EBS BULL #2441  5/94 CHAPTER 4/ SM 1992 MEDICAL DENTAL & VISION CARE 
HEALTH
 
Chapter 4. Medical, Dental, and Vision Care Medical Care 
 
	Medical care benefits were provided to 71 percent of full-time employees in small 
private establishments in 1992.  Among the three occupational groups, professional technical 
and related employees were the most likely to participate in medical plans (83 percent), while 
blue-collar and service employees were the least likely (61 percent).   
	Of those workers with medical care insurance:  
 
	*  Just under one-half were required to pay a plan premium for individual coverage; 
approximately seven-tenths paid part of the cost for family coverage; 
 
	*  One-third were covered by non-traditional medical care plans, that is, health 
maintenance organizations (HMO's) or preferred provider organizations (PPO's); 
 
	*  Virtually all participants in traditional fee-for-service plans were subject to an annual 
deductible; the average annual deductible was $220; 
 
	*  Nearly nine-tenths of participants in fee-for-service plans had an annual limit on 
individual out-of-pocket expenses; the average limit was $1,108; 
 
	*  Mental health coverage, and alcohol and drug abuse treatment, though available to 
nearly all participants, had more restrictive provisions than other ailments; 
 
	*  Seven-tenths of workers covered by non-HMO plans were required to get 
preadmission certification before entering the hospital. 
 
Coverage of selected categories of medical care  
	All of the participants in medical care plans had coverage for hospital room and board, 
physicians' visits in the hospital, surgery, and x-ray and laboratory services.  With few 
exceptions, coverage was provided for physicians' office visits, mental health conditions, and 
out-of-hospital prescription drugs (table 34).  Virtually all participants were covered by inpatient 
alcohol and drug detoxification benefits.  Coverage was somewhat less extensive for inpatient 
and outpatient substance abuse rehabilitation benefits.   
	Among benefits less frequently provided were hearing care (18 percent of participants), 
routine physical exams (28 percent), well-baby care (37 percent), and immunizations and 
inoculations (26 percent).   
 
Funding arrangements  
	In 1992, two-thirds of full-time medical plan participants in small private establishments 
were covered by a fee-for-service medical plan (table 35).  These plans pay for specific 
medical procedures as expenses are incurred.  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) covered two-fifths of fee-for-service participants.  
Commercially insured plans covered just over one-third of the fee-for-service participants, while 
Blue Cross/Blue Shield plans covered slightly more than one-fifth of the 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 18 percent of medical care 
participants in small private establishments in 1992.  PPO's offer a higher benefit for services 
rendered by designated health care providers (such as hospitals and physicians), although 
participants are free to choose any provider.  Designated providers agree in advance to a given 
fee schedule. 
	Fourteen 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					37 
Individual Practice Association			54 
Combination					 9 
 
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 34).   
	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, reasonable, and 
customary charges, 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.)   
	The most common type of payment arrangement in fee-for-service plans is coverage 
subject to overall limitations only.  Under such an arrangement, the employee must satisfy the 
deductible and meet the coinsurance requirement before any benefits are paid.  Nearly three-
fifths of all participants in plans with hospital room and board benefits had coverage subject to 
overall limitations only.  Services for which at least three-fifths of plan participants had coverage 
subject to overall limits only were physicians' office visits, in-hospital physician services, 
diagnostic x-rays and laboratory services, outpatient prescription drugs, inpatient surgery, and 
outpatient surgery. 
	Separate 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. 
 
Overall limitations  
	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, 88 percent of full-time participants were in plans 
with overall limits (tables 36-40).  Ninety 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, 13 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 three-tenths of 
the participants subject to overall limits.  Deductibles of $200 and $250 were the next most 
commonly observed deductibles.  The average annual deductible in 1992 was $220 for all 
workers.  The amount of the average deductible showed some variation between occupational 
groups.  It was highest ($236) for professional, technical and related participants and lowest 
($210) for blue-collar and service participants. 
	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.  Four out of 5 participants with overall 
limitations were in plans that specified limits on the number of persons in the family required to 
satisfy an annual deductible.   Most commonly, family deductibles were equal to two or three 
times the individual deductibles. 
	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.  Ninety percent of participants in traditional fee-for-service plans with overall 
limitations had their expenses paid at 80 percent.  In contrast, PPO enrollees were most likely 
to have their expenses paid at 90 percent or more, including 14 percent of PPO participants 
with overall limitations who had their expenses paid at 100 percent.  Workers who had their 
coverage paid at 100 percent, however, were generally subject to a yearly deductible and a 
lifetime plan maximum. 
	Fewer than 1 out of 10 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. 
	Nine-tenths 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).  Slightly more than three-fifths of participants in plans with 
overall limits had an annual maximum individual out-of-pocket expense of $1,000 or less.  
Maximum out-of-pocket ceilings were also specified for family expenses in plans covering just 
under three-fifths of participants with overall limitations.  The annual maximum for out-of-pocket 
expenses for plan participants averaged $1,108 for an individual and $2,262 for a family. 
	Plans that both required an annual deductible and placed a maximum on out-of-pocket 
expenses covered 81 percent of the participants subject to overall limitations.  The sum of these 
two items represents 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 maximum out-of-
pocket expense averaged $1,317 per individual.2	Plans with overall limitations often place 
a ceiling on the amount payable by the plan, usually a lifetime maximum.  In 1992, three-fourths 
of the participants in plans with overall limitations had a lifetime maximum apply to their benefits.  
A maximum of $1 million applied to seven-tenths of these participants.  Just under one-tenth of 
participants were in plans with a lifetime maximum of greater than $1,000,000; the average of all 
maximums was $1,027,411.  There were small variations in the average lifetime maximums 
between occupational groups.  Professional, technical, and related participants had the highest 
average lifetime maximum ($1,063,431), while clerical and sales workers had the lowest 
($1,003,467).  Plans that did not impose a maximum on plan payments covered one-fourth of 
the participants subject to overall limitations.    
 
Hospital coverage  
	All medical plan enrollees covered by the survey had benefit provisions for hospital 
room and board charges  (tables 41-42).  Fifty-nine 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.  Fifteen 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.   
	Sixteen 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 under seven-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 being required to pay a separate copayment 
for hospital care, to discourage unnecessary hospitalization.  Fourteen percent of participants 
with hospital room and board coverage were subject to a separate copayment.  It was 
somewhat more likely for HMO participants to be subject to a hospital copayment (18 percent) 
than for non-HMO participants (13 percent). 
	When copayments were required for hospitalization, it was most likely on a per 
admission basis.  For non-HMO participants, these copayments usually ranged up to $200; 
HMO participants were usually required to pay copayments between $200-$300. 
 
Alternatives to hospitalization 
	To help hold down the costs of medical care, a number of plans provide coverage for 
less expensive alternatives to a hospital stay.  These alternatives include extended care facilities, 
home health care, and hospices (table 34).  Coverage patterns typically differed between HMO 
and non-HMO participants. 
	Coverage for stays in an extended care facility was available to just over four-fifths of 
full-time participants.  Extended care facilities provide skilled nursing care, rehabilitation, and 
convalescent services to patients requiring less intensive treatment than would otherwise be 
provided in a hospital.  Seven-eighths of HMO participants had coverage for stays in an 
extended care facility; one-fifth 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 80 percent of participants.  Home health care benefits were provided 
to virtually all HMO participants (99 percent); these benefits were provided less extensively to 
non-HMO participants (77 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.  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 quite 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 is commonly limited to 60 days per confinement, while home health care services are 
frequently restricted to 100 visits per year. 
	Coverage for hospice care, another alternative to hospitalization, was provided to 57 
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.4  As was true with hospitalization, in-hospital surgical benefits were most likely to 
be covered at a specified percentage rate, usually after any required overall plan deductible.  
Fifty-two percent of participants were covered at 80 percent of the UCR charges.  Twenty-four 
percent of participants were covered for the full UCR charges (tables 43-44). 
	In-hospital surgery was covered according to a schedule establishing a maximum 
amount payable for each procedure for 4 percent of full-time enrollees.  Charges exceeding the 
scheduled maximums, however, were generally covered, subject to the plan's overall deductible 
and coinsurance. 
	Four-fifths of participants were in plans where outpatient surgery was covered in an 
identical manner 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 costs of medical care, health care insurers are encouraging 
enrollees to substitute less expensive outpatient services, such as outpatient surgery, for inpatient 
hospital services.  Non-HMO health care providers have increasingly begun to provide higher 
reimbursement rates for outpatient surgery to encourage its use over inpatient surgery.5  
Twenty-three percent of participants in non-HMO's had coverage for outpatient surgery treated 
differently (generally with a higher reimbursement) than for inpatient surgery.  	Two-thirds 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, just under 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 applicable for outpatient procedures. 
 
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.  The goal of these programs is to make sure that the services 
rendered are medically necessary and provided in the most appropriate health setting.  These 
programs were developed to some extent in response to the rapid rise in medical care costs 
during the 1980's. 
	Eighty-nine percent of medical care participants had some "managed care" provision 
available to them (table 45). 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 that had at least one managed care feature, such as 
hospital pre-admission certification, pre-admission testing, and second surgical opinion. 
	Some 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 more appropriate health care settings, and mandatory second 
surgical opinions for certain selected procedures.   
	Among the plan features studied in 1992 was the finding that 71 percent of the non-
HMO participants were required to get authorization before being admitted to a hospital (table 
46).  When precertification was required prior to hospitalization, a deductible per hospital 
admission or a reduction in the coinsurance paid by the plan were the most prevalent penalties 
for non-compliance.  It was most common for the deductibles to range between $200-$500.  
When the coinsurance rate paid by the plan was reduced for participants who did not seek 
approval before being hospitalized, it was most likely to 50 percent of charges.   
	Less prevalent cost containment features in non-HMO plans included incentives for the 
employee to audit hospital bills (8 percent) and more restrictive benefits for nonemergency 
weekend admissions (15 percent).  In plans where there were penalties imposed for 
nonemergency weekend admissions, it was nearly universal for no benefits to be provided. 
	Thirty-seven percent of participants had their care subject to utilization review.  
Utilization review is the process of reviewing the appropriateness and quality of care provided 
to patients.  Benefit provisions for prehospitalization testing, a means of decreasing the length of 
hospitalization, covered 53 percent of the non-HMO participants.  Most plans covered 100 
percent of charges for preadmission testing. 
	In non-HMO plans, second surgical opinion provisions were applicable to just over 
seven-tenths of participants with inpatient surgical benefits (table 47).  The majority of these 
plan enrollees were assessed penalties for not obtaining second opinions, generally applying only 
to selected procedures.  The most common penalty was to reduce the coinsurance rate if a 
second opinion was not sought. 
	Second surgical opinion provisions are rare in HMO's  which, 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, where care is managed by directing 
patients to specific providers or services. 
	PPO's include incentives for receiving medical services and supplies from designated 
providers, with certain medical services more likely to be subject to these incentives than others.  
For example, virtually all PPO participants had hospital room and board coverage treated more 
generously if care was received at specified hospitals (table 48).  In contrast, surgery, physicians 
services and outpatient prescription drugs were less likely to be subject to an incentive for using 
preferred providers. 
	When a PPO option was available, it was nearly universal for the plan to pay 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 90 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 100 percent of covered expenses if the participants 
stayed within the PPO network and 80 percent if they went outside of the network. 
	About 1 in 3 workers covered by a PPO had an annual deductible based on who 
provided care.6  Enrollees in PPO's may be subject to a yearly deductible of $100; however, if 
they go outside of the network, the deductible might be $200.  There are also some plans where 
participants in PPO's are not subject to a deductible for network services, but are required to 
pay one if they do not go to the designated providers. 
	Finally, 38 percent of the PPO participants were in plans subject to a modest 
copayment for physicians' office visits, for example, $10 per visit.  For these same workers, 
visits to non-preferred doctors were usually covered under overall limits, requiring satisfaction of 
an annual deductible and a 20-percent coinsurance paid by the enrollee. 
 
Prescription drug benefits 
	Virtually all participants had medical plans that provided coverage for outpatient 
prescription drugs (table 34).  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.  
	It is more likely for non-HMO participants to have prescription drug coverage than 
HMO participants, and rare for both HMO and non-HMO participants to have prescription 
drugs covered in full.  Sixteen percent of HMO participants were not covered for prescription 
drug benefits, compared with 3 percent of non-HMO participants. 
 	A prescription can often be filled using either a brand name drug or a generic drug; 
generic drugs are often less expensive than their brand name counterparts.  Eighteen 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 10 percent of employees with prescription 
drug coverage.  These programs provided drugs for maintenance purposes, that is, drugs 
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.7Mental health coverage  
	Mental health coverage, though available to nearly all participants, was frequently 
subject to more restrictive limitations than other illnesses (table 49).  Of the medical care 
participants with mental health benefits, 83 percent had more restrictive hospital coverage for 
mental illness than for other ailments.  Plans commonly limited the duration of hospital stays to 
30 or 60 days per year for mental health care, compared to 120, 365, or unlimited days for 
other illnesses.8  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.9Alcohol and drug abuse 
treatment 	Alcohol and drug abuse treatment benefits covered nearly all full-time medical 
participants (tables 50-52).  Nine out of 10 participants with alcohol abuse treatment benefits 
had their coverage treated the same as those for drug abuse treatment.  Benefits provided under 
substance abuse care included 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. 
	Virtually all participants covered by alcohol abuse treatment benefits were eligible for 
inpatient (in-hospital) detoxification, but only 73 percent received inpatient rehabilitation 
coverage.  (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 75 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.10  Participants were four times more 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 (36 percent and 9 percent, respectively).  
Eight 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.11  
	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.  Days and dollar limits for alcohol and drug abuse 
treatment may also apply to mental health care.  For example, it is not uncommon for mental 
health care and alcohol and drug abuse treatment to be 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.  For 
physicians' office visits, 78 percent of HMO participants were required to pay a copayment, 
typically $5 or $10 per visit, before treatment was received.  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 84 percent of HMO 
participants.  Most of these workers had to pay a copayment per prescription of $5 or more.   
	Finally, extended care treatment facility benefits were provided to 87 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 measured the incidence of several other services provided through 
medical care plans (table 53).  For example, 28 percent of medical care participants were in 
plans that covered at least some of the costs for routine physical examinations, 37 percent had 
coverage for well-baby care, and 22 percent had incentives for child deliveries in lower cost 
birthing centers rather than in hospitals.   HMO's nearly 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.12Employee contributions  
	Just under one-half of full-time participants were required to pay part of the cost for 
their individual medical coverage in 1992.  Seven-tenths of participants shared in the cost for 
family coverage (tables 54-56).  Blue-collar workers were more likely to have family coverage 
fully employer financed than white-collar workers.  One-third of blue-collar workers had family 
coverage totally employer paid compared to one-fifth for white-collar workers.  There was very 
little difference among occupational groups in the percentage of workers provided fully 
employer financed individual medical coverage. 
	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 $37 and $151 a month, respectively.   
	Employee medical care premiums for individual coverage showed considerable variation 
by type of plan.  Sixty-two percent of full-time participants in HMO's were required to 
contribute for single coverage compared to 44 percent for non-HMO's.  Differences were less 
pronounced for family coverage.  Under HMO's, 77 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 HMO's than for 
those in non-HMO's; in fact, average employee contributions for family coverage in HMO's 
were $21 per month higher than in non-HMO's.  Individual premiums were almost $4 higher 
per month for HMO participants than for non-HMO participants. 
	Of employees required to contribute toward the cost of their medical care coverage in 
1992, one-fifth 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 or optional, and also may be 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.  One-fourth of medical care plan participants were 
allowed to join a plan immediately upon being hired.  For participants required to complete a 
minimum length of service, the required period was usually 3 months or less.   
 
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.13  The survey 
of small private establishments focused on coverage for retired employees that was financed 
wholly or partly by the employer (table 57).	Of the medical care participants in the survey, 
18 percent worked for employers who financed, at least in part, medical care protection after 
retirement.  The vast majority of workers were in plans that provided post retirement coverage 
regardless of their age.  It was quite common to impose an eligibility requirement for retiree 
coverage; this requirement was usually either a stated length of service or qualification for the 
company 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, it was more likely for the coverage 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 preceeding 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.14  
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 
what percentage of total medical care expenses are paid by the employee and the plan during 
the course of the year.  Two of the factors which will be discussed in this section 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 
58).  As described earlier in this chapter, the majority of medical care participants are in plans 
subject to overall limits only.  In these types of plans, the employee must satisfy an annual 
deductible and meet the coinsurance requirement before any benefits are paid.  In 1992, the 
annual deductible averaged $220 and the individual usually had to meet a 20-percent 
coinsurance requirement. 
	With annual expenses of $673 in scenario 1, the deductible and coinsurance 
requirements significantly affect what the employee and the plan pay for health care expenses.  
In this scenario, the employee and the plan share equally in the cost of total health care 
expenses. 
	In scenario 2, the employee incurred $7,085 in total health care expenses.  In this 
scenario, the plan paid 83 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, many health care plans limit an employee's liability for catastrophic 
expenses which holds 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 58 shows that, in both scenarios, the employee paid a much 
lower percentage of total expenses in HMO's than in non-HMO's.  In HMO's, it was rare for 
enrollees to be subject to an annual deductible or to be required to pay a portion of expenses 
(coinsurance requirement) for health care services.  Doctor's office visits frequently required a 
copayment, most frequently $5 or $10 per visit.  Most other services were generally covered in 
full.  In contrast, non-HMO participants frequently had expenses covered 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 33 percent of full-time employees in small private 
establishments in 1992 (tables 59-64).15  Among the three occupational groups, professional, 
technical, and related employees had the highest percentage of employees participating in dental 
plans (43 percent), and blue-collar and service employees had the lowest percentage of 
employees participating in dental plans (27 percent).  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 offer a series of medical plans from which employees may choose, as well as 
a separate dental plan that can accompany any medical plan.  Of the participants in dental plans: 
 
	*  The overwhelming majority were reimbursed by a percent of the usual, customary, 
and reasonable charge for all dental procedures; 
 
	*  Two-fifths were required to contribute toward the cost of their individual coverage, 
and seven-tenths were required to contribute toward the cost of family coverage; 
 
	*  Nearly two-thirds were in plans that specified a yearly deductible amount before any 
benefits were paid by the plan; 
 
	*  Just over four-fifths 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 toward 
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. 
	Eighty-five 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 35).  Such plans were most commonly self-insured or obtained through a 
commercial insurer.  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 three-fifths 
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.16 	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. 
	Less than 1 out of 10 dental plan participants were offered reimbursement based on a 
schedule of cash allowances for restorative services, such as fillings, crowns, and endodontics.  
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 rarely found in the survey.  Under this arrangement, the 
percent of dental expenses paid by the plan increases each year if the participant is examined 
regularly by a dentist. 
	Finally, a small number of participants were in plans requiring a copayment, after which 
benefits were paid in full.  Copayments were commonly $5 or $10 per procedure for preventive 
care, while higher copayments often applied to major dental services. 
	Sixty-five 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 $50 per year.  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 (usually $50) rather than a deductible every year. 
	Plans that limited the amount of payment each year by specifying an annual maximum 
benefit covered 84 percent of dental plan participants.  The most common limit was $1,000 per 
year, and the average was $1,105.  Among participants in plans with orthodontic services, 85 
percent had orthodontic benefits subject to a separate lifetime maximum.  These orthodontic 
maximums which were usually either $1,000 or $1,500, averaged $1,078.17  Professional 
technical, and related employees had the highest average lifetime orthodontic maximum 
($1,154) and blue-collar and service participants had the lowest average ($995).
	Preauthorization clauses require participants to obtain authorization from the plan before 
undergoing expensive treatment.  Fifty-seven percent of dental participants were in plans with 
this cost containment technique.  Commonly, procedures costing $200 or more were subject to 
advance authorization. 
	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 53).  
These participants with only preventive dental care almost always had their benefits provided 
under HMO's. 
 
Vision Care 
 
	Vision care coverage was available to 10 percent of full-time employees in small private 
establishments in 1992  (table 65).18  Sixty-six percent of participants covered by vision care 
provisions received benefits through a fee-for-service plan (table 35). 	All participants eligible 
for vision benefits had coverage for eyeglasses; with few exceptions vision care participants had 
coverage for eye examinations.  Three out of 4 vision care participants had coverage for contact 
lenses.	Participants with vision care coverage generally had limits placed on their benefits.  
Typically, vision care participants had their coverage for eyeglasses and contact lenses subject 
to a scheduled dollar allowance per benefit. Other plans often required an employee copayment 
or offered a discount on the purchase of eyeglasses and contact lenses. 
	Eye examinations were commonly subject to either a dollar maximum per visit, or the 
participant was required to pay a small copayment per visit.   
	Finally, 14 percent of the medical participants were covered for eye examinations only 
(table 53).  This coverage was not part of a regular vision care plan.  Such limited benefits 
covered 69 percent of all participants enrolled in an HMO.19  



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  This figure differs from that published in the January 27, 1994 
news release, USDL 94-42.	7  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. 
 
	8  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 coinsurance payments.	9  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. 
 
	10  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.


	11  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). 
 
	12  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. 
 
	13  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.	14  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. 
 
	15  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 53. 

 	16  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. 
 
	17  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.

	18  Eyeware (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.  

	19  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.