Understanding Health Insurance Carve-outs: A Comprehensive Guide

Health insurance carve-outs concern a method to separate specific services from general healthcare contracts. A different contract and payment arrangement covers the designated services. Carve-outs also include services or benefits provided to a smaller segment of an employee population, or used to offer additional benefits under a different insurance carrier.

Types

• There are several types of carve-outs typically offered by employers; they may include prescription drug benefits, vision care or dental and similar services. Insurers often separate mental health coverage from the general health contract in a carve-out, delegating these benefits to specialized vendors with high levels of expertise in managing substance abuse, inpatient utilization, outpatient services and provider negotiation.

Benefits

• Insurance carve-outs allow employers to minimize their risk exposure for catastrophic healthcare claims. Carve-outs for high-risk procedures or conditions transfer more of the financial risk to a third party, and helps employers more effectively predict future healthcare costs. Examples of high-risk carve outs include transplants or premature infant care.

Prevention/Solution

• Carve-outs offer a preventive strategy for companies to avoid much of the healthcare financial costs associated with unpredictable claims and new medical technology. Healthcare services evolve rapidly, and advanced medicine and technology change the way people utilize healthcare services. Educated consumers access new healthcare services daily; they have more healthcare choices than ever before. Carve-outs provide a partial solution to the employer's financial dilemma.