23 Compensation and Working Conditions Summer 1998

Hospital Room and

Board Benefits

Employee Benefits

BY JAMES H. MOORE, JR.

An analysis of changes in employer-sponsored health plans

between 1979 and 1995 discloses that employers sought to contain rising hospital room and board expenditures through changes

in plan designs. These changes necessitated revisions in the

presentation of the EBS hospital room and board data.

James H. Moore, Jr. is an economist in the Division of Compensation Data Analysis and Planning, Bureau of Labor Statistics.

Telephone: (202) 606-6264

E-mail: Moore_James@bls.gov

The expense for hospital room

and board is one of the most

commonly covered provisions

in medical insurance plans. During

the 1980s and the first half of this decade, the costs for hospital room and

board rose dramatically, along with

other health care costs. As measured

by the Consumer Price Index for All

Urban Consumers from 1979 to 1995,

all medical care items increased by an

annual average of 7.7 percent, and

hospital room costs increased by an

annual average of 9.9 percent.1 All

expenditures for national health care

during this period increased from $215

billion to $988 billion, 10 percent annually, on average.2 From 1979 to

1995, total personal health care expenditures increased from $187 billion to

$879 billion, also an annual average

increase of 10 percent; at the same

time, hospital expenditures, the single

largest component of personal health

care expenditures, increased from $88

billion to $350 billion, an annual average increase of 9 percent.

Over the years, the Employee Benefits Survey (EBS) has captured and

published data on prevailing hospital

room and board benefits offered in

employer-sponsored health benefit

plans.3 Hospital room and board benefits cover expenses for occupancy of

the room and bed, general nursing and

nurse’s aid services, food and beverages, and personal hygiene items.

Hospital room and board benefits relate to costs of occupancy and not the

professional services of physicians,

intensive-nursing care, or many of the

other costs associated with inpatient

care.

Since 1979, the health care delivery system in the United States and the

employer-sponsored health benefit

plans that support it have evolved in

an effort to provide more comprehensive medical services at manageable

prices. One change has been in how

hospital room and board benefits are

provided to plan participants. As a

reaction to these changes, the EBS has

changed how it captures, organizes,

and presents data on hospital room and

board benefits collected from employer-sponsored health plans.

This article shows how the EBS

data presentation has changed, and

identifies significant trends in hospital room and board benefits over the

1989-95 period. It uses a historical

summary of the EBS data on hospital

room and board benefits for private

sector establishments employing 100

or more workers. Throughout, this

article uses the percent of health plan

participants to measure the prevailing

plan designs and hospital room and

board provisions.
 Compensation and Working Conditions Summer 1998 24

The early years, 1979-86

The health insurance scene was

considerably different in 1979, the first

year the EBS was conducted, than it

is today. In 1979, virtually all employer-sponsored health care was provided by fee-for-service or indemnity

plans.4 Coverage was provided primarily through commercial insurance

carriers or Blue Cross/Blue Shield

plans; only 11 percent of plan participants were in self-insured plans.

Health maintenance organizations

covered less than 5 percent of plan

participants.

From 1979 to 1986, the EBS presented several major characteristics of

hospital room and board benefits that

reflected the prevailing design of this

benefit. First, most fee-for-service

plans covered benefits under major

medical provisions5 as basic benefits,6

or as basic benefits in combination

with major medical coverage. Second,

the survey described the limits on days

of coverage per hospital confinement,7

and other limits.8 Lastly, the survey

detailed how the amount of actual hospital room and board benefits were

paid: As a daily dollar allowance or

the usual and customary semiprivate

room rate for the area.

Basic benefits are sometimes referred to as “first dollar coverage,”

because initial expenses are paid by the

plan rather than by the patient. This

is in contrast to major medical coverage, which calls for cost sharing

through the imposition of deductibles

or coinsurance arrangements or both.

Between 1979 and 1986, the proportion of participants with some form

of basic hospital room and board benefits declined. (See table 1.) In 1979,

basic hospital room and board benefits

were available to 93 percent of medical plan participants. Of these, about

four-fifths had extended coverage—

beyond the period covered by basic

benefits—subject to major medical

cost-sharing arrangements. The remaining 7 percent were subject to

major medical cost-sharing arrangements from the outset. By 1986, basic

hospital room and board benefits were

available to 64 percent of medical plan

participants. Of these, three-fifths had

extended coverage subject to major

medical cost-sharing arrangements.

The proportion of participants with

hospital room and board benefits subject to major medical cost sharing from

the outset increased fivefold over the

period, to 35 percent.

The proportion of participants with

limits on their basic hospital room and

board benefits also declined between

1979 and 1986, from 95 percent to 75

percent. (See table 2.) Over the entire period, between 58 and 72 percent

of participants had a limit on the number of days of basic benefits. These

limits were mainly split between 120

days or fewer and 365 or more days

per confinement. Other types of limits included those with a maximum

dollar amount per confinement.

In 1979, 9 out of 10 medical plan

participants had hospital room and

board benefits equated with the cost

of a semiprivate room; the remainder

had benefits set to a daily dollar allowance. By 1986, the daily allowance form of room and board benefits

had all but disappeared in favor of the

semiprivate room benefit.

The middle period, 1988-91

During the late 1980s, many health

care plans adopted “cost containment”

provisions to stem the tide of rising

health plan costs.9

 With the erosion

of first dollar (“basic”) coverage for

hospital room and board, health plan

designers developed a variety of ways

to limit hospital benefits. To keep pace

with these changes, the EBS revised

the way it captured and presented benefits data.

From 1988 to 1991, EBS presented

hospital room and board benefits by

whether services were covered in full,

were subject only to internal limits,

were subject to overall plan limits only,

or were subject to both internal and

overall plan limits. Internal limits

were defined as those applying to individual categories of care, for example, separate limits on benefits for

hospital room and board. These limits were expressed in terms of dollar

ceilings on benefits, restrictions on the

number of days of coverage, requirements that the participant pay a perTable 1. Percent of participants in employer-sponsored health plans by extent

of coverage for hospital room and board benefits payments, 1979-86

(In percent)

Year

All

participants1

Participants covered by

Basic benefits

only2

Major medical

only3

Both basic and

major medical

1979 .......... 100 17 7 76

1980 .......... 100 16 12 72

1981 .......... 100 18 13 69

1982 .......... 100 18 12 70

1983 .......... 100 16 19 65

1984 .......... 100 17 28 54

1985 .......... 100 20 33 47

1986 .......... 100 24 35 40

1 Excludes participants without a hospital

room and board benefit. 2 A provision was classified as a basic

benefit when it related to the initial expenses

incurred for a specific medical service. Under

these provisions, a plan covered expenses in

one of several ways: (1) In full with no

limitations; (2) in full for a specified period of

time, or until a dollar limit was reached; or (3)

a cash scheduled allowance benefit that

provided up to a dollar amount for a service

performed by a hospital or physician. 3 Major medical benefits cover many

categories of expenses, some of which are

not covered under basic benefits and others

for which basic coverage have been

exceeded. These benefits are characterized

by deductible and coinsurance provisions. 

 NOTE: Data are for full-time employees in

private establishments employing 100 or

more workers. Because of rounding, sums of

individual items may not equal totals.
25 Compensation and Working Conditions Summer 1998

Table 2. Percent of particpants in employer-sponsored health plans by type and limit of basic hospital

room and board benefit payments, 1979-86

(In percent)

Year and type

of payment

All

participants1

Subject to a limit on the days

of coverage per hospital confinement Subject

to other

limits2

Unlimited

All

120 or

fewer

days

121 - 364

days

365 or

more

 days

1979

All payment types ......... 100 72 33 4 35 23 5

Daily dollar allowance ... 10 7 5 1 1 3–

Semiprivate rate ........... 90 65 28 3 34 20 5

1980

All payment types ......... 100 72 34 3 34 21 7

Daily dollar allowance ... 9 8 6 3 () 1 1 –

Semiprivate rate ........... 91 64 28 3 33 20 7

1981

All payment types ......... 100 72 31 3 36 19 9

Daily dollar allowance ... 8 8 7 3 () 1 3 () –

Semiprivate rate ........... 92 64 26 3 35 19 9

1982

All payment types ......... 100 71 32 4 35 19 10

Daily dollar allowance ... 8 7 5 3 () 1 3 () –

Semiprivate rate ........... 92 64 26 3 34 18 10

1983

All payment types ......... 100 71 30 4 36 20 10

Daily dollar allowance ... 6 6 5 3 ( ) 3 ( ) 3 () –

Semiprivate rate ........... 94 65 25 4 36 19 10

1984

All payment types ......... 100 70 30 4 35 18 12

Daily dollar allowance ... 6 5 4 3 () 1 1 –

Semiprivate rate ........... 94 65 26 4 35 17 12

1985

All payment types ......... 100 66 27 4 35 19 15

Daily dollar allowance ... 5 4 2 3 () 1 1 –

Semiprivate rate ........... 95 62 23 4 34 18 15

1986

All payment types ......... 100 58 23 4 30 17 25

Daily dollar allowance ... 4 4 2 3 () 1 1 –

Semiprivate rate ........... 96 54 21 4 29 16 25

1 Excludes participants without a hospital room and

board benefit. 2 Includes workers in plans that limit basic benefits to

maximum dollar amount per confinement or per year, and in

other plans that also limit the number of days of coverage to

within a specified time period.

3 Less than 0.5 percent.

 NOTE: Data are for full-time employees in private

establishments employing 100 or more workers. Because of

rounding, sums of individual items may not equal totals. 

Dash indicates no employees in this category.

centage of costs (coinsurance), requirements that the participant pay a specific amount (deductible or copayment) before reimbursement begins or

services are rendered, or similar provisions. Overall limits (also called

major medical limits) were expressed

only in terms of total benefits payable

under the plan, rather than for individual categories of care. Limits were

set as deductibles, coinsurance percentages, and overall dollar limits on

plan benefits.

During these years, the EBS also

presented data on how hospital room

and board benefits were paid. The presentation essentially categorized these

data by whether benefits were geared

to semiprivate rates or a daily dollar

allowance, and further classified semiprivate rate provisions by whether the

full semiprivate rate or selected percentages of it were paid. For example,

31 percent of participants in 1988
 Compensation and Working Conditions Summer 1998 26

were in plans that paid the full semiprivate rate; 24 percent were in plans

that paid the full semiprivate rate for

a limited period, and then a percentage of the semiprivate rate (almost always 80 percent); and 42 percent were

in plans that paid a percentage of the

semiprivate rate (80 percent in about

3 out of 4 cases). Daily dollar allowances were rare. Each of these provisions was, in turn, categorized by the

presence or absence of day or dollar

limits.

EBS data showed how limits on

hospital room and board benefits continued to change from 1988 to 1991.

(See table 3.) In 4 years, the proportion of plan participants whose hospital room and board benefit was subject only to overall plan limits (major

medical) increased from 38 to 46 percent; the proportion whose benefit was

paid in full was 23 percent in 1988

and 17 percent in 1991; and the proportion whose benefit was subject to

both internal and overall plan limits

was 37 percent in 1988, compared with

34 percent in 1991.

Cross-currents in hospital room

and board benefits, 1979-91

By 1991, the EBS data indicated

that 17 percent of plan participants had

basic hospital room and board benefits

equivalent to the semiprivate room rate

without limits. In 1979, it was 5 percent. This appears to run counter to

the cost containment efforts that characterized health plan design in the late

1980s. This change reflects a different phenomenon—the market penetration of prepaid plans like health maintenance organizations (HMO) and the

advent of preferred provider organizations (PPO) among medical plan

participants. (See box, “Glossary of

Health Care Terms.”) During the late

1980s, these alternatives to traditional

fee-for-service plans captured a large

share of the health care market, rising

to 27 percent of plan participants in

1989 from 7 percent in 1985.10 (See

table 4.)

However, factoring out increases in

participation in prepaid plans like

HMO’s and PPO plans without limits

for use of preferred hospitals, there was

little verifiable increase in the percent

of participants in all other plans with

unlimited basic hospital room and

board benefits. HMO participants accounted for 2 percent of all health plan

participants in 1979 and 17 percent

by 1991. (See table 4.) These HMO

hospital room and board benefits

would probably have been without limits for almost all their participants in

1979, and without limits for roughly

7 out of 8 participants in 1991. PPO’s,

unknown in 1979, covered 16 percent

of all health participants by 1991.

Later EBS data suggest some PPO

participants also had basic hospital

room and board benefits without limits in 1991, if they used a preferred

hospital provider.

Between 1979 and 1991, the proportion of participants subject only to

major medical (overall) limits on their

hospital room and board benefits increased from 7 to 46 percent (from 7

to 55 percent if HMO participants are

excluded). This represents the loss of

a basic hospital room and board benefit paid on the first day of confinement, even if that basic benefit was

limited in amount or number of days.

Instead, basic hospital room and board

benefits and major medical benefits

coalesced. Plans imposed cost-sharing arrangements associated with major medical coverage at the beginning

of each hospital confinement instead

of after a basic benefit limit had been

reached. So, while in 1979, 93 percent of all medical plan participants

had a basic hospital room and board

benefit paid for the first day of confinement, only 55 percent did in 1991.

(See chart.)

Neither the growth of participation

in HMO and PPO plans, nor the loss

of first day basic hospital room and

board benefits were easily discerned

in the presentation of EBS data on

hospital room and board benefits

through 1991. Yet, as shown, both had

a dramatic effect on these statistics.

Current EBS data on hospital

room and board benefits

Beginning in 1993, the presentation of the EBS hospital room and

board benefits data was revised again

by categorizing plans into non-HMO

(i.e., fee-for-service) and HMO plans.

This change allowed the EBS to explore differences in coverage between

these two major approaches to delivery of health care services. The EBS

can now provide more detailed data

on hospital room and board coverage

relevant to plan type.

Detailed data for hospital room and

board benefits are presented separately

for the two classifications of plans. For

non-HMO plans, detail follows the

scheme of prior years: The percent of

Table 3. Percent of participants in employer-sponsored health plans by extent of

coverage for hospital room and board benefits payments, 1988, 1989, and 1991

(In percent)

Year

All

participants1

Covered

in

full

Coverage is subject to 

Specific

limits only2

Overall plan

limits only3

Both specific and

overall plan limits

1988 ........ 100 23 2 38 37

1989 ........ 100 22 3 45 31

1991 ........ 100 17 4 46 34

1 Excludes participants without a hospital room

and board benefit. 2 Subject to specific limits for hospital care only.

For example, these limits can include a limit on days

per confinement, a dollar ceiling, or a copayment

requirement. 3 Overall plan limits can include dollar

deductibles for all medical care, which must be met

before a benefit is paid; coinsurance requirements;

and limits on overall plan benefits for the participant’s lifetime.

 NOTE: Data are for full-time employees in private

establishments employing 100 or more workers. 

Because of rounding, sums of individual items may

not equal totals.
27 Compensation and Working Conditions Summer 1998

Chart . Percent of participants in medical plans with "first dollar" 

hospital benefits, selected years, 1979-95 

0

20

40

60

80

100

1979 1980 1981 1982 1983 1984 1985 1986 1988 1989 1991 1993 1

Percent

 NOTE: Data are for full-time employees in private establishments employing 100 or more w

participants whose hospital room and

board benefits were covered in full;

were subject only to separate limits on

hospital room and board benefits; were

subject to these limits and major medical coverage limits; and were subject

only to major medical coverage limits. Additional data present the prevailing major medical coinsurance

rates for medical benefits, including

hospital room and board. Other data

present the limits imposed on just hospital room and board benefits such as

separate deductibles, separate coinsurance rates, limits on days of confinement, and limits on dollars. Further

data on PPO plans include the percent

of plan participants with an incentive

for using a network provider, and the

type of incentive such as a lower hospital deductible or higher coinsurance

rate. For HMO plans, additional data

show the percent of participants whose

hospital room and board benefits were

covered in full, or were subject to limits.

From the data on hospital room and

board benefits presented for 1993 and

1995, the erosion of the basic hospital

room and board benefits continues.

The proportion of HMO participants

with hospital room and board benefits

covered in full declined from 82 percent in 1993 to 77 percent in 1995.

(See table 5.) This reflects increased

imposition of hospital copayments.

HMO’s accounted for 23 percent of all

health plan participants in 1993 and

27 percent in 1995. The proportion

of non-HMO participants with some

level of basic coverage before major

medical fell from 42 percent in 1993

to 31 percent in 1995. This reflects

the continued decline of first-dollar basic benefits.

Major medical coverage for hospital room and board benefits

In 1979, 92 percent of the participants with hospital room and board

coverage were provided a substantive

basic benefit on the first day of confinement, compared with 50 percent

in 1995. This decline signified a shift

in plan designs, where major medical

limits on coverage were imposed at the

outset of each confinement, requiring

the participant to pay a deductible and

coinsurance prior to receiving any benefit. Participants with major medical

coverage are also commonly limited

to a lifetime maximum amount of benefits payable under the plan.

Under major medical coverage, the

most common coinsurance rate paid

by the plan has been 80 percent. (See

table 6.) However, other coinsurance

rates have become more common in

recent years, for example, 90 or 100

percent if an in-network provider is

used in a PPO plan.

Not surprisingly, the EBS data

show an increase in the amounts of

major medical deductibles imposed on

plan participants between 1979 and

1995. In 1979, deductibles usually

were $100 or less. By 1995, deductibles less than $100 were almost nonexistent, while the $100 deductible was

imposed only half as frequently—on

one-fifth versus one-half of plan participants with major medical coverage.

One area where coverage has expanded has been in lifetime dollar limits. In 1983, the first year data are

available, four-fifths of participants

had a lifetime limit of less than $1million; the remainder, $1 million. By

1995, nearly four-fifths had a lifetime

limit of $1 million or more.

Typical coverage for hospital

room and board by type of plan

Traditional fee-for-service plans.

Room and board benefits in a traditional fee-for-service plan are usually

subject to major medical plan limits,

such as deductibles and coinsurance

requirements, before any benefits are

received. Deductibles are typically a

flat dollar amount of $100 to $200 per

year for each covered individual. In

1995, 91 percent of participants in this

type of medical plan were required to

pay an individual deductible. Coinsurance requirements specify what

percent of costs the plan and insured

will each pay after the annual deductible is met. In 1995, 95 percent of the

employees in traditional fee-for-service plans participated in plans with a

coinsurance arrangement—commonly

80 percent of covered expenses were

paid by the plan.

Preferred provider organization plans.

A preferred provider organization is a

network of hospitals and physicians

that contract to provide comprehensive

medical services at pre-arranged

prices. To encourage use by organization members, the health care plan

limits the reimbursement rate or imposes a deductible when participants

use non-member services. The coverage in a preferred provider organization resembles that of a traditional feefor-service plan; usually, a deductible

and a coinsurance are required before

any expenses are paid by the plan.

However, benefits in a preferred provider organization are usually more

liberal for plan participants who use

in-network providers compared with

Chart. Percent of participants in medical plans with "first dollar" hospital

benefits, selected years, 1979-95

NOTE: Data are for full-time employees in private establishments employing 100 or more

workers. Basic benefits are sometimes called "first dollar" coverage because initial expenses

are paid by the plan rather than by the patient.
 Compensation and Working Conditions Summer 1998 28

Table 5. Percent of participants in employersponsored health plans, extent of coverage for

hospital room and board by type of plan, 1993 and

1995 

(In percent)

Extent of coverage

for hospital room

and board

1993 1995

Non-health maintenance

organizations1

Covered in full ....................... 5 6

Subject to limits .................... 37 25

Specific room and board

limits only2 ...................... 3 3

Specific and major medical

limits ............................... 34 22

Major medical limits only3 ..... 58 69

Health maintenance

organizations

Covered in full ....................... 82 77

Subject to limits4 ................... 18 23

1 Includes all fee-forservice and preferred

provider organization plans. 2 Limits may be dollar or

day ceilings, a coinsurance

percentage, a copayment,

or a deductible that must be

paid before plan benefits

begin. 3 Major medical limits

are on total benefits payable

under the plan, rather than

on individual categories of

care. Limits are generally in

the form of deductibles,

coinsurance percentages,

and overall dollar limits on

plan benefits. 4 Limits are usually a

dollar copayment per confinement.

 NOTE: Data are for

full-time employees in private establishments employing 100 or more workers. 

Because of rounding, sums

of individual items may not

equal totals.

Table 4. Percent of participants in employer-sponsored health plans

by type of plan benefits for medical care plans with hospital room and

board benefits, selected years, 1979-1995 

(In percent)

Year All plans1

Fee-forservice

plans

Preferred

provider

organizations

Health

maintenance

organizations

1979 ...... 100 98 2 () 2

1980 ...... 100 98 2 () 2

1981 ...... 100 97 2 () 3

1982 ...... 100 96 2 () 4

1983 ...... 100 97 2 () 3

1984 ...... 100 95 2 () 5

1985 ...... 100 93 2 () 7

1986 ...... 100 86 1 13

1988 ...... 100 74 7 19

1989 ...... 100 74 10 17

1991 ...... 100 67 16 17

1993 ...... 100 50 26 23

1995 ...... 100 37 34 27

1 Includes participants in some

plans not presented separately, for

example, exclusive provider organization plans 2 Data are not available.

 NOTE: Data are for full-time

employees in private establishments

employing 100 or more workers. 

Because of rounding, sums of individual

items may not equal totals.

s.
29 Compensation and Working Conditions Summer 1998

traditional fee-for-service plans. In

1995, 63 percent of preferred provider

organization participants had to pay a

deductible and 75 percent had a coinsurance arrangement if an in-network

provider was used.

Health maintenance organization

plans. A health maintenance organization provides a prescribed set of benefits to enrollees for a fixed prepayment. The participant’s choice of providers and facilities is usually limited

to those affiliated with the organization. HMO’s both finance and deliver

health care services, with emphasis on

preventive care. Usually, most health

maintenance organization services,

particularly room and board, are covered in full or require only a nominal

Table 6. Percent of participants 1 in employer-sponsored health plans by prevailing major medical plan limits, selected

years, 1979-95 

(In percent)

Year

Coinsurance rate Individual deductible3 Lifetime dollar limit4

All 80

percent

85

percent Other2 All Under$100 $100 Over$100 All

Under

$1

million

$1

million

Over

$1

million

1979 .... 100 91 5 4 100 35 52 13 5 ( ) 5 ( ) 5 ( ) 5 ( )

1980 .... 100 89 5 5 95 33 53 8 5 ( ) 5 ( ) 5 ( ) 5 ( )

1981 .... 100 90 4 6 95 31 55 8 5 ( ) 5 ( ) 5 ( ) 5 ( )

1982 .... 100 90 5 6 94 30 56 7 5 ( ) 5 ( ) 5 ( ) 5 ( )

1983 .... 100 88 5 6 94 29 52 13 74 60 14 6 ( )

1984 .... 100 86 5 9 94 25 47 22 72 53 19 6 ( )

1985 .... 100 85 5 9 94 19 44 30 74 52 22 6 ( )

1986 .... 100 86 5 9 96 14 44 38 68 45 22 1

1988 .... 5 ( ) 5 ( ) 5 ( ) 5 ( ) 91 11 40 40 71 33 38 1

1989 .... 97 79 4 12 93 6 34 54 71 29 40 2

1991 .... 93 74 3 16 86 4 27 55 72 27 43 2

1993 .... 90 71 3 15 81 3 22 56 75 24 46 6

1995 .... 84 60 4 19 68 2 17 49 70 14 47 9

1 Includes participants in plans with stated major medical limits,

1979-91. Data for 1993 and 1995 excluded participants in HMO plans. 2 Includes participants in plans where the overall coinsurance

varies or coverage is not at a rate of 80 or 85 percent. Prior to 1989,

"Other" included all other coinsurance rates. Whereas, from 1989 to

1995, "Other" did not include plans where the coinsurance rate was

100 percent; these data were included in the "without coinsurance"

catergory. Thus, the totals between 1989 and 1995 will not equal 100 

percent. 3 Specified flat amounts per year. 4 Specified flat amounts per lifetime only. 5 Data are not available. 6 Less than 0.5 percent

 NOTE: Data are for full-time employees in private establishments

employing 100 or more workers. Because of rounding, sums of

individual items may not equal totals.

copayment. For instance, in 1995, 23

percent of all participants in health

maintenance organization plans were

subject to a limit for hospital room and

board. In nearly all cases, these limits were in the form of separate

copayments, often $100 to $200 per

confinement. The remaining participants had hospital room and board

paid in full.
 Compensation and Working Conditions Summer 1998 30

—ENDNOTES—

1

 Price indices for hospital room and board

were discontinued after July 1994. 2

 Data are from the Health Care Financing

Administration, Office of the Actuary, National

Health Expenditures By Type Of Service And

Source Of Funds: Calendar Years 1960-95. 3

 In addition to medical care benefits, the BLS

Employee Benefits Survey provides data on life

and disability insurance, retirement and capital

accumulation plans, paid and unpaid leave, and

other benefits. Results for medium and large private establishments are available for 1979-86,

1988-89, 1991, 1993, and 1995. Results for small

private establishments are available for 1990,

1992, 1994, and 1996. Results for State and local governments are available for 1987, 1990,

1992, and 1994. 4

 In this article, the term “fee-for-service” is

used for indemnity plans. (See box, “Glossary

of Health Care Terms,” for definitions.)

5

 Major medical benefits include many categories of expenses, some of which are not covered under basic benefits and others for which

basic coverage has been exceeded. These benefits are characterized by deductible and coinsurance provisions. 6

 A provision was classified as a basic benefit when it related to the initial expenses incurred

for a specific medical service. Under these provisions, a plan covered expenses in one of several ways: (1) In full with no limitations; (2) in

full for a specified period of time, or until a dollar limit was reached; or (3) a cash scheduled

allowance benefit that provided up to a specific

dollar amount for a service performed by a hospital or physician. 7

 In some plans, the limit on days of coverage varied by length of participation in the plan.

In these cases, the participant was assumed to

have been in the plan for 15 years.

8

 These included limits on maximum dollar

amounts per confinement or per year, and limits

on the number of days of coverage within a specified time period. 9

 For a more extensive discussion on cost containment provisions in health plans, see Stephanie

L. Hyland, “Health care benefits show cost-containment strategies,” Monthly Labor Review, February 1992, pp. 42-47; Robert Grant, “Outpatient surgery: Helping to contain health care costs,” Monthly

Labor Review, November 1992, pp. 33-36; and

Thomas Burke, “Alternatives to hospital care under employee benefits plans,” Monthly Labor Review, December 1991, pp. 9-15.

10 For a discussion of overall changes in

health plan design during this period, see John J.

Kane, Allan P. Blostin, and Jordan N. Pfuntner,

“Changing Survey Strategies in the Evolution of

Health Care Plans,” Compensation and Working Conditions, September 1996, pp.3-10.

Glossary of Health Care Terms

Coinsurance provisions require the insured to pay a portion of covered medical expenses, with the plan

paying the remaining portion. For example, the employee may pay 20 percent and the plan pay the

remaining 80 percent of the covered charges.

Deductibles are a specified amount of covered medical expenses that must be paid by the insured each

calendar year before any expenses are reimbursed by the plan. Deductibles are typically specified as an

annual flat-dollar amount, such as $100 per year for individuals and $300 a year for a family.

Fee-for-service is a type of health care plan that pays for specific medical procedures as expenses are

incurred. Payments can be made directly to health care providers or to the plan participants. Fee-forservice plans generally include deductibles and coinsurance.

First-dollar coverage is a feature of a health care plan which does not require its participants to pay any

deductibles or copayments before benefits are received.

Health maintenance organization (HMO) is a type of health care plan that provides a prescribed set of

benefits to enrollees for a fixed premium payment. Enrollees are restricted to specific care providers, and

have charges for most services covered in full. Types of HMO’s include the group/staff type, in which

providers are located in central facilities, and independent practice associations (IPA’s), in which providers work from their own offices.

Lifetime maximum benefit is the maximum lifetime amount payable for covered expenses for the insured and each covered dependent while under the medical plan. For example, a lifetime maximum of $1

million per individual is common.

Preferred provider organization (PPO) is a type of health care plan that, like a fee-for-service plan,

pays expenses as they are incurred. Participants can choose any health care provider, but receive higher

benefits for services rendered by designated hospitals, physicians, and other health care providers.