Health insurance
Health
insurance is insurance against the risk of
incurring medical expenses among individuals. By estimating the overall risk
of health
care expenses among a targeted group, an insurer can develop a routine finance structure, such as a
monthly premium or payroll tax, to ensure that money is available to pay for the health care benefits specified in
the insurance agreement.
The benefit is administered by a central organization such as a government agency,
private business, or not-for-profit entity.
A health insurance policy is:
1) a contract between an insurance provider (e.g. an
insurance company or a government) and an individual or his sponsor (e.g. an employer or a community organization).
The contract can be renewable (e.g. annually, monthly) or lifelong in the case of private insurance, or be
mandatory for all citizens in the case of national plans. The type and amount of health care costs that will be
covered by the health insurance provider are specified in writing, in a member contract or "Evidence of Coverage"
booklet for private insurance, or in a national health
policy for public insurance.
2) Insurance coverage is provided by
an employer-sponsored self-funded ERISA plan. The company generally advertises that they have one of the big
insurance companies. However, in an ERISA case, that insurance company "doesn't engage in the act of insurance",
they just administer it. Therefore ERISA plans are not subject to state laws. ERISA plans are governed by federal
law under the jurisdiction of the US Department of Labor (USDOL). The specific benefits or coverage details are
found in the Summary Plan Description (SPD). An appeal must go through the insurance company, then to the
Employer's Plan Fiduciary. If still required, the Fiduciary’s decision can be brought to the USDOL to review for
ERISA compliance, and then file a lawsuit in federal court.
The individual insured person's obligations may take several
forms:[2]
- Premium: The amount the policy-holder or his sponsor (e.g. an employer)
pays to the health plan to purchase health coverage.
- Deductible: The amount that the
insured must pay out-of-pocket before the health insurer pays its share. For example, policy-holders might have to pay a
$500 deductible per year, before any of their health care is covered by the health insurer. It may take
several doctor's visits or prescription refills before the insured person reaches the deductible and the
insurance company starts to pay for care.
- Co-payment: The amount that the
insured person must pay out of pocket before the health insurer pays for a particular visit or service. For
example, an insured person might pay a $45 co-payment for a doctor's visit, or to obtain a prescription. A
co-payment must be paid each time a particular service is obtained.
- Coinsurance: Instead of, or in
addition to, paying a fixed amount up front (a co-payment), the co-insurance is a percentage of the total
cost that insured person may also pay. For example, the member might have to pay 20% of the cost of a
surgery over and above a co-payment, while the insurance company pays the other 80%. If there is an upper
limit on coinsurance, the policy-holder could end up owing very little, or a great deal, depending on the
actual costs of the services they obtain.
- Exclusions: Not all services are covered. The insured are generally
expected to pay the full cost of non-covered services out of their own pockets.
- Coverage limits: Some health insurance policies only pay for health care
up to a certain dollar amount. The insured person may be expected to pay any charges in excess of the
health plan's maximum payment for a specific service. In addition, some insurance company schemes have
annual or lifetime coverage maximums. In these cases, the health plan will stop payment when they reach the
benefit maximum, and the policy-holder must pay all remaining costs.
- Out-of-pocket maximums: Similar to coverage limits, except that in this
case, the insured person's payment obligation ends when they reach the out-of-pocket maximum, and health
insurance pays all further covered costs. Out-of-pocket maximums can be limited to a specific benefit
category (such as prescription drugs) or can apply to all coverage provided during a specific benefit
year.
- Capitation: An amount paid by an
insurer to a health care provider, for which the provider agrees to treat all members of the
insurer.
- In-Network Provider: (U.S. term) A health care provider on a list of
providers preselected by the insurer. The insurer will offer discounted coinsurance or co-payments, or
additional benefits, to a plan member to see an in-network provider. Generally, providers in network are
providers who have a contract with the insurer to accept rates further discounted from the "usual and
customary" charges the insurer pays to out-of-network providers.
- Prior Authorization: A certification or authorization that an insurer
provides prior to medical service occurring. Obtaining an authorization means that the insurer is obligated
to pay for the service, assuming it matches what was authorized. Many smaller, routine services do not
require authorization.
- Explanation of Benefits: A document
that may be sent by an insurer to a patient explaining what was covered for a medical service, and how
payment amount and patient responsibility amount were determined.
Prescription drug plans are a form of insurance offered through some health
insurance plans. In the U.S., the patient usually pays a copayment and the prescription drug insurance part or all
of the balance for drugs covered in the formulary of the plan.
Such plans are routinely part of national health insurance programs. For example
in the province of Quebec, Canada, prescription drug insurance is universally required as part of the public health
insurance plan, but may be purchased and administered either through private or group plans, or through the public
plan.
Some, if not most, health care providers in the United States will agree to bill
the insurance company if patients are willing to sign an agreement that they will be responsible for the amount
that the insurance company doesn't pay. The insurance company pays out of network providers according to
"reasonable and customary" charges, which may be less than the provider's usual fee.
The provider may also have a separate contract with the insurer to accept what
amounts to a discounted rate or capitation to the provider's standard charges. It generally costs the patient less
to use an in-network provider. Disability Insurance
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