a qualifying event and can end when:

  • The last day of maximum coverage is reached
  • Premiums are not paid on a timely basis
  • The employer ceases to maintain any group health plan
  • Coverage is obtained with another employer group health plan that does not contain any exclusion or limitation with respect to any pre-existing condition of such beneficiary
  • A beneficiary is entitled to Medicare benefits

Special rules for disabled individuals may extend the maximumperiods of coverage. If a qualified beneficiary is determined under Title II or XVI of theSocial Security Act to have been disabled at the time of a termination of employment orreduction in hours of employment and the qualified beneficiary properly notifies the planadministrator of the disability determination, the 18-month period is expanded to 29months.

Although COBRA specifies certain maximum required periods of timethat continued health coverage must be offered to qualified beneficiaries, COBRA does notprohibit plans from offering continuation health coverage that goes beyond the COBRAperiods.

Some plans allow beneficiaries to convert group health coverage toan individual policy. In this case, you must be given the option to enroll in a conversionhealth plan. You usually must enroll in the plan within 180 days before your COBRAcoverage ends. The premium is generally not at a group rate. The conversion option,however, is not available if you end COBRA coverage before reaching the maximum period ofentitlement or it is unavailable under the plan.


Beneficiaries may be required to pay the entire premium forcoverage. It cannot exceed 102 percent of the cost to the plan for similarly situatedindividuals who have not incurred a qualifying event. Premiums reflect the total cost ofgroup health coverage, including both the portion paid by employees and any portion paidby the employer before the qualifying event, plus two percent for administrative costs.

For disabled beneficiaries, the premium may be increased after 18months to 150 percent of the plan's total cost of coverage for the last 11 months ofcontinuation coverage.

Premiums due may be increased if the costs to the plan increase butgenerally must be fixed in advance of each 12-month premium cycle. The plan must allow youto elect to pay premiums on a monthly basis if requested by you.

The initial premium payment must be made within 45 days after thedate of the COBRA election by the qualified beneficiary. Payment must cover the period ofcoverage from the date of COBRA election retroactive to the date of the qualifying event.Premiums for successive periods of coverage are due on the date stated in the plan with aminimum 30-day grace period for payments. No payment, however, need be made earlier than45 days after the date of the election.

The due date may not be prior to the first day of the period ofcoverage. For example, the due date for the month of January could not be prior to January1 and coverage for January could not be canceled if payment is made by January 31.

Premiums for the rest of the COBRA period must be made within 30days of the due date for each such premium or such longer period as provided by the plan.

COBRA beneficiaries remain subject to the rules of the plan andtherefore must satisfy all costs related to deductibles, catastrophic and other benefitlimits.


Health plan rules must explain how to obtain benefits and mustinclude written procedures for processing claims. Claims procedures are to be included inthe SPD booklet.

You should submit a written claim for benefits to whomever isdesignated to operate the health plan (employer, plan administrator, etc.). If the claimis denied, notice of denial must be in writing and furnished generally within 90 daysafter the claim is filed. The notice should state the reasons for the denial. anyadditional information needed to support the claim and procedures for appealing thedenial.

You have 60 days to appeal a denial and must receive a decision onthe appeal within 60 days after that unless the plan:

•provides for a special hearing, or •the decision must bemade by a group which meets only on a periodic basis. Contact the plan administrator formore information on filing a claim for benefits. Complete plan rules are available fromemployers or benefits offices. There can be charges up to 25 cents a page for copies ofplan rules.


Continuation coverage laws are administered by several agencies. TheDepartments of Labor and the Treasury have jurisdiction over private sector health plans.The United States Public Health Service administers the continuation coverage law as itaffects public sector health plans.

The Labor Department's interpretative and regulatory responsibilityis limited to the disclosure and notification requirements. If you need furtherinformation on your election or notification rights with a private sector plan, write to:

U.S. Department of Labor
Pension and Welfare Benefits Administration
Division of Technical Assistance and Inquiries
200 Constitution Ave., N.W.
(Room N-5658)
Washington, D.C. 20210

The Internal Revenue Service, which is in the Department of theTreasury, is responsible for publishing regulations on COBRA provisions relating toeligibility and premiums. Both Labor and Treasury share jurisdiction for enforcement.

The U.S. Public Health Service, located in the Department of Healthand Human Services, has published Title XXII of the Public Health Service Act entitled"Requirements for Certain Group Health Plans for Certain State and LocalEmployees." Information about COBRA provisions concerning public sector employees isavailable from the:

U.S. Public Health Service
Office of the Assistant Secretary for Health
Grants Policy Branch (COBRA)
5600 Fishers Lane
(Room 17A-45)
Rockville, Maryland 20857

Federal employees are covered by a law similar to COBRA. Thoseemployees should contact the personnel office serving their agency for more information ontemporary extensions of health benefits.


Rising medical costs have transformed health benefits from aprivilege to a household necessity for most Americans. The COBRA law creates anopportunity for persons to retain this important benefit.

Workers need to be aware of changes in health care laws to preservetheir benefit rights. A good starting point is reading your plan booklet. Most of thespecific rules on COBRA benefits can be found there or with the person who manages yourplan.

Be sure to periodically contact the health plan to find out aboutany changes in the type or level of benefits offered by the plan.

Re-printed from : THE ALEXANDER LAW FIRM - alexanderlawdot com

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Should I COBRA my coverage from my previous employer, or buy a personal policy ?

The answer to this question depends on several things, but the two mainissues are eligibility and duration.

Eligibility : Individual (personal) plans require that youqualify by health. If you have pre-existing conditions that would keep youfrom qualifying for an individual plan you may want to consider COBRA. Thehealth qualifications vary from insurance company to insurance company, and ifyou are uncertain if you would qualify, be certain that you are approved for newcoverage before you decline your COBRA option.

Duration : If your plan is to only need coverage for a fewmonths until new coverage would be available, such as a waiting period from a new employer or laid off, you may be better offto COBRA your current coverage. Individual plans can take up to 60 days to be approved.

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What is the Health Insurance Portability Availability and Affordability Act of1996?

Often referred to as HIPAA, allows people to change from one grouphealth plan to another without being imposed a pre-existing condition exclusion on the new group plan.
See this link for a detailed description of this act

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What is a HMO (Health Maintenance Organization)?

If you want to know more about HMOs or want to know why you might choose an HMO foryour health insurance needs, this page may provide you with some of the answers.

• What is an HMO?
• The basic HMO models
• What is a federally qualified HMO?
• How to access care through an HMO
• Co-payments, your share of the bill
• How claims are processed?

What is an HMO?

The term HMO stands for Health Maintenance Organization. A good working definition is:"A health plan that offers prepaid comprehensive health coverage's for both hospitaland physician services; members are required to use participating providers and areenrolled for specified periods of time."

Common provisions of HMO health insurance includes the following:

1. Members choose a primary care physician (PCP) that is part of the contracted providernetwork.
2. Member pays a physician co-payment and/or a hospital co-payment at the time of service
3. Member is not usually responsible for submitting claims 4.member must have anauthorized referral before seeking specialty care outside of their PCP or medical group5.most HMO offer preventive care benefits such as well baby care, immunizations, andprenatal benefits

HMO Models:

HMO models essentially define the provider relationships and marketing focus. There arefour basic types of HMO models:

1. IPA: Independent Practice Association In IPAs, physicians practicing in their ownoffices participate in a prepaid health care plan. The physicians charge agreed-upon ratesto enrolled patients and bill the IPA on a discounted fee-for-service or captivated basis.According to industry reports from Marion Merell Dow Managed care Digest, updated edition1994, 83% of the fastest growing smaller HMOs are IPAs.

2. Staff: A staff-model HMO consists of a group of physicians who are either salariedemployees of a specially formed professional group practice that is an integral part ofthe HMO plan, or salaried employees of the HMO. Medical services in staff models aredelivered at HMO-owned health centers. Kaiser is a staff model HMO.

3. Network: A network-model HMO is an organizational form whereby the health maintenanceorganization contracts for medical services within a "network" of medical groupsor multi-specialty medical clinics.

4. Group: There are two kinds of group-model HMOs: a) the closed panel plan, in whichmedical services are delivered in the HMO-owned health center or satellite clinic byphysicians who belong to a specially formed but legally separate medical group that onlyserves the HMO, and b) the plan in which the HMO contracts with an existing, independentgroup of physicians to deliver medical care.

Source: Glossary of Terms Used in Managed care, 1994, Medical Group Management Assn.

Federally Qualified HMOs:

The majority of HMOs are "federally qualified." To become a federallyqualified HMO, the Federal HMO Act of 1974 requires an HMO to provide ten "basicbenefits," most of them without limits:

1. Physician services and referrals.
2. Hospitalizations.
3. Well child care; prenatal care; periodic health evaluations; eye examinations and earexaminations for children under age 18; immunizations; and infertility services.
4. Emergency treatment inside and outside the HMO's service area.
5. Diagnostic laboratory tests and diagnostic services.
6. Outpatient, inpatient, and short-term rehabilitation services.
7. Physical, occupational and speech therapy (up to two months, if the patient showsimprovement).
8. Outpatient mental health benefits (20 visits).
9. Detoxification and referral services for alcohol and drug abuse or addiction.
10. Home health care.

Additional benefits are often offered by the HMO, depending on the plan purchased bythe individual or by the group.

More than half (53 percent) of all of HMO members, or about 24 million people, wereenrolled in federally qualified HMOs at the end of 1993, and thus had at least the amountof coverage required by the HMO act.

How Do You Access care with An HMO?

The majority of HMO members are covered through a "group" plan. The"group" is usually the employer the member/or their spouse work for.

The procedure may vary by HMO model, but the usual procedure is for each member tochoose a Primary care Physician (PCP) through his/her employer group. The PCP isaccountable for the total health services of the members he/she serves and arranges forspecialty care and hospitalization.

Primary care physicians include those in general or family practice, internal medicine,pediatrics, and obstetrics/gynecology.

Members of an HMO have unlimited visits to their PCP. When a member needs to receiveadditional services not provided by the PCP a written referral is required which must beauthorized by the HMO for the services to be covered.

A referral is the process whereby a patient is sent by one practitioner (PCP) toanother practitioner or program for services or consultation that the referring source isnot prepared or qualified to provide.

Co-payments, Your Share of the Bill

One of the factors that create value in a health care benefit package is the level ofcost sharing faced by the member in the form of a co-payments. A co-payment is a fixed dollar amount that members must pay each time they receive aspecified service.

The Federal HMO Act of 1974 also limits member cost sharing. Co-payments may not begreater than 50 percent of the cost of providing any single service and not, in aggregate,more than 20 percent of the cost of all basic health services. The total of all co-paymentsmade by an HMO member in a year may not exceed twice the annual premium for that member'scoverage.

Claims Processing:

Members do not usually have to become involved in the claims processing aspect of anHMO. Normally a claim is sent directly to the HMO from the provider. Exceptions usuallyinvolve emergency care out of the HMO service area. In this case the member may have topay the claim and then submit it to the HMO for reimbursement.

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What is a PPO (Preferred Provider Organization)?

Overview of the Principal Types of Health care Plans

An Introduction to PPOs/EPOs

If you want to know more about PPOs/EPOs or want to know why youmight choose a PPO/EPO for your health insurance needs, this page may provide you withsome of the answers.

• What Is a PPO or EPO?
• The Basic Characteristics of a PPO/EPO
• How to Access care
• How Does a PPO/EPO Differ From an HMO?
• Services That Are Usually Covered
• How Services Are Paid
• Deductibles
• Coinsurance
• Customary and Reasonable
• Out- Of -Pocket Maximum
• How Claims Are Processed

What Is a PPO or EPO?

PPOs, Preferred Provider Organizations, are groups of hospitalsand/or physicians who, directly or through a third party, develop contractual arrangementswith payers to provide a specified set of health care services under defined financialarrangements.

EPOs, Exclusive Provider Organizations, are similar to PPOs in theirorganization and purpose. Unlike PPOs, however, EPOs limit their beneficiaries toparticipating providers for their health care services.

Nationally, enrollment in EPOs increased 18% from 8.3 million in1992 to 9.8 million in 1993. In 1993, an estimated 328 PPOs offered an EPO option, and 69%of these required users to actively enroll in the EPO.

The main reason PPOs are offering their customers EPOs is thebenefit of increased control of health care cost.

Common provisions of PPO/EPO health insurance include the following:

Consumers have a choice of using in-network contracted providers atlower costs or out-of-network providers for increased co-pa.9h?!.?b(E??.'.les andcoinsurance charges. In-network providers are those providers who have contracts with thePPO/EPO.

Out-of-network providers are all other physician and hospitalservices not contracted with the PPO/EPO.

The insured makes a decision every time he/she needs care to usePPO/EPO and get better benefits or go outside of the network and pay more. No claim formsfor in-network services out -of -network insureds are responsible for submitting claims ina PPO/EPO.

Now that you have a general definition of what a PPO/EPO??X???p?f?N.?.e is, it's time to move on to a more detailed explanation of the basiccharacteristics of a PPO/EPO.

The Basic Characteristics of a PPO/EPO:

The basic characteristics of PPO/EPOs discussed below include;selected provider panel, negotiated payment rates, rapid payment terms, utilizationmanagement, access to care, services that are covered, what a member pays for services,and how a member would receive reimbursement for services received and paid for.

Selected provider panel: PPOs/EPOs typically contract with selectedproviders in a community to provide health services for covered individuals. MostPPOs/EPOs contract directly with hospitals, physicians, and other diagnostic facilities.Providers are selected to participate on the basis of their constant efficiency, communityreputation, and scope of services.

Negotiated payment rates: Most PPO/EPO participation agreementsrequire participating providers to accept the PPO's/EPO's attempt to negotiate paymentrates that provide it with a competitive cost advantage relative to charge based paymentsystems. These negotiated payment rates usually take the form of discounts from charges,all-inclusive per diem rates, or payments based on diagnosis-related groups.

Rapid payment terms: Some PPOs/EPOs are willing to include promptpayment features in their contracts with participating providers in return for favorablepayment rates. For example, a PPO/EPO may commit to pay all "clean" claimssubmitted by its providers within 15 days of submittal in return for a 5% discount fromcharges.

Utilization management: Many PPOs/EPOs implement utilizationmanagement programs to control the utilization and cost of health services provided totheir covered beneficiaries. In the more sophisticated PPOs/EPOs, these utilizationmanagement programs resemble programs operated by HMOs.

Some EPOs parallel HMOs in that they not only require exclusive useof the EPO provider network, but also use a "gatekeeper" approach to authorizingnon-primary care services. In these cases, the primary difference between an HMO and EPO isthat the former is regulated under HMO laws and regulations while the latter is regulatedunder insurance laws and regulations.

EPOs usually are implemented by employers whose primary motivationis cost saving. These employers are less concerned about the reaction of their employeesto severe restrictions on the choice of health care providers.

How to Access care

In a PPO type of health insurance, the insured is free to choose adoctor from the "in-network" or "out-of-network" list of providerseach time he/she needs health care. The PPO benefit plans with the deductibles, co-paymentsand coinsurance are designed to discourage the insured from frequently using theout-of-network providers due to the increased costs to both the insured and the insurancecompany.

How Does a PPO/EPO Differ From an HMO?

In an HMO, the insured's choice of doctors and hospitals is limitedto those that have agreements with the HMO to provide care. Exceptions are made inemergencies and when medically necessary. In contrast, an insured in a PPO can use doctorswho are not part of the plan and still receive some coverage. In such cases, the insuredwill pay a larger portion of the bill him/herself and will have to fill out some claimforms.

Services That Are Usually Covered

The types of services that may be insured through a PPO/EPO typeproduct typically include:

  • office visits
  • x-ray and laboratory procedures
  • ambulance
  • some durable medical equipment (e.g., wheelchair)
  • hospitalization
  • preventive care benefits

The level of coverage for these services themselves will vary frompolicy to policy. Not all insurance companies offer the same level of benefits.

How Services Are Paid?

PPOs and EPOs are not as costly as Indemnity type of insurance, butthey are more expensive than HMOs generally.

When using PPO services "in-network," payment of serviceoften resembles a HMO in that there are co-payments for office visits, emergency room useand some other services.

PPOs also have deductibles and coinsurance. Before the insurancecompany will begin paying for covered services someone has received, the person insured isresponsible for paying a deductible.


The deductible is the amount that a covered individual must paybefore an insurance company begins reimbursing for eligible expenses. Deductibles varyaccording to the plan purchased, but they range from $100 - $750.

Once the deductible is met, then the insurance company will begin toreimburse the member for eligible expenses. The amount the insurance company reimbursesthe insured depends on the coinsurance the insured is responsible for, the amount theprovider of service is billing, and the usual, customary and reasonable (UCR) amount theinsurer will consider eligible for reimbursement.


Coinsurance: refers to the arrangement by which the insurer and theinsured share a percentage of the cost of usual, customary and reasonable charges forcovered services (after the deductible is met).

The coinsurance of a PPO plan is typically a defined percentage, incontrast to co-payments, which are flat dollar amounts. For example, in a typical 80/20plan, the 20% paid of the customary and reasonable charges for eligible expenses by themember is the coinsurance.

Note: the insured is responsible for any charges over and above thecustomary and reasonable charges.

Usual, Customary and Reasonable (UCR):

Usual, customary and reasonable (UCR): The maximum amount an insurerwill consider eligible for reimbursement under group health insurance plans based upon itssurveys of prevailing fees in a geographic area. Typically, the insured is responsible forany charges for a covered service that exceed the usual, customary and reasonable (UCR)amount indicated for that specific service. For example, if an insured receives a bill fora covered service in the amount of $125, and the UCR charge for that covered service is$100, the member will be responsible to pay the appropriate coinsurance of $100 inaddition to the $25 that exceeds the UCR.

Out- Of- Pocket Maximum:

Out- Of -Pocket Maximum Expenses: As soon as an Insured Personincurs expenses for Covered Services equal to the Out-of-Pocket Expense Maximum, theBenefit percentage will be increased to 100%. An insured will need to refer to theirbenefit contract to learn those expenses that will not be applied toward the Out-of-PocketExpense Maximum.


The following is a sample of the amount an insured might befinancially responsible for a given hospital bill on a typical PPO type health insurancepolicy:

Plan design = $250 deductible 90%/70% Preferred ProviderOrganization (PPO), $5,000 Maximum out-of-Pocket
Total Charges $10,000
Expenses not covered ( 300)** This may vary
Eligible Charges 9,700
Deductible ( 250)


Remaining Charges to be applied to co-insurance $ 9,350

90% of 5,000 (Max. Out-of-Pocket) is $4,500 (company share)

10% of 5,000 (Max. Out-of-Pocket) is $500 (insured share)

Insured pays $500
Company pays $4,500
Max. Out-of-P??3?t?.?*".???

- $5,000

Remaining charges 4,350

Company pays 100% thereafter (4,350 up to Lifetime Maximum Benefit -often 1 million)

Balance due -0-

Subscriber pays: $1,050
Company pays: $8,950

Total paid: $10,000

How Claims Are Processed?

In a PPO the insured has the choice of "in-network orout-of-netw?*??".K*?>???the in-network plan is used, the insured often just pays theco-payment and the provider files the claims. Out-of- network claims are processed verymuch like an indemnity plan. The insured will pay the doctor or provider of services atthe time the service is received ("fee-for-service"). It is then the insured'sresponsibility to submit any proof of payments to the insurance company to receivereimbursement. The insurance company will review the claim taking into account the amountof deductible the insured may be responsible for or has already applied to their benefits,the coinsurance the insured is responsible for, what the usual, customary and reasonablecharges are for the services being billed, and whether or not the insured has possibly mettheir maximum out-of-pocket limit for the calendar year. Once the claim is reviewed, theinsurance company will then reimburse the insured the appropriate amount.

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What is a Traditional Indemnity Plan?

This introduction to Indemnity will give you a very basicunderstanding of how this type of health insurance generally works throughout theindustry.

If you want to know more about Indemnity health insurance plans orwant to know why you might choose a Indemnity health insurance plan for your healthinsurance needs, this page may provide you with some of the answers???????#n#???N• Basic characteristics of indemnity health insurance
• How you access care
• The type of services that are covered
• How and what you pay for services
• What does deductible mean?
• What does coinsurance mean?
• What does custo..P.u????m???able mean?
• What does maximum out of pocket mean?
• How indemnity claims are processed

Basic Characteristics of Indemnity Health Insurance:

Indemnity Health Insurance is the "standard" type ofhealth insurance someone can purchase to cover comprehensive major medical benefits. Someinsurance companies offer individual policies, meaning you can buy the insurance foryourself and your family directly from the insurance company. Some insurance companiesoffer group policies, meaning you can purchase the insurance through your employer. Manyinsurance companies offer both individual and group.

Most Indemnity policies work the same way. Common provisions includethe following:

You may go to any physician of your choice to access care.
You must meet a deductible before any coverage applies.
You pay a coinsurance (of usual, customary and reasonable charges)for covered services. You are responsible for submitting claims.

This is a general explanation of what an Indemnity Type of HealthInsurance is. Read on and you'll find a more detailed explanation of the basiccharacteristics of Indemnity Health Insurance.

How Do You Access care?

Typically, if you have Indemnity Health Insurance, you can go to anydoctor or provider of service you want to. There are no limitations. Therefore in order toreceive care, all you need to do is choose a physician or provider and go.

What Kind of Services Are Covered?

The types of services you may be covered for on an indemnity typeproduct typically include:

Office visits
X-ray and laboratory procedures
Some durable medical equipment (e.g., wheelchair)

The level of coverage for these services themselves varies frompolicy to policy. Not all insurance companies offer the same level of benefits. Thecoverage available depends on the policy the individual purchased or the policy theemployer group offers.

How and What You Pay For Services:

Indemnity health insurance is normally more expensive to a memberthan an HMO or PPO type of insurance. Not only are the premiums for the policy normallyhigher than what might be paid for a PPO or HMO type of insurance, the financialresponsibility you have toward eligible covered services is higher as well.

With Indemnity insurance, before the insurance company will beginpaying for covered services you've received, you are responsible for paying a deductible.

What Does Deductible Mean?

The deductible is the amount that you as an "insured" mustpay before the insurance company will begin reimbursing you for eligible expenses. In atrue indemnity plan, a deductible must be met before reimbursement for any coveredexpenses begins. The amount of a deductible may range anywhere from $100-$500. Sometimesthey're even higher.

Once you've paid the deductible, then the insurance company willbegin to reimburse you for eligible expenses. The amount the insurance company reimbursesyou depends on a few things:

The coinsurance your policy states you are responsiblefor.
The amount your doctor or the provider of service you went to is billing.
The usual, customary and reasonable amount that the insurancecompany will consider eligible for reimbursement.

What Does Coinsurance Mean?

Coinsurance simply means that both you and the insurance companyshare a percentage of the cost of usual, customary and reasonable charges for coveredservices. The policy you purchase defines a percentage that you are responsible to pay andthat the insurance company is responsible to pay. (For example, and "80/20" planmeans you, as the member, are responsible to pay for 20% of covered charges, and theinsurance company will pick up the remaining 80% of covered charges.)

There is a catch, however. With an Indemnity insurance, thecoinsurance amount refers to the percentage of customary and reasonable charges you andthe insurance company are responsible for paying for. Not a percentage of total charges adoctor or provider of service may charge.

What Does Usual, Customary and Reasonable Mean (UCR)?

Because you can go anywhere you'd like for services, chances are theinsurance company won't have a contract with the doctor or provider of services you decideto go to. Therefore, the insurance company has no control over the amount of money yourdoctor or provider is billing for their services. The insurance company has to controlcosts somehow. What they (the insurance companies) do is establish usual, customary andreasonable charges for any kind of services you might receive.

Usual, Customary and Reasonable (UCR) is the maximum amount aninsurance company will consider eligible for reimbursement under group health insuranceplans. It is based on surveys of prevailing fees in a geographic area. Typically, you areresponsible for any charges for a covered service that exceeds the usual, customary andreasonable (UCR) amount indicated for that specific service.

Example: You receive bill for a covered service in the amount of$125 and the UCR charge for that covered service is $100, then you will be responsible topay the appropriate coinsurance of $100 in addition to the $25 that exceeds the UCR.

Let's look at an actual example of what you would pay for aservice...


You are on an 80/20 indemnity health insurance policy
Your deductible is $500 - (not bad as deductibles go)
You were in the hospital last month and just received a bill .?.?s??I?iYs???

The insurance company has reviewed the claim, has determined thatthe services are covered and that the UCR is $4000 ($1000 less than the actual bill).

The following lists out what you pay:

$500 = deductible (only if you have not already paid)
800 = 20% coinsurance of $4000 (UCR)
+1000 = amount that exceeds (UCR)
$2300 = the amount you pay

What Does Maximum Out-of-Pocket Mean?

In order to reduce the financial burden on the insured, mostindemnity type health insurance policies have what is known as a maximum out of pocketamount indicated on your policy within the calendar year. Once that maximum is met, theinsurance company will kick in and pay 100% (of UCR) for any additional covered expensesyou incur for that year.

How Indemnity Claims Are Processed?

Normally, when you are on an indemnity policy, you will pay thedoctor or provider of service at the time you receive the service("fee-for-service"). It is then your responsibility to submit any proof ofpayments to the insurance company to receive reimbursement. The insurance company willreview the claim taking into account:

The services being billed are covered on your policy

The amount of deductible you are responsible for (or have alreadyapplied to your benefits), The coinsurance you are responsible for, What the usual,customary and reasonable charges are for the services being billed,

Whether or not you have met your maximum out of pocket limit for thecalendar year.

Once the claim is reviewed the insurance company will then reimburseyou the appropriate amount.

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How do deductible plans work? (Individual andFamily Plans)

The deductibleis a calendar year deductible: January1 st – December 31 st .

After you havepaid in medical bills the amount equal toward your deductible, the Blue CrossMajor Medical PPO insurance plan pays 90% and you pay 10% until you reach your “out of pocketmaximum” ( Other options are available including 80%/20% coverage.) After you have paid outthe out of pocket maximum for any calendar year then the insurance pays 100% upto the lifetime maximum.

Example: If your eligible medical costs for the year total $30,000 for a coveredperson, and you’ve chosen the $500 deductible option with the Blue Cross MajorMedical PPO plan.

• You pay your deductible($500).

• You pay10%, and the plan pays 90% of the eligible charges (in network) untilyou reach your out-of-pocket maximum ($500) – (your deductible plus yourco-insurance of 10%)

• Then the plan pays 100%.

You would havepaid - $1000

The plan wouldhave paid - $29,000

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How are pre-existing conditions covered?(Individual and Family Plans)

This is probably the single mostasked question regarding individual health insurance, and probably the mostimportant as well. The first thingto note is that acceptance is notguaranteed for individual health insurance plans. That is to say that it is possible that someone with pre-existingconditions may be declined coverage (see whatif I am declined) Thisdepends on the specific condition and the cost of treatment and medication forthat condition. If you are approved,companies treat pre-existing conditions differently as outlined below:

Blue Cross Blue Shieldofgeorgia – Pre-existingconditions that are not disclosed on your applicationare not covered until after you have been on the plan for 12 months. A pre-existing condition is one for which, in the 12 months before the plan tookeffect, car was received, diagnosis was made or symptoms were present that wouldcause most people to seek care.

WPS Individuals and Families: Aftera waiting period of at least 12 months, but to exceed 18 months, WPS will paybenefits under Individual Preferred for a pre-existing condition for coveredexpenses. Medical conditions are not considered pre-existing if they meetcertain requirements.

-Disclosed on the enrollment application and

-Not excluded or limited by an exclusion or rider upon evaluation byWPS's

underwriting department.

HumanaA pre-existing condition isa sickness or injury which was diagnosed or treated, or which produced signs orsymptoms that would cause an ordinary prudent person to seek treatment, duringthe 5 year-period before the covered persons' effective date of coverage. Benefits for pre-existing conditions are not payable until thecovered person's coverage has been in force for 12 consecutive months withHumana. Humana will waive the pre-existing limitation for those conditionsdisclosed on the application provided benefits relating to those conditions arenot excluded. Conditions specifically excluded by rider are never covered.

Golden Rule <(United Healthcare) Pre-existingconditions will not be covered during the first 12 months after an individualbecomes a covered person. This exclusion will not apply to conditions which areboth: (a) fully disclosed to Golden Rule in the individual’s application; and(b) not excluded or limited by our underwriters.

A preexisting condition is an injury or illness:(a) for which a covered person received medical advice or treatment within 24months prior to the applicable effective date for coverage of the illness orinjury; or (b) which manifested symptoms which would cause an ordinarily prudentperson to seek diagnosis or treatment within 12 months prior to the applicableeffective date for coverage of the illness or injury.

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What if I am declined coverage? (Individual and Family Plans)

If you are declined coverage youmay be eligible for a MRMIP. See the information below for information.

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can I see any doctor I want? (Individual andFamily Plans)

Blue Cross Blue Shield of GA – Find a physician,dentist or other health care professional in the Blue Cross Blue Shield providerdirectory. Evaluate the breadth of the provider network.

Blue Cross Blue Shield of Georgia Provider Directory

Health Net After a waiting period of at least 12 months, but not to exceed 18 months, will pay benefits under Individual Preferred for a pre-existing condition forcovered expenses. Medical conditions are not considered pre-existing if theymeet certain requirements.

Fora list of network clinics - click on the link below.

PacificareBroadprovider network PPOplans give you access to anationwide network of doctors and hospitals, with no referrals necessary. ThePPO network includes nearly 300,000 doctors and hospitals. Since these providerscharge lower rates for Humana members, and you pay a smaller share of the costwhen you use these providers, you have lots of ways to save money on healthcare. Evaluate the network.

TonikFind a physician, dentist or other health careprofessional in the Golden Rule provider directory. Evaluate the providernetwork.

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How long does it take to get coverageapproved? (Individual and Family Plans)

Generally, it takes from 2-6 weeks to receiveconfirmation that your application has been approved. The amount of time yourapplication takes is usually dependant on if medical records are requested. If the health carrier requests medical records to help evaluate yourapplication, this process may take several weeks depending on the clinicsresponse. We suggest that if medicalrecords are requested that you take a proactive role in getting the medicalrecords to the health carrier.

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What is MRMIP?

The Georgia Major MedicalInsurance Plan (MRMIP) provides access to health insurance for Georgians whoare not able to be underwritten by traditional individual insurance plans. Thelegislation passed in 1989 and became operational March, 1991.


Who is eligible to participate?

The participant must be:
  • - a permanent resident of Georgia
  • - not eligible for Parts A and B of Medicare except for end-stage renal disease;
  • - not eligible for COBRA or COBRA benefits;
  • - able to demonstrate inability to secure adequate coverage, within the previous 12
  • months due to being:
  • a. denied individual coverage,
  • b. involuntarily terminated for reasons other than non-payment of premium or fraud
  • c. requested to pay premium in excess of program subscriber rate

Premium costs

Generally, you will pay from 25 percent to 37.5 percent more for the MRMIP than you would for a private plan, were you eligible to enroll in one. Keep in mind however, that you must be turned down for an individual plan in the private market in order to qualify. *see above

Maximum benefit

$75,000 annually, $750,000 lifetime.


None, all plans offer first dollar coverage with co-pays.

Maximum annual out-of-pocket


Waiting Period and Pre-existing Conditions

For PPO plans, any condition for which you've sought medical advice, care or treatment within the preceding six months has a 90-day exclusion period. You must still pay your premiums to the MRMIP during this period.

For HMO plans, there is a 90-day post-enrollment waiting period for which NO services are provided. However, you also do not pay premiums during this period.

Waiver of waiting period

In some cases, the waiting period can be waived: (This can be very good news for you if you've had preexisting coverage)

  • if your waiting period has already satisfied under prior coverage and you apply for the MRMIP within 63 days following termination of that prior coverage;
  • or if you were covered under a similar program in another state within the last 12 months;
  • or if a you had employer-sponsored coverage that ended because you lost that job, or because the employer stopped offering or providing health coverage, or because the employer stopped making contributions towards your health coverage and you apply for the MRMIP within 180 days following the termination of that coverage.

Sometimes, the plan may be closed to new enrollees

You may be put on a waiting list if enrollment in the MRMIP is full. If you are on the waiting list for 180 or more days, the time you spend on it is Time you spend on it is credited toward the waiting period for pre-existing conditions.

Medicare Supplement Plan

MRMIP does not offer a Medicare Supplement Plan.


This plan is NOT the individual market portability alternative for Georgia?

Federal Health care Tax Credit payments

MRMIP plans are not currently eligible for these payments.

Health Savings Accounts (HSA)

None of the MRMIP plans are currently eligible to be used with a Health Savings Account.


If you are interested in learning more about MRMIP, clickhere to review the broshure. Additional information is available form theirwebsite

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Aremy premium payments tax deductible? (Individual and Family Plans)

In short, if you are self-employed, a partner in apartnership or S Corporation shareholder owning more than 2% of thecorporation's stock, and you received wages from that S Corporation andyou (or your spouse) are not eligible to participate in an employer paid plan,you can deduct up to 100% of the premiums for the tax year 2004. Be sure toconsult your tax advisor regarding your eligibility for this deduction. Also, here are some helpful links:

Link to IRSwebsite publication 535 – Business expenses

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