Many types of health insurance coverage are available, including HMO and PPO plans and HSA-eligible high-deductible plans. While these plans differ in the benefits they offer and the costs to the insured, they have similar features that allow for direct comparison. Familiarity with the basic terminology used to describe different insurance plans will help you select the best coverage for you and your dependents.
Premium
The premium is the amount you or your employer must pay, typically on a monthly basis, to maintain health insurance. An employer may cover some or all of the premium for employees who have group coverage through the company. The premium depends on a variety of factors such as the type of coverage you select and your age and gender. If you have individual coverage, your premium is likely also a function of your health history and the risk class to which your insurance company assigned you. Premiums can range from less than $100 a month to more than $1,000 a month, depending on all of these factors. This is the amount you pay for coverage, even if you never see a doctor or file a claim.
Deductible
Most insurance policies have a deductible, which is the amount of health services you must pay for before the insurance coverage kicks in. Some policies provide for limited services, such as routine wellness exams and physician visits, regardless of whether you have met your deductible. Other policies, including some high-deductible policies, provide no benefits until you have paid for health services yourself in an amount equal to the deductible. Typically, the premium for a policy with a low deductible is greater than that for one with a high deductible.
Co-Insurance
Once your deductible is met, or if you do not have a deductible, the insurance company may require you to pay a percentage of your health care costs. This is called your co-insurance. While some policies cover 100 percent of costs after the deductible, and those have zero percent coinsurance, typically, the insurance pays 70 percent, 80 percent or 90 percent and you pay the remainder. Your policy may also include a maximum out-of-pocket that limits the amount you pay for co-insurance. After you reach that maximum, your policy covers 100 percent of covered costs up to your annual or lifetime maximum.
Pre-Existing Condition
Health insurance policies typically do not provide coverage for pre-existing conditions during the initial term of coverage, usually 12 months. A pre-existing condition is any condition that a person experienced during a set time period before the start date of the insurance policy that meets certain criteria set by the insurance company. In most cases, if you saw a doctor or took medication for a condition, or if a reasonable person would be expected to have done so, that condition is considered pre-existing. The time period for establishing pre-existing conditions varies, and in some states is limited by law. For a group insurance plan, it can be no more than six months. A person who maintains group health insurance for at least a year is exempt from the pre-existing condition limitation when acquiring new group insurance if the new policy starts less than 63 days after the prior policy's end date.
Underwriting
The underwriting process involves assessing risk for a given individual or group and then offering or denying coverage based on that assessment. A person seeking individual health insurance submits extensive health history information, and the insurance company uses that information to determine whether to approve coverage, what the premium will be and whether to incorporate any special exclusions or other conditions.
Exclusion
An exclusion is any condition, procedure or item that the insurance policy does not cover. Group policies and individual policies typically have a list of conditions, types of equipment and situations that are not covered for anyone insured. An individual policy may also exclude certain conditions for a specific individual based on health history and the underwriting (risk-assessment) process.
Co-Payment
For some services, especially routine doctors' office visits and prescriptions, your insurance requires a co-payment or co-pay. Rather than applying your co-insurance percentage, you pay a set amount when you obtain a specific service or medication. Typically, you pay the service provider directly, and the provider then bills the insurance company for the remainder. Co-pays for prescriptions may depend on whether the medication is brand name or generic, while co-pays for medical services can vary based on the type of provider and type of service.
Member Comments