How Health Insurance Works

Health Insurance is a contract that offers financial protection for medical expenses. Health insurance is often offered by employers as a benefit to the employee, this coverage is referred to as group health insurance. People who are not offered health insurance benefits through their employer have the option to purchase individual or family health insurance (provided the insurance carrier approves their policy). Both group and individual insurance requires the payment of a premium. By paying the health premium the insured protects his or her financial exposure to medical bills and ensures that one will receive proper coverage during a time of illness or injury. Healthcare expenses in the US increase at rapid rates. In the state of Ohio an average night in the hospital can be over $7000 a night and in Nevada hospitals can average over $9000 a night. Anthem Blue Cross of California estimates a ruptured appendix can cost over $48,000 if one is un-insured.  

What does a health company do?

Besides managing claims, member benefits, and selling health insurance policies, a health insurance carrier calculates the overall medical expenses that policy holders should accrue and divide this amount amongst the pool of subscribers. Each policy holder must pay his or her portion of the premium. Premium is further calculated on ones age, resident zip code, current health, and chosen plan. The collection of insurance premium ensures that money is available to cover one's medical needs. Naturally, premiums increase as one grows older and as the medical field advances. Add yearly inflation into the mix and medical insurance increases at rapid rates.

Glossary of common health insurance terms:

Premium: The amount the policy holder pays to the insurance carrier each month.
Deductible: The out-of-pocket amount the policy holder must pay before the policy pays its portion.
Copayment: The dollar amount the policy holder must pay for a doctor office visit or service, such as for a prescription medication.
Coinsurance: After a deductible is met, some policies pay 100% while other pay a percentage. For example the term 80/20 refers to co-insurance. The carrier pays 80% while the insured pays 20%. Traditionally this is after a deductible is met. For example, after a $1000 deductible the plan may have 80/20 coinsurance. This is usually followed by an Out-of-Pocket Max, which is the maximum dollar amount the insured could pay for the calendar year. Example: After the $1000 deductible one pays 80/20 coinsurance for $2000. In this situation the most the subscriber could ever pay is $1000 plus the $2000 coinsurance, so $3000. $3000 would be the maximum-out-of-pocket.
Exclusions: Not all services are covered. The insured is expected to pay the entire cost of non-covered services. Example, most medical policies won't cover elective surgery such as plastic surgery, breast implants, infertility treatments etc.
Coverage limits: Most health policies only pay for medical costs until a certain dollar amount is reached. This may apply to individual services such as chiropractic coverage, transplants, etc. Or it can apply to the entire plan. A health insurance subscriber may be covered for a set amount like $3,000,000. This can be referred to as a lifetime maximum.
In-Network Provider: A provider is In-Network if he or she is contracted with the insurance carrier and agrees to offer benefits on the carriers behalf. Out-of-network providers are doctors who do not accept insurance. These doctors can be visited by the insured but the insured usually does not get the full benefits associated with ones policy.

What are Pre-existing Condition Periods?

Any services received by an Insured Person shortly after (usually 6 -12 months) the Effective Date of coverage will not be covered, if they are related to a Pre-existing Condition which existed within a 6-12 month period prior to the Effective Date of coverage.

 

HOWEVER:  The exclusion for Pre-existing Conditions DOES NOT APPLY to an Insured Person who was continuously covered for an aggregate period of 18 months by Creditable Coverage and that the policy was in effect without a gap over 63 days.