Merritt Personal Lines Manual: Part III: Major Medical Expense Policy
There are dozens possibly hundreds of specific health insurance policy forms. In this chapter, we are considering the details of the most common forms. The last of these is the Major Medical Expense Policy.
ADDITIONAL DEFINITIONS
accumulation period: The continuous period of time during which insured expenses must be incurred which satisfy the deductible.
An "accumulation period" is a specified period of time during which expenses are charged against the deductible before benefits begin. The period is usually specified in the policy schedule.
An example: Your policy shows a $500 deductible and an accumulation period of six months. If you have $450 of medical expenses during a six-month period, no benefits are paid. If you have $750 of medical expenses during a six-month period, your policy will provide benefits for the amount above $500 (minus any copayment). In either case, you will have to pay the first $500 of expenses during the next six-month period.
copayment: After the deductible is paid by you, that part of continuing insured expenses which you pay. The copayment varies with each level of insured expenses.
Covered expenses above the deductible are subject to a copayment. This policy has copayment percentages that change with each level of covered expenses. These are shown in the policy schedule.
To illustrate, let's assume that an insured's deductible is $500 and the policy shows the following copayments: 20 percent for the first $500 of covered expenses, 15 percent for the next $500, 10 percent for the next $1,500, 5 percent for the next $2,500 and 0 percent for covered expenses above $5,000. At this point, the insured's "stop loss" is reached and the insurance company will pay 100 percent of additional expenses.
An example: You incur $17,500 in medical expenses due to an accidental injury. You have to pay the deductible ($500) and the above copayment amounts ($100 + $75 + $150 + $125 + $0 = $450). Your "stop loss," the maximum expense you must pay, is $950. The insurance company pays $16,550 for this injury.
deductible: The insured expenses for any one injury or sickness which must be incurred during the accumulation period before we make any payments. You pay the insured expenses satisfied by the deductible. You elect the deductible when you purchase this policy.
Each insured person must satisfy the deductible during the accumulation period before any benefits are paid. A deductible applies to each injury or sickness. Separate deductibles may apply to injury and sickness. These are shown in the policy schedule.
insured expenses: A charge which results from injury or sickness which is covered by this policy: is medically necessary; and is authorized by a physician or surgeon.
The phrase to watch here is "medically necessary." Your definition of what's -- even your doctor's -- may be different than your insurance company's. And, short of a lawsuit, the company's is the one that matters most. Your agent should be able to tell you about a particular company's reputation for defining terms like this.
If you've had very much experience at all with health insurance, you know that most common application of the term "medically necessary" involves disputes over experimental coverage. The 1991 Alabama Supreme Court case Jack J. Griffis v. Blue Cross and Blue Shield of Alabama shows why it's such a big deal.
In 1986, Jack Griffis underwent a magnetic resonance imaging scan (MRI) to measure the progression of cancer of the prostate. The test was prescribed by Dr. Thomas Moody and performed and interpreted by Dr. Robert Naftel, a qualified diagnostic radiologist. Griffis submitted a claim to Blue Cross and Blue Shield of Alabama for the cost of the MRI.
Blue Cross denied coverage, based on a provision in Griffis's policy that excluded benefits for procedures considered by Blue Cross to be "experimental" or "investigative." That provision stated:
We will not provide benefits for the following, whether or not a physician performs or prescribes them:
... Any treatment, procedure, facilities, drugs, drug usage, equipment, or supplies which are experimental or investigative.
The policy defined "experimental" or "investigative" as follows:
Experimental or investigative means any treatment, procedure, facility, equipment, drugs, drug usage, or supplies either (a) not recognized by us as having scientifically established medical value and [as] being in accordance with generally accepted standards of medical practice or (b) not approved by a governmental agency from which approval is required.
At the time the MRI was done on Griffis, Blue Cross did not recognize the use of MRIs for diagnosing cancer of the prostate "as having scientifically established medical value and [as] being in accordance with generally accepted standards of medical practice." The use of MRIs for diagnosing conditions of the brain, spine and limbs, however, was recognized by Blue Cross.
Griffis sued Blue Cross, seeking to recover damages for Blue Cross' refusal to pay a claim under his medical insurance policy. He claimed breach of contract and the tort of bad faith refusal to pay an insurance claim.
Dr. Patrick Ryce, director of Blue Cross' medical department, said that it was his decision to place MRIs of the prostate on the company's list of experimental or investigative procedures. His decision was based on information that he had received in consultations with Blue Cross' medical review committee, which consisted of practicing physicians who were not employed by Blue Cross, as well as on information that he had received from practicing radiologists who were experts in their field and had hands-on experience with MRIs.
Ryce also testified that he had reviewed various medical journals regarding new treatments and tests and that he had considered the recommendation of the National Blue Cross and Blue Shield Association, a central organization that reviews new medical procedures and disseminates information to the approximately 78 Blue Cross and Blue Shield plans throughout the country. Ryce explained that Blue Cross' list of experimental or investigative procedures was reevaluated continuously and that the list was revised approximately every six to eight weeks to reflect the technological advances that had been made in various procedures.
