EBS BULL #2444 7/94 CHAPTER 4/ SL 1992 MEDICAL DENTAL & VISION CARE 
 
Chapter 4. Medical, Dental, and Vision Care 
 
	Ninety percent of full-time employees in State and local governments participated in a 
medical care plan in 1992.  There was virtually no difference in participation rates among the 
three occupational groups studied.  Of those workers with medical care insurance:  
 
	*  Just under three-fifths were covered by non-traditional medical care plans, that is, 
health maintenance organizations (HMO's) or preferred provider organizations (PPO's); 
 
	*  Slightly over four-tenths were required to pay a plan premium for individual 
coverage; approximately seven-tenths paid part of the cost for family coverage; 
 
	*  Over eight-tenths of participants in traditional fee-for-service plans were subject to 
an annual deductible; the average annual deductible was $173; 
 
	*  Over eight-tenths of the participants in fee-for-service plans had an annual limit on 
individual out-of-pocket expenses; the average limit was $908; 
 
	*  Mental health coverage, and alcohol and drug abuse treatment, though available to 
nearly all participants, had more restrictive provisions than other ailments; 
 
	*  Three-fourths of workers covered by non-HMO plans were required to get 
preadmission certification before entering a hospital. 
 
Coverage of selected categories of medical care  
	With few exceptions, coverage was provided in medical care plans for hospital room 
and board, physicians' visits in the hospital, office visits, surgery, x-ray and laboratory services, 
mental health care, and inpatient alcohol and drug detoxification benefits (table 36).  Coverage 
was somewhat less extensive for inpatient and outpatient substance abuse rehabilitation benefits, 
and out-of-hospital prescription drugs.   
	Among benefits less frequently provided were hearing care (33 percent of participants), 
routine physical exams (47 percent), well-baby care (56 percent), and immunizations and 
inoculations (49 percent).   
 
Funding arrangements  
	In 1992, 43 percent of full-time medical plan participants in State and local governments 
were covered by a fee-for-service medical plan (table 37).  These plans pay for specific 
medical procedures as expenses are incurred.  And, for the first time since BLS began 
conducting this survey, the majority of medical care participants were enrolled in non-traditional 
health care plans, namely HMO's and PPO's. 
	There are generally three arrangements for financing plan benefits: Self-insured plans, 
commercially insured plans, and Blue Cross/Blue Shield plans.  Self-insured plans (where the 
plan sponsor--typically the employer--bore the financial risk for making plan payments) and 
Blue Cross/Blue Shield plans each covered two-fifths of fee-for-service participants.  
Commercially insured plans covered one-seventh of the fee-for-service participants.  In 
addition, a small proportion of fee-for-service participants had their benefits financed by more 
than one source.  
	Preferred provider organizations (PPO's) covered 29 percent of medical care 
participants in State and local governments in 1992.  PPO's offer a higher benefit for services 
rendered by designated health care providers, such as hospitals and physicians who agree in 
advance to a given fee schedule, although participants are free to choose any provider.  This 
survey presents a comparison of benefits between the preferred provider and non-preferred 
provider options. 
	Twenty-seven percent of medical care participants covered by the survey were enrolled 
in health maintenance organizations (HMO's).  HMO's provide a prescribed set of benefits to 
enrollees for a fixed payment.  The HMO thus bears the risk associated with delivering care.1  
HMO's are classified in this survey as either group/staff, with services provided in central 
facilities, or as individual practice associations (IPA's), with providers working from their own 
offices.  The following tabulation shows the percent of HMO participants by type of plan in 
1992: 
    Plan type    				    Percent of  
                				   participants 
Group/staff					50 
Individual Practice Association			47 
Combination					3 
 
Payment arrangements  
	Medical plan provisions were examined to determine the extent of coverage for each 
type of medical service.  In this survey, each category of medical care is classified under one of 
four payment arrangements:  Full coverage, coverage with internal (separate) limitations only, 
coverage with overall limitations only, or coverage with internal and overall limitations (table 36).   
	Full coverage for HMO's indicates no restrictions on the number of days of care, no 
dollar maximums on benefits, and no required payments by the covered individual.  In a fee-for-
service plan, when a benefit is covered in full, all expenses up to the usual, customary, and 
reasonable charges (UCR), or the prevailing hospital semiprivate rate, are borne by the plan. 
	Internal or separate limitations restrict the level of coverage for a particular type of 
medical service, independent of other plan provisions.  An example of a separate limit is a 
maximum of 45 days of hospitalization per year for mental health care. 
	Overall limitations are deductibles, coinsurance requirements, maximum benefit levels, 
or other provisions that apply to many, if not all, types of medical care provided under the plan.  
Examples of overall limits include a requirement that the employee pay the first $100 of 
expenses in a year, regardless of the source of the expense, before the plan will begin payments 
(deductible); a requirement that the employee pay 20 percent of covered expenses beyond the 
deductible (coinsurance); a $1,000 limit on the amount the employee must pay, after which the 
plan pays 100 percent of covered expenses (maximum out-of-pocket expense); and a lifetime 
ceiling on plan payments of $1 million (maximum).   
	HMO's generally do not impose any overall limits on the benefits they provide.  
Traditional fee-for-service plans, on the other hand, almost always impose overall limitations on 
their benefits.  PPO's also impose overall limits, but may alter or reduce those limits if services 
are received from designated providers.   
	Internal and overall limitations may apply to the same category of care.  For example, a 
plan may impose a separate limit of 365 days per confinement on fully paid hospital room and 
board coverage, with protection beyond that point subject to overall plan coinsurance rates and 
maximum dollar limitations. 
	The payment arrangement (full coverage, internal, overall, or combined limitations) 
varied significantly by service.  It was most prevalent for medical care participants to have their 
hospital room and board benefits subject to both internal and overall limits (37 percent).  Other 
services for which a plurality of plan participants had coverage subject to both internal and 
overall limits were: Stays in an extended care facility, inpatient and outpatient mental health care, 
and alcohol and drug abuse coverage. 
	Such services as inpatient and outpatient surgery and diagnostic x-ray and laboratory 
services were frequently covered in full (49 percent for inpatient surgery and 48 percent for 
both outpatient surgery and diagnostic x-rays and laboratory services).  Additionally, a high 
proportion of participants received full coverage for physicians' visits in the hospital (41 percent) 
and hospital room and board (26 percent).  Such high percentages of fully paid benefits are 
largely attributable to coverage by HMO's and PPO's. 
	Finally, physicians' office visits were generally subject to overall limits only, usually under 
traditional fee-for-service plans.  Under such an arrangement, the employee must satisfy the 
deductible and meet the coinsurance requirement before any benefits are paid. 
 
Overall limitations  
Deductible.  Plans with overall limitations nearly always require a participant to meet a specified 
deductible before eligibility for benefit payments.  This approach is designed to discourage 
unnecessary use of medical services.  In 1992, 76 percent of full-time participants in State and 
local governments were in plans with overall limits (tables 38-42).  Eighty-four percent of the 
participants in plans with overall limitations had coverage subject to an annual flat-dollar 
deductible.  Of the participants with overall limitations, however, 18 percent were in plans 
where the deductible did not apply to hospital room and board expenses. 
	The most prevalent individual annual deductible was $100, applying to one-third of the 
participants subject to overall limits.  Slightly less than one-third of participants were required to 
pay deductibles of $200 or more.  The average annual deductible in 1992 was $173 for all 
workers, with little variation between occupational groups. 
	When a medical care plan covered an employee and family, a family deductible was 
often specified in addition to individual deductibles.  After the family deductible is met, no 
additional individual deductibles apply during that year.  Three-fourths of participants with 
overall limitations were in plans that specified limits on the number of persons in the family who 
are required to satisfy an annual deductible.   Most commonly, family deductibles were equal to 
two or three times the individual deductibles. 
 
Coinsurance.  Once the deductible has been met, the plan almost always pays a specified 
percentage of covered medical expenses, with the employee paying the remainder 
(coinsurance).  The percentage of expenses paid by the plan varied greatly between traditional 
fee-for-service plans and PPO's.  PPO's offer a higher benefit for services rendered by 
designated health care providers (such as hospitals and physicians), although participants retain 
the option of choosing any provider.  Eighty-two percent of participants in traditional fee-for-
service plans with overall limitations had their expenses paid at 80 percent.  In contrast, 50 
percent of PPO enrollees had their expenses paid at 80 percent if they chose network 
providers, 21 percent had expenses paid at 90 percent, and 20 percent had their expenses paid 
at 100 percent.  Those workers who had their expenses paid at 100 percent, however, were 
generally subject to a yearly deductible and a lifetime plan maximum. 
	Just over one-tenth of participants were in plans where the coinsurance rate was 
different for hospital room and board expenses than for other expenses.  In such cases, the 
percent of hospital expenses paid by the plan was generally higher, often 100 percent. 
 
Out-of-pocket ceiling.  Eighty-four percent of full-time participants in plans with overall 
limitations had their coinsurance increase to 100 percent after they paid out a specified dollar 
amount for covered expenses (maximum out-of-pocket expense).  Sixty-seven percent of 
participants in plans with overall limits had an annual individual out-of-pocket expense maximum 
of $1,000 or less.  Maximum out-of-pocket ceilings were also specified for family expenses in 
plans covering 47 percent of participants with overall limitations.  Annual out-of-pocket ceilings 
averaged $908 for individuals and $1,856 for families. 
	Seventy-five percent of participants with overall limitations were in plans that both 
required an annual deductible and placed a maximum on out-of-pocket expenses.  These two 
items represent the total that the plan requires an individual to pay for covered medical expenses 
in a calendar year.  In 1992, the annual deductible plus the annual out-of-pocket expense 
maximum averaged $1,090 per individual.2Maximum benefit limits.  Plans with overall 
limitations often place a ceiling on the amount payable by the plan, usually a lifetime maximum.  
In 1992, lifetime maximums applied to seven-tenths of the participants in plans with overall 
limitations.  A maximum of $1 million applied to three-quarters of participants subject to a 
lifetime maximum.  A small proportion of participants were in plans with a lifetime maximum of 
greater than $1,000,000; the average lifetime maximum was $986,071.  There was some 
variation in the average lifetime maximums between occupational groups.  Teachers had the 
highest average lifetime maximum ($1,010,738), while blue-collar and service workers had the 
lowest ($926,011).  Plans that did not impose a maximum on plan payments covered three-
tenths of the participants subject to overall limitations.    
 
Hospital coverage  
	Virtually all medical plan enrollees covered by the survey had benefit provisions for 
hospital room and board charges (tables 43-44).  Thirty-four percent of full-time participants 
were in plans where hospital room and board expenses were covered at a percentage of the 
semiprivate room rate, generally at 80 percent.  In these types of plans, the individual was 
typically subject to a yearly deductible before the percentage rate would go into effect.  
Twenty-three percent of participants had hospital room and board expenses covered at the full 
semiprivate room rate for a limited period, followed by a percentage of the semiprivate room 
rate, almost always 80 percent.   
 
	Thirty-one percent of participants with hospital room and board coverage were in plans 
in which expenses were reimbursed for the full semiprivate room rate for an unlimited number of 
days without being subject to either a separate deductible or separate dollar maximum.  Such 
full service hospital benefits were commonly provided by HMO's. 
	Significant differences in hospital room and board coverage were evident by type of 
medical care provider.  While just over eight-tenths of HMO participants had hospital room and 
board covered in full without any limitations, full coverage was virtually non-existent for 
hospitalization in non-HMO's.   
	Increasingly, medical care participants are required to pay a separate copayment for 
hospital care, to discourage unnecessary hospitalization.  Twenty-two percent of participants 
with hospital room and board coverage were subject to a separate copayment.  Non-HMO 
participants were more likely to be subject to a hospital copayment (25 percent) than HMO 
participants (14 percent). 
	When copayments were required for hospitalization, it was usually on a per admission 
basis.  For all participants, these copayments usually were $250 or less; 12 percent of HMO 
participants, however, were subject to copayments of more than $300. 
 
Alternatives to hospitalization 
	A number of plans provide coverage for less expensive alternatives to hospital stays to 
hold down costs.  These alternatives include extended care facilities, home health care, and 
hospices (table 36).  Participant coverage often differed between HMO's and non-HMO's. 
	Coverage for stays in extended care facilities was available to just over four-fifths of 
participants.  These facilities provide skilled nursing care, rehabilitation, and convalescent 
services to patients requiring less intensive treatment than would otherwise be provided in a 
hospital.  Nine-tenths of HMO participants had coverage for stays in an extended care facility; 
one-fourth were in plans that provided unlimited coverage.  In comparison, although 8 of 10 
non-HMO participants were in plans that provided coverage for extended care benefits, very 
few had full coverage. 
	Home health care, providing skilled nursing and related care to patients in their own 
homes, was available to 87 percent of participants.  Home health care benefits were provided 
to virtually all HMO participants (97 percent); these benefits were provided less extensively to 
non-HMO participants (83 percent).  The higher incidence of coverage for home health care 
benefits in HMO's occurs because federally qualified HMO's are required to provide this 
benefit, and the vast majority of HMO participants in the survey belong to federally qualified 
plans.  When home health care benefits were provided in HMO's, coverage was typically 
unlimited.  Unlimited coverage was rare in non-HMO's. 
	Plans, especially non-HMO's, often limited the duration of stays in an extended care 
facility and the number of visits of home health care services.  Coverage in an extended care 
facility was commonly limited to 60 days per confinement, while home health care services were 
frequently restricted to 100 visits per year. 
	Hospice care, another alternative to hospitalization, was provided to 54 percent of full-
time participants.  A hospice offers nursing care and psychological support to terminally ill 
patients, usually defined as having 6 months or less to live.  Plans often placed ceilings on 
maximum dollar amounts payable during a hospice stay.3Surgical coverage 	Virtually all 
participants had medical plans that based payments for in-hospital surgery on the "usual, 
customary, and reasonable" (UCR) charges for the particular procedure performed (tables 45-
46).4  Forty-nine percent of participants were covered for the full UCR charges for in-hospital 
surgical benefits.  Forty-eight percent of participants were covered at a percentage of the UCR 
charge; the majority of these participants were covered at 80 percent of the UCR charges, 
usually after any required overall plan deductible. 
	In-hospital surgery was covered according to a schedule establishing a maximum 
amount payable for each procedure for 2 percent of full-time enrollees.  Charges exceeding the 
scheduled maximums, however, were generally covered, subject to the plan's overall deductible 
and coinsurance. 
	Eighty-seven percent of participants were in plans where outpatient surgery was 
covered in a manner identical to in-hospital surgery, whether in full, a percent of UCR charges, 
or subject to a schedule of maximum payments.  For HMO enrollees, both inpatient and 
outpatient surgery were almost always covered in full.   
	With the steady rise in medical care costs, health care insurers are encouraging enrollees 
to substitute less expensive outpatient services, such as outpatient surgery, for inpatient hospital 
services.  To encourage the use of outpatient surgery, non-HMO health care providers have 
increasingly begun to provide higher reimbursement rates for outpatient rather than inpatient 
surgery.5  Seventeen percent of participants in non-HMO's had coverage for outpatient surgery 
treated differently (generally with a higher reimbursement) than for inpatient surgery.  	Slightly 
over two-fifths of medical care participants with coverage for inpatient surgery had to satisfy 
either a separate deductible or were subject to the overall plan deductible prior to receiving 
benefits.  When outpatient surgery was provided in those plans, one-fifth of participants were 
not required to pay any deductible before receiving benefits.  Generally, when deductibles are 
not applicable for in-hospital surgery, neither are they for outpatient surgery. 
 
Cost containment 
	In addition to data on the extent of coverage for specific medical services, the survey 
looked at the availability of medical plans with either benefit management programs, managed 
care plans, or review boards.  Such programs were designed to ensure that the services 
rendered are medically necessary and provided in the most appropriate health setting.  These 
programs developed at least partly in response to the rapid rise in medical care costs during the 
1980's. 
	Ninety-three percent of medical care participants were covered by "managed care" 
provisions (table 47). This includes all participants in HMO's and PPO's, where care is 
managed by directing patients to specific providers or services.  In addition, 84 percent of fee-
for-service participants were in plans with at least one managed care feature, such as hospital 
pre-admission certification, pre-admission testing, and second surgical opinion. 
	Advanced managed care programs can consist of four or more features such as: Pre-
admission review of all hospital admissions for non-emergency or non-maternity care, 
concurrent review to monitor care while hospitalized, discharge planning to coordinate a 
continued course of treatment in a more appropriate health care setting, and a mandatory 
second surgical opinion for certain selected procedures.   
	Among the features studied in 1992, 76 percent of the non-HMO participants were 
required to receive precertification before being admitted to a hospital (table 48).  A deductible 
per hospital admission or a reduction in the coinsurance paid by the plan were the most 
prevalent penalties for non-compliance.  Most commonly, the deductibles ranged from $200 to 
$500.  When the coinsurance rate paid by the plan was reduced for non-compliance, the 
reduction was most often to 50 percent of charges.   
	Less prevalent cost containment features in non-HMO plans included incentives for the 
employee to audit hospital bills (6 percent) and more restrictive benefits for nonemergency 
weekend admissions (6 percent).  In plans where there were penalties imposed for 
nonemergency weekend admissions, it was nearly universal for no benefits to be provided. 
	Forty percent of participants had their care subject to utilization review.  This process 
consists of reviewing care provided to patients for appropriateness and quality. 
	Benefit provisions for preadmission testing, a means of decreasing the length of 
hospitalization, covered 39 percent of the non-HMO participants.  Generally, plans covered 
100 percent of charges for preadmission testing. 
	In non-HMO plans, second surgical opinion provisions were applicable to seven-tenths 
of participants with inpatient surgical benefits (table 49).  The majority of plan enrollees were 
assessed penalties for not obtaining second opinions.  These penalties generally applied only to 
selected procedures.  The most prevalent penalty was to reduce the coinsurance rate if a 
second opinion was not sought. 
	HMO's by their very nature emphasize preventive, cost efficient medical care.  As such, 
built-in forms of utilization review, including second surgical opinions, are automatically 
provided. 
 
Preferred provider organizations 
	The previous section concentrated on managed care features within traditional fee-for-
service plans.  This section will discuss PPO's, that is, plans where care is managed by directing 
patients to specific providers or services.  This survey represents the first time that the  benefit 
provisions of PPO's versus non-PPO's are compared. 
	PPO's provide incentives for receiving medical services and supplies from designated 
providers.  Certain medical services are more likely to be subject to these incentives than are 
other services.  For example, surgery, physicians' visits in the hospital, and office visits were 
subject to an incentive using preferred providers for about 80 percent of PPO participants 
(table 50).  It was less likely for participants with hospital room and board coverage to be 
treated more generously if care was received at specified hospitals (68 percent).  Twenty-six 
percent of PPO participants were provided higher benefits for outpatient prescription drugs if 
they used the designated providers. 
	When a PPO option was available, nearly all plans paid a higher percentage of 
expenses if the participant received care from the designated providers.  In such plans, it was 
most prevalent for the plan to pay 100 percent of covered charges if the individual used the 
PPO provider and 80 percent if the individual chose a non-PPO provider.  Another common 
arrangement was for plans to pay 80 percent of covered expenses if the participants stayed 
within the PPO network and 60 percent if they went outside of the network. 
	About one-third of workers covered by a PPO had a different annual deductible based 
on who provided care.  Enrollees in PPO's might be subject to a yearly deductible of $100 if 
they received care from a preferred provider, but subject to a $200 deductible if they did not.  
There are also plans where participants in PPO's are not required to pay a deductible for 
network services, but must pay one if they do not go to the designated providers. 
	Forty-one percent of PPO participants were subject to a different catastrophic 
maximum if they stayed within the network.  For example, PPO enrollees may be required to 
pay $1,000 in expenses, after which, the plan covers all charges at 100 percent.  However, if 
they seek care from a non-network provider, the limit on expenses might be $2,000. 
	PPO's also encouraged the use of network providers by reducing charges for certain 
services.  Four in 10 PPO participants were in plans subject to a modest copayment for 
physicians' office visits of perhaps $10 per visit.  However, visits to non-preferred doctors were 
usually covered under overall limits, requiring satisfaction of an annual deductible and a 
coinsurance paid by the enrollee.  Five percent of PPO participants were covered by similar 
provisions for outpatient prescription drugs. 
 
Prescription drug benefits 
	Eighty-eight percent of participants had medical plans that provided coverage for 
outpatient prescription drugs (table 36).  Inpatient prescription drugs are always covered under 
hospital miscellaneous services, generally in the same fashion as room and board charges.  
Outpatient prescription drugs, when provided, are covered under a separate provision of the 
medical plan or a separate outpatient prescription drug plan. 
	Coverage for outpatient prescription drugs differed by type of medical plan.  Usually in 
non-HMO plans, outpatient prescription drugs were covered under overall limitations only; that 
is, before any benefits were provided, the participant was subject to a yearly deductible or a 
coinsurance requirement.  However, in HMO's, prescriptions were usually subject to a minimal 
copayment, commonly $5 per prescription.  
	Non-HMO participants were slightly more likely to have prescription drug coverage 
than HMO participants.  It was rare for either HMO and non-HMO participants to have 
prescription drugs covered in full (6 percent for HMO's and 1 percent for non-HMO's).   
 	Prescriptions can often be filled using either a brand name drug or a generic drug, which 
is less expensive than its brand name counterpart.  Twenty-nine percent of the participants with 
prescription drug coverage received a higher reimbursement for obtaining generic rather than 
brand name prescription drugs.   
	Mail order drug programs were available to 15 percent of employees with prescription 
drug coverage.  These programs provide drugs that are required on a continuous basis.  In such 
arrangements, participants often receive a higher reimbursement or are charged less for mail 
order drugs than for drugs purchased directly from a pharmacy.6Mental health coverage 
	Mental health coverage, though available to nearly all full-time participants, was 
frequently subject to more restrictive limitations than other illnesses (table 51).  Of those with 
mental health benefits, 85 percent had more restrictive hospital coverage for mental illness than 
for other ailments.  Plans commonly limited the duration of hospital stays (often to 30 or 60 days 
per year for mental health care, compared to 120, 365, or unlimited days for other illnesses).7 
They also frequently imposed a separate, lower, dollar maximum on all mental health expenses, 
such as a lifetime maximum of $50,000.	Even more restrictive was coverage for mental health 
care outside the hospital (psychiatric office visits).  Virtually all participants with mental health 
care coverage were subject to special limits for outpatient care in 1992.  Outpatient mental 
health care was commonly covered for fewer visits per year than other outpatient services, 
subject to special maximum dollar limits on annual payments, and covered at a coinsurance rate 
of 50 percent rather than the usual 80 percent paid by the plan for other illnesses.  Also, 
outpatient mental health care expenses often could not be used to meet the employee's 
maximum out-of-pocket expense limitation.  Therefore, reimbursement for these expenses did 
not increase to 100 percent even when the out-of-pocket expense limitation was met.8Alcohol 
and drug abuse treatment 	Alcohol and drug abuse treatment benefits covered nearly all 
full-time medical participants (tables 52-54).  Ninety-six percent of participants with alcohol 
abuse treatment benefits received the same benefits for both alcohol and drug abuse treatment.  
Benefits provided under substance abuse care include both detoxification and rehabilitation.  
Detoxification involves supervised care by medical personnel designed to reduce or eliminate 
the symptoms of chemical dependency.  Rehabilitation is designed to provide a variety of 
services intended to alter the behavior of substance abusers.  Such services are generally 
provided once detoxification has been completed. 
	While virtually all participants covered by alcohol abuse treatment benefits were eligible 
for inpatient (in-hospital) detoxification, 73 percent had coverage for inpatient rehabilitation.  
(Detoxification is generally considered medically necessary, and thus it is included in nearly all 
medical plans.  There is a greater tendency to exclude inpatient rehabilitation, because it requires 
less constant and less immediate care.)  Outpatient alcohol abuse treatment, generally 
rehabilitative care, was available to 74 percent of participants with alcoholism coverage.  
Coverage patterns were similar for drug abuse treatment benefits. 
	As was true with mental health care, plans were more restrictive in covering substance 
abuse treatment than other illnesses.9  Participants were more than three times as likely to have 
inpatient detoxification treated the same as any other inpatient confinement than to have inpatient 
rehabilitation covered the same as any other illness (35 percent and 10 percent).  Fourteen 
percent of the participants with alcoholism treatment coverage had outpatient care treated the 
same as other conditions. 
	Specific limitations for substance abuse treatment most commonly included restrictions 
on the number of days of inpatient hospital care per year, the number of outpatient visits per 
year, reduced coinsurance levels for outpatient treatment, ceilings on out-of-pocket limits not 
applying to outpatient care, and maximum dollar amounts per year or per lifetime.  A typical 
limitation on inpatient care was 30 days per year.  Similarly, outpatient care might be restricted 
to 20 or 30 visits per year at a coinsurance rate of 50 percent.  Dollar maximums were often 
combined between inpatient and outpatient care, with $50,000 per lifetime a common limit.10  
	Finally, limitations on days and dollars were often combined for alcohol and drug abuse 
care.  For example, plans often limit coverage to 30 days per year and to $50,000 per lifetime 
for both alcohol and drug abuse treatment.  Day and dollar limits for alcohol and drug abuse 
treatment may also apply to mental health care.  For example, mental health care and alcohol 
and drug abuse treatment often were subject to the same lifetime dollar maximum. 
 
Health maintenance organizations  
	Health maintenance organizations provide a fixed set of medical benefits for a prepaid 
fee.  The survey tabulated the details of three categories of medical care provided by HMO's--
physicians' office visits, out-of-hospital prescription drugs, and extended care facilities.   
	Sixty-three percent of HMO participants were required to pay a copayment for office 
visits, typically $5 or $10 per visit, before treatment was received (table 55).  Virtually all of the 
remaining participants received coverage in full.  In general, HMO's did not limit the number of 
physicians' visits.   
	Out-of-hospital prescription drug benefits were available to 86 percent of HMO 
participants.  Most of these workers had to pay a copayment per prescription, commonly $5 or 
greater.   
	Finally, extended care treatment facility benefits were provided to 89 percent of HMO 
participants.  Most commonly, the number of days of coverage was limited; typical limits were 
100 days per year. 
 
Other medical benefits  
	The 1992 survey of State and local governments measured the incidence of several 
other services provided through medical care plans (table 56).  Included in these other services 
were routine physical examinations well-baby care, and coverage for birthing centers.  Forty-
seven percent of medical care participants were in plans that covered at least some of the costs 
for routine physical examinations, 56 percent had coverage for well-baby care, and 14 percent 
had incentives for child deliveries in lower cost birthing centers rather than in hospitals.  HMO's 
almost always included coverage for hearing care, physical examinations, well-baby care, and 
immunizations and inoculations.  The main reason for such a high incidence of these services is 
that HMO's are required to include these benefits to qualify under the Health Maintenance 
Organization Act of 1973, as amended.11Employee contributions  
	Forty-three percent of full-time participants in State and local governments were 
required to pay part of the cost for their individual medical coverage in 1992 (tables 57-59).  
Seventy-two percent of participants shared in the cost for family coverage.  Teachers were 
more likely to have both their individual and family coverage fully employer financed than the 
other two occupational groups.  Sixty-three percent of teachers had their individual coverage 
wholly employer financed compared with 53 and 57 percent, respectively for white-collar 
workers, except teachers, and blue-collar and service workers.  Thirty-four percent of teachers 
were in plans where family coverage was fully employer paid, compared with 24 percent for 
white-collar workers, except teachers, and 27 percent for blue-collar and service participants. 
	Data on the amount of an employee's contributions for medical benefits occasionally 
were not available because a single payroll deduction applied to both medical care and one or 
more other benefits.  Where the amount was reported, employee premiums for individual and 
family coverage averaged $29 and $139 a month, respectively.   
	Medical care premiums for individual coverage showed some variation by type of plan.  
Forty-six percent of full-time participants in HMO's were required to contribute for single 
coverage compared to 42 percent for non-HMO's.  Similar differences were seen for family 
coverage.  Under HMO's, 76 percent of the participants were required to contribute towards 
family coverage, compared to 71 percent for non-HMO's.  The average premiums for individual 
and family coverage were higher for participants in non-HMO's than for those in HMO's; in 
fact, average employee contributions for family coverage in non-HMO's were $29 per month 
higher than in HMO's.  Individual premiums were just over $4 per month higher for non-HMO 
participants than for HMO participants. 
	Of employees required to contribute toward the cost of their medical care coverage in 
1992, nearly one-half could do so with pretax dollars.  These employees had the advantage of 
reducing their taxable income while purchasing medical coverage.  Pretax contributions may be 
required, optional, or offered as part of a flexible benefits arrangement. 
 
Participation requirements 
	Medical care plans typically required that only a short eligibility period, if any, be served 
by new employees before coverage began (table 60).  For those required to complete a 
minimum length of service, it was usually 3 months or less.  The service requirement was not 
determinable for two-fifths of participants, usually because plan documents (typically prepared 
by a health coverage provider) did not include the employer's eligibility provisions.  The data in 
table 60 should be interpreted with this limitation in mind. 
 
Coverage for retired workers  
	Although the Consolidated Omnibus Budget Reconciliation Act of 1985 requires 
employers to offer continued health care benefits for employees who are retired, laid off, or 
otherwise separated from employment, workers may be charged all of the premium costs at 
group rates.  In addition, the continuation period stipulated by the law is limited.12  The survey 
of State and local governments focused on coverage for retired employees that was financed 
wholly or partly by the employer (tables 61-62).	Fifty-one percent of medical care 
participants worked for employers who financed at least part of their medical care after 
retirement.  The vast majority of workers were in plans that provided postretirement coverage 
regardless of their age.  An eligibility requirement was commonly imposed for retiree coverage; 
it was usually either a stated length of service or qualification for the employer's pension plan. 
	The level of medical care coverage for retirees under age 65 was generally the same as 
for active workers.  Although benefit provisions were reduced for some retirees upon reaching 
age 65, more commonly there was no change in benefit levels apart from coordination with 
Medicare. 
	Finally, coverage was more likely to be partly paid by the retiree than to be wholly 
employer financed.  This was true both for retirees under age 65 and those age 65 and over. 
 
Employee and plan payments 
	The preceding sections of this chapter have focused on various benefit provisions found 
in employer-provided health care plans.  These data have been used by the Bureau of Labor 
Statistics to create a model of employee expenses for selected health care services.13  The 
model incorporates benefit provisions and selected scenarios of health care expenses, designed 
to represent different levels of health care usage and different types of health care services.  The 
results of the model are estimates of what the employee and the plan would pay over the course 
of a year for specified medical services. 
	There are several factors that affect the percentage of total medical care expenses paid 
by the employee and the plan during the course of the year.  Two of these factors are the 
amount of expenses and the type of health care provider. 
 
Amount of expenses.  In scenario 1, the employee had $673 in total health care expenses (table 
63).  As described earlier, various types of medical services are subject to overall limits, either 
alone or in combination with internal limits.   
	When overall limits are present, the employee must satisfy an annual deductible and 
meet the coinsurance requirement before any benefits are paid.  In 1992, the annual deductible 
averaged $173 and the individual usually had to meet a 20-percent coinsurance requirement. 
	With annual expenses of $673, the deductible and coinsurance requirements significantly 
affect what the employee and the plan pay for health care expenses.  In this scenario, the 
employee paid, on average, 36 percent of the cost of total health care expense. 
	In scenario 2, the employee incurred $7,085 in total health care expenses.  In this 
scenario, the plan paid, on average, 88 percent of total expenses.  Because total charges in this 
scenario were much higher than in scenario 1, the deductible had much less of an effect on the 
employee's cost.  In addition, the presence of limits placed on an employee's liability for 
catastrophic expenses in many health care plans held down out-of-pocket costs.  Individuals 
with large expenses are more likely to reach the catastrophic expense limit (most frequently 
$1,000) than individuals with lower expenses.  After this limit is reached, plans typically pay 100 
percent of covered charges. 
 
Type of health plan.  The percentage of the cost paid by the employee and the plan varied by 
type of health care plan. Table 63 shows that, in both scenarios, the employee paid a much 
lower percentage of total expenses in HMO's than in non-HMO's.  In scenario 1, the employee 
paid an average of 45 percent of total expenses under non-HMO's compared with an average 
of 13 percent for HMO's.  The pattern was similar for scenario 2, with employees averaging 16 
percent of total expenses under non-HMO's and 3 percent in HMO's.  In HMO's, enrollees 
rarely were subject to an annual deductible or required to pay a portion of expenses 
(coinsurance requirement) for health care services.  Doctor's office visits frequently required a 
copayment, most often $5 or $10 per visit.  Most other services were generally covered in full.  
In contrast, the expenses of non-HMO participants frequently were subject to an annual 
deductible and a coinsurance requirement.  Thus, participants in HMO's typically paid a lower 
percentage of total expenses than those in non-HMO's. 
 
Dental Care 
	Dental care benefits were available to 65 percent of full-time employees in State and 
local governments in 1992 (tables 64-69).14  Among the 3 occupational groups, there were no 
observable differences in participation.  Dental care may be offered as a part of a 
comprehensive medical and dental plan, or as a separate plan in addition to medical coverage.  
Often, employers offered a series of medical plans from which to choose, as well as a separate 
dental plan that can accompany any medical plan.  Of the participants in dental plans:	*  The 
most prevalent means of coverage was for plans to reimburse a percent of the usual, customary, 
and reasonable charge for all dental procedures; 
	*  Three-tenths were required to contribute toward the cost of their individual coverage, 
and just over one-half were required to contribute toward the cost of family coverage; 
	*  Nearly one-half were in plans that specified a yearly deductible amount before any 
benefits were paid by the plan; 
	*  Three-fourths were covered by plans that limited the amount of payment each year 
by specifying an annual maximum benefit. 
 
	Where dental benefits are included in a single plan with medical care benefits, it was not 
possible to distinguish which portion of the employee's contribution, if applicable, went towards 
dental coverage.  Employee contribution data were examined in stand-alone dental plans, that 
is, those offered separately from medical plans.  When such plans required an employee 
contribution, that contribution was typically under $15 per month for individual coverage and 
under $25 per month for family coverage. 
	Seventy-nine percent of participants covered by dental care plans received benefits 
through a fee-for-service plan, which reimburses patients or providers only after services are 
received (table 37).  Such plans were most commonly self-insured or obtained through a dental 
society.  The remaining participants had their dental benefits provided through either a health 
maintenance organization or a preferred provider organization. 
	Dental plans nearly always covered preventive and restorative services, and seven-
tenths of participants were in plans that also covered orthodontic expenses, at least for children.  
Preventive care typically includes dental examinations, prophylaxis (cleaning), and x rays.  
Restorative procedures include such basic services as fillings, periodontal care, and endodontic 
care, and such major services as inlays, crowns, and prosthetics.15 	Dental payments were 
generally based on a proportion of the usual, customary, and reasonable charge for a 
procedure.  The proportion covered by a plan often depended on the type of procedure 
performed.  Less costly procedures such as examinations and x rays were usually covered at 
100 percent.  Fillings, surgery, endodontics, and periodontics were more likely to be covered at 
80 percent.  The most expensive procedures--inlays, crowns, prosthetics, and orthodontia--
were often covered at 50 percent of the usual, customary, and reasonable charge. 
	Slightly more than one-tenth of dental plan participants were offered reimbursement 
based on a schedule of cash allowances for preventive and restorative services.  In this type of 
arrangement, each procedure is subject to a specified maximum dollar amount that can be paid 
to the participant or dentist.  Orthodontic care was rarely subject to this type of schedule.   
 
	Incentive schedules were found infrequently.  Under such an arrangement, the percent 
of dental expenses paid by the plan increases each year if the participant is examined regularly 
by a dentist. 
	Finally, one-tenth of participants were in plans requiring a copayment, after which 
benefits were paid in full, for such services as surgery, crowns, endodontics, and prosthetics.  A 
small number of participants were required to pay a copayment for examinations and x rays.  
Copayments were commonly $5 or $10 per procedure for preventive care, though higher 
copayments often applied to major dental services. 
	Forty-six percent of dental participants were in plans that specified a deductible amount 
before any benefits were paid by the plan.  The most frequently observed individual deductible 
was $25 per year, with the average being $40.  Dental plans often placed a limit on the amount 
of deductibles for each family (usually three times the individual deductibles).  A few plans 
required the participant to pay a one-time deductible rather than a deductible every year. 
	Plans that limited the amount of payment each year by specifying an annual maximum 
benefit covered 75 percent of dental plan participants.  The most common limit was $1,000 per 
year, and the average was $1,135.  Among participants in plans with orthodontic services, 70 
percent had orthodontic benefits subject to a separate lifetime maximum.  These orthodontic 
maximums, which were usually either $1,000 or $1,500 and averaged $1,047.16  	Forty-
four percent of dental participants were in plans that had preauthorization clauses.  This cost 
containment technique requires participants to obtain authorization before undergoing expensive 
treatment.  When required, it was commonly for procedures costing $200 or more. 
	Finally, a small percentage of participants were covered by plans with only preventive 
dental care, which includes dental examinations, prophylaxis (cleaning), and x rays (table 56).  
Participants with only preventive dental care almost always had their benefits provided under 
HMO's. 
 
Vision Care 
	The following table indicates the percent of full-time employees in State and local 
governments with vision care coverage in 1992:17
  
   All employees						35

	   White-collar employees, except teachers		34 
	   Teachers						33 
	   Blue-collar and service employees			38 
 
	Fifty-nine percent of participants covered by vision care provisions received benefits 
through a fee-for-service plan (table 37).  
	All participants eligible for vision benefits had coverage for eyeglasses; with few 
exceptions, coverage was provided for eye examinations as well (table 70).  Ninety-two 
percent of vision care participants had coverage for contact lenses. 
	Twenty-eight percent of vision care participants had coverage for eyeglasses paid in full; 
the remainder had limits placed on their benefits.  One prevalent limit was that coverage for 
eyeglasses was subject to a scheduled dollar allowance per benefit. Other plans required an 
employee copayment or offered a discount on the purchase of eyeglasses. 
	Three-fifths of vision care participants had their coverage for contact lenses subject to a 
scheduled dollar allowance per benefit.  Just over one-fifth of participants were required to pay 
a copayment before coverage was provided for contact lenses.  Contact lenses were rarely 
covered in full. 
	Eye examinations were commonly subject to either a dollar maximum per visit or a small 
copayment per visit.  Thirty-eight percent of participants in vision care plans were provided full 
coverage for eye examinations. 
	Finally, 21 percent of participants were covered for eye examinations only (table 56).  
This coverage was not part of a regular vision care plan.  Such limited benefits covered 67 
percent of all participants enrolled in an HMO.18 
 
Notes:
 
	1  For a more detailed discussion on HMO's, see Thomas P. Burke and Rita S. Jain, 
"Trends in Employer-provided Health Care Benefits," Monthly Labor Review, February 1991, 
pp. 24-30. 
	2  This average is slightly different from the sum of the individual averages because some 
participants have only an annual deductible or only an annual maximum out-of-pocket expense 
limitation.  The combined average includes only those participants with both provisions.	3  For 
a more detailed discussion on alternatives to hospitalization, see Thomas P. Burke, "Alternatives 
to Hospital Care under Employee Benefit Plans," Monthly Labor Review, December 1991, pp. 
9-15. 
	4  The "usual, customary, and reasonable" charge is defined as being not more than the 
physician's usual charge; within the customary range of fees charged in the locality; and 
reasonable, based on the medical circumstances.	5  For more information on incentives 
for outpatient surgery, see Robert B. Grant, "Outpatient Surgery: Helping to Contain Health 
Care Costs," Monthly Labor Review, November 1992, pp. 33-36. 
	6  For a more comprehensive discussion on prescription drug coverage, see Cathy 
Baker and Natalie Kramer, "Employer-sponsored Prescription Drug Benefits,"  Monthly Labor 
Review, February 1991, pp. 31-35.	7  In some plans, a limited number of days of mental 
health care in the hospital were covered at the full semiprivate rate.  After these limits were 
reached, mental health care was then subject to overall plan limits such as deductibles and 
coinsurances. 
	8  A detailed examination of mental health care provisions in employer-provided health 
care plans is provided by Allan P. Blostin in "Mental Health Benefits Financed By Employers," 
Monthly Labor Review, July 1987, pp. 23-27.
	9  The designation of substance abuse coverage as more restrictive than that for other 
illnesses results from a comparison of types of coverage.  For instance, if a plan limits inpatient 
substance abuse care to 30 days per year but the limit on inpatient care of any other type of 
illness is greater than 30 days per year, that plan contains separate, more restrictive, limits. 
	10  For more detailed discussion of employer-provided substance abuse coverage, see 
Marc E. Kronson, "Substance Abuse Coverage Provided by Employer Medical Plans," 
Monthly Labor Review, April 1991, pp. 3-10.  In addition, see Substance Abuse Provisions in 
Employee Benefit Plans, Bulletin 2412, Bureau of Labor Statistics, August 1992.	11  
Under this act, an HMO must provide certain coverage, such as home health care, physical 
examinations, and children's eye and ear examinations.  Under certain circumstances, employers 
may be required to offer employees medical care coverage through federally qualified HMO's. 
	12  The act requires employers who maintain health insurance plans to continue 
coverage to terminated workers for up to 18 months.  Workers may be charged up to 102 
percent of the premium cost.  Based on a 1989 change to this law, employees disabled at the 
time of termination can have benefits continued for up to 29 months, and can be charged up to 
150 percent of the premium cost after 18 months. 
	13  For more information regarding out-of-pocket expenses for medical services, see 
Allan P. Blostin, Robert B. Grant and William J. Wiatrowski, "Employee Payments for Health 
Care Services," Monthly Labor Review, November 1992, pp. 17-32.
	14  For tabulation purposes, plans that provided only preventive dental care benefits 
were not included as having full dental care coverage.  Data for preventive dental care benefits 
are found in table 56. 
	15  Periodontal care is the treatment of tissues and bones supporting the teeth.  
Endodontics involves the treatment of the tooth pulp, such as root canal work.  Prosthetics 
deals with the construction and fitting of bridges and dentures.	16  For more details on dental 
care benefits, see Rita S. Jain, "Employer-sponsored Dental Insurance Eases The Pain," 
Monthly Labor Review, October 1988, pp. 18-23.	17  Eyewear (eyeglasses and/or contact 
lenses) must be included for there to be vision care coverage.  If a plan provided only eye 
examinations, for tabulation purposes, the plan was not considered as providing vision care 
coverage.   
	18  For more details on vision care benefits, see Rita S. Jain, "Employer-sponsored 
Vision Care Brought Into Focus," Monthly Labor Review, September 1988, pp. 19-23.