Briefly describe the differences among the commercial insurance industry, the Blues, and HMOs.

Question

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Answer 1

• The commercial industry is comprised of for-profit mutual insurance companies and stock insurance companies. Commercial health insurance companies can be multiline carriers or single-line carriers.
• Throughout the early portion of its history, Blue Cross plans specifically focused attention on insurance for hospital costs. Conversely, in 1939, Blue Shield began offering medical insurance protection for physicians’ services.
• Since the 1960s, many Blue Cross and Blue Shield plans have merged their activities, essentially becoming a single insurance entity. However, by the 1980s, a number of Blue Cross and Blue Shield plans had separated and become bitter rivals in some states.
• Unlike commercial insurance carriers that are regulated in most states by a state insurance department, most Blue Cross and Blue Shield plans are subject to special enabling state legislation.
• The Blues have also historically differentiated themselves from commercial carriers by establishing premium levels using community rating rather than experience rating. Another area of differentiation between the Blues and commercial insurers is the Blues’ use of service benefits rather than indemnity benefits. Today, however, many commercial insurers offer service or hybrid benefits, particularly in their managed care products.
• Unlike the commercial carriers and the Blues that offer reimbursement for health care outlays, HMOs actually guarantee the provision of covered health services. In other words, HMOs do not guarantee reimbursement for medical expenses. Their obligation to the insured is to provide actual medical services.
• Like the Blues, historically HMOs have generally relied on community rating rather than experience rating to establish their premium levels. Another distinction between HMOs and their pure insurance colleagues is that HMOs are often regulated by an entirely different set of statutes and organizations.