The Standard Small Employer Health Benefits Plans
The SEH Program Board of Directors has adopted 5 standard small employer health benefits plans, generically known as Plans A through E, plus a standard HMO plan.

Plan A
Plan A is the most limited of the standard small employer health benefits plans, and is designed primarily to cover facility charges and other health care provider charges related to services rendered while a person is hospitalized.  Plan A limits coverage to 30 days of in-patient hospitalization per calendar year.  Inpatient hospital days may be exchanged on a 2:1 basis for services provided in an extended care/rehabilitation facility, through home health care, or hospice.  Plan A provides coverage of childhood immunizations, and includes some benefits for other preventive services.  Plan A has a specified deductible, coinsurance and maximum out-of-pocket (MOOP) amount for which the covered person is responsible before the carrier begins paying 100% of the allowed charges.

Plans B, C, D and E
Plans B through E all provide comprehensive inpatient and outpatient hospital and medical coverage, including the following health care services:

• office visits
• hospital care
• prenatal and maternity care
• immunizations and well-child care
• screenings, including mammograms, pap smears and prostate examinations
• x-ray and laboratory services
• biologically based mental illness services
• certain non-biologically based mental illness and substance abuse services
• therapy services
• prescription drugs

Like Plan A, Plans B through E have no lifetime maximum benefit.

Plans B through E differ from one another because of the level of benefits they offer – that is, because of the amount of allowed charges for which the carrier agrees to be responsible.  Carriers may offer Plans B through D with a variety of deductible options among which employers may choose, ranging from a low of $250 to a high of $5,000 per person.  Plans B through D have specified coinsurance levels, with the carrier agreeing to pay 60% of the allowable charges for Plan B, 70% for Plan C, and 80% for Plan D.  The MOOP amount is variable for each health benefits plan, and can be offered by the carrier in a range from $2,000 to $10,000.  Plan E has a specified deductible of $150 per person, and a coinsurance level of 90%, with a specified MOOP of $1650 per person. 

HMO Plan
The HMO plan covers the same comprehensive set of services that Plans B through E cover, but generally restricts covered individuals to utilization of a specified network of health care providers.  However, carriers may offer the HMO plan with a point-of-service (POS) design, which allows the utilization of some services out-of-network.

The carrier may offer the HMO plan (including HMO plans with a POS design) with a variety of copayment options among which the employer may choose, with a $15 copayment or 50% coinsurance requirement for prescription drugs.  In addition, the carrier may offer the HMO plan with deductibles ranging from $250 to $2,500 per person, and coinsurance ranging from 50% to 90%, plus some copayments.  Coinsurance and copayments cannot apply to the same health care services.  For instance, when the HMO plan includes coinsurance requirements, copayments will apply to primary care office visits and maternity visits, and deductible and coinsurance may apply to most other services.  When a deductible and coinsurance apply generally, then the HMO plan will also have a MOOP of no more than $5,000. 

Snapshot of the Standard Small Employer Health Benefits Plans
The following chart highlights the cost-sharing requirements and options of the standard small employer health benefits plans (SEH Plans) when offered with a network design.  That is, the plans are shown when offered as Preferred Provider Organization (PPO), Point-of-Service (POS) or closed Health Maintenance Organization (HMO) products.  Carriers typically choose to offer the SEH Plans with a network feature, and employers typically choose to purchase the SEH Plans with a network feature.  Remember that, except for Plan A, the SEH Plans cover the same set of health care services, so the primary difference among the plans is the cost-sharing requirements, and the networks.  Networks and cost-sharing are discussed more following the chart.

More about Health Benefits Plan Designs and Options

Delivery Systems: Indemnity and Network-based Health Benefits Plans
Plans A through E may be offered as traditional indemnity plans.  This means that the covered person has the ability to go to any health care provider he or she chooses.  Under an indemnity plan, the covered person often pays bills for covered services directly and then is reimbursed by the carrier. 

Plans A through E are most often offered with a network, as a PPO or POS product.  A PPO or POS product gives an individual the option to access services in the carrier’s network, or go to out-of-network health care providers.  The individual receives greater benefits when he or she uses in-network health care providers, and will not be responsible for any charges in excess of what has been negotiated between the carrier and health care provider.  POS products require members to obtain referrals to in-network specialists, but PPO products do not.  PPO and POS products may apply a deductible and coinsurance to both in-network and out-of-network services.  When the covered person obtains services in-network, his or her share of the coinsurance is less than what it would be for out-of-network services, the determination of what is owed is based on a negotiated fee, and the covered person is not responsible for any charges in excess of the negotiated fee.  Alternatively, PPO and POS products often apply copayments for in-network services and deductible and coinsurance for out-of-network services. 

The HMO plan is a network-based product, with services provided through a network of health care providers under contract with the carrier.  The HMO Plan must be offered as a closed network product, meaning services and supplies are covered only if rendered by in-network providers.  The covered person selects a primary care physician (PCP) who generally coordinates the health care services the covered person needs, or refers the covered person to an in-network specialist when necessary.  HMOs will permit a specialist to be designated as the PCP for individuals with chronic conditions, if appropriate.

Carriers may also offer the HMO Plan as a POS product, which allows an individual to use in-network services, but also allows the option of obtaining services outside of the HMO’s network while still receiving benefits.  The individual will have to pay more in out-of-pocket costs, and may incur charges in excess of allowed charges when he or she goes out-of-network.

There are many ways carriers may design PPO and POS products for the standard plans.  There may be a common deductible for the in- and out-of-network benefits or separate deductibles; there may be a common MOOP for the in- and out-of-network benefits or separate MOOPs.  The family deductible (at 2 times the individual deductible) can require satisfaction of the deductible by two separate family members, or by the family in the aggregate.  The out-of-network MOOP can be up to 3 times that of the in-network MOOP.  There may be two sets of coinsurance, or the carrier may require the payment of copayments in-network and coinsurance out-of-network.  The carrier may require the payment of both copayments and deductible in-network, but not for the same health care services.

Riders
A rider is a document that changes the terms of a standard small employer health benefits plan.  Riders add to the number of coverage options available to employers and their employees by offering a benefit not otherwise covered under the standard plan, or revising the way a service is covered under the standard small employer health benefits plan.  The standard small employer health benefits plans have several standard riders providing options for the delivery of prescription drug benefits using a prescription drug card program or a mail order program and copayment options (otherwise, prescription drugs are covered pursuant to a deductible/coinsurance requirement). 

Carriers are permitted to offer their own riders to standard small employer health benefits plans.  The riders may either increase the benefits of the plan (subject to review of the SEH Program Board) or decrease the benefits of the plan (upon approval of the New Jersey Department of Banking and Insurance).  Carriers that offer a rider with a standard plan must offer the rider to all groups who are interested, but the choice to purchase the rider rests with the employer.  Most carriers offering standard health benefits plans offer one or more of their own optional riders.

Health Savings Accounts and Other Tax-favored Options
Plans B through D and the HMO Plan can all be designed as “high deductible health plans” (HDHP) that may qualify for use with a Health Savings Account (HSA) or an Archer Medical Savings Account (Archer MSA), both of which permit money to be set aside in a federally tax-favored savings vehicle for subsequent distribution without a federal tax liability if used to pay for qualifying medical expenses, set forth in IRS Publication 502.  (HDHPs with MSAs may only be available for renewal after 2007.)  There are differing minimum and maximum deductible and MOOP amounts that an HDHP must meet to qualify for combination with one of the savings accounts.  Not all plans with high deductibles necessarily qualify as HDHPs.  Carriers may market both the HDHP and the savings account, or an employer may purchase an HDHP from a carrier and obtain the savings account through another financial institution.  For more information, consult IRS Publication 969.  In addition, IRS Publication 969 provides information about other employer-sponsored, federally-tax-favored health accounts, such as Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs), which permit employees to pay for qualified medical expenses using pre-tax dollars. 

More about Cost-Sharing Requirements for the Standard Plans

Deductibles
The deductible is the amount of the allowed covered charges that the covered person must satisfy before the carrier agrees to pay anything towards covered charges.  Deductibles are set forth as a specified dollar amount, and are usually determined per person and per family when more than one person in a family is covered.  The employer may choose among the options available for the per person deductible.  The carrier chooses whether to offer the plan with the family deductible at 2x the per person charge (satisfied by two separate family members, or, for Plans B, C, D and the HMO Plan, in the aggregate), or 3x the per person charge (satisfied by the family in aggregate when 3X the per person charge is an option). 
 
Coinsurance
The coinsurance is the percentage of the allowed charges that are shared by the carrier and the covered person after the deductible is satisfied.  The carrier and covered person both contribute a specified percentage to the allowed charges until the MOOP amount is satisfied.  Depending upon what plan is chosen, the carrier will pay 50% to 90% of the allowed charges, and the covered person will pay 10% to 50% of the allowed charges until the MOOP amount is reached.  Note that, except with respect to HDHPs, the carrier may determine whether coinsurance for prescription drug charges accumulate towards the MOOP. If a carrier chooses not to have prescription drug charges accumulate towards satisfaction of the MOOP, then a coinsurance charge for prescription drugs will still apply after the MOOP is satisfied for other services.

Copayments
A copayment is a specified dollar amount that a covered person pays per visit, per day or per service.  Typically, an HMO Plan or the in-network component of a POS plan will specify a copayment for office visits.  A copayment may be applied for each day in the hospital (for a limited number of days).  A copayment applies for use of a hospital’s emergency department (but the copayment – which is more akin to a penalty – is waived if the person is admitted to the hospital).  Copayments accumulate towards the MOOP amount. Services subject to a copayment may not also be subject to a deductible or coinsurance.

Maximum Out-of-Pocket (MOOP)
MOOP is the term used to refer to the total amount of covered charges that a covered person is expected to pay in a calendar year for health care services after which the carrier pays 100% of the covered charges.  The MOOP is satisfied by the covered charges incurred by the covered person as part of the deductible, coinsurance and copayments required under the health benefits plan.  In policies covering more than one person, the MOOP is usually 2x (but sometimes 3x) the per person MOOP, as specified by the carrier.  The following do not count towards satisfying the MOOP:

• Charges incurred by the covered person for services that are not covered under the terms of the health benefits plan.
• Charges that exceed the amount that the carrier considers reasonable and customary (or allowed charges) for the covered services.
• Prescription drug charges when the plan specifically states that the charges will not satisfy the MOOP.

Allowed Charges
Carriers will not cover or pay for charges associated with services or supplies that:

• are excluded under the terms of the health benefits plan;
• exceed limits set forth for the services or supplies in the health benefits plan; or
• are not considered medically necessary and appropriate by the carrier.  (Remember, the covered person may appeal the determination.)

If a health care service or supply is excluded or exceeds the limitations under the health benefits plan, the covered person is responsible for the charges related to the health care service.  A covered person may or may not be responsible for the costs of services that a carrier determines are not medically necessary and appropriate, depending upon:

• whether the services were obtained from a health care provider in a carrier’s network; and
• the terms of the contract between the carrier and the in-network health care provider, when services were obtained from a health care provider in a carrier’s network.

The carrier will issue the covered person an explanation of benefits (EOB) indicating whether costs for services and supplies are the responsibility of the covered person when the carrier determines the health care services or supplies are not medically necessary and appropriate.  An individual may appeal the carrier’s medical necessity determination even if the individual is not considered responsible for the related costs. 

In addition, a carrier will only pay for what the carrier determines are reasonable costs for the covered services.  Carriers and in-network health care providers come to an agreement on reasonable compensation for health care services as part of the contract between them.  Health care providers that are not in a carrier’s network may charge fees as they see fit for the services they provide.  However, carriers may only pay what they consider to be a “reasonable and customary” charge for the services.  Currently, the SEH Program requires carriers to use the 80th percentile of the Prevailing Healthcare Charges Schedule (PHCS) owned by a private company, Ingenix, for charges billed using the Current Procedural Terminology (CPT) codes developed and owned by the American Medical Association.

In New Jersey, under the terms of the contract between the carrier and in-network health care providers, health care providers may not try to collect from a carrier’s covered person charges that are more than the fees agreed to between the carrier and the health care provider.  However, a non-network health care provider may bill charges in excess of the 80th percentile of the PHCS.  The carrier will determine its payment using the 80th percentile of the PHCS, and the covered person is responsible for any amounts that exceed the 80th percentile of the PHCS.