Health
insurance is a is a form of group insurance, where individuals
pay premiums or taxes in order to help protect themselves
from high or unexpected healthcare expenses. Health
insurance works by estimating the overall "risk"
of healthcare expenses and developing a routine finance
structure (such as a monthly premium, or annual tax) that
will ensure that money is available to pay for the healthcare
benefits specified in the insurance agreement. The healthcare
insurance benefit is administered by a central organization,
which is most often either a government agency, or a private
or not-for-profit entity operating a health plan.
Market-based health care systems such as that in the United
States rely heavily on private and not-for-profit health
insurance.
A Health insurance policy is a contract between an insurance
company and an individual. The contract can be renewable
annually or monthly. The type and amount of health care
costs that will be covered by the health plan are specified
in advance, in the member contract or Evidence of Coverage
booklet. The individual policy-holder's payment obligations
may take several forms:
- Premium:
The amount the policy-holder pays to the health plan
each month to purchase health coverage.
- Deductible:
The amount that the policy-holder must pay out-of-pocket
before the health plan pays its share. For example,
a policy-holder might have to pay a $500 deductible
per year, before any of their health care is covered
by the health plan. It may take several doctor's visits
or prescription refills before the policy-holder reaches
the deductible and the health plan starts to pay for
care.
- Copayment:
The amount that the policy-holder must pay out of
pocket before the health plan pays for a particular
visit or service. For example, a policy-holder might
pay a copayment for a doctor's visit, or to obtain
a prescription. A copayment must be paid each time
a particular service is obtained.
- Coinsurance:
Instead of paying a fixed amount up front (a copayment),
the policy-holder must pay a percentage of the total
cost. For example, the member might have to pay 20%
of the cost of a surgery, while the health plan pays
the other 80%. Because there is no upper limit on
coinsurance, the policy-holder can end up owing very
little, or a significant amount, depending on the
actual costs of the services they obtain.
- Exclusions:
Not all services are covered. The policy-holder is
generally expected to pay the full cost of non-covered
services out of their own pocket.
- Coverage
limits: Some health plans only pay for health care
up to a certain dollar amount. The policy-holder may
be expected to pay any charges in excess of the health
plan's maximum payment for a specific service. In
addition, some plans 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 member's payment obligation ends
when they reach the out-of-pocket maximum, and the
health plan 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.
Prescription drug plans are a form of insurance offered
through many employer benefit plans in the U.S., where
the patient pays a copayment and the prescription drug
insurance pays the rest.
Some health care providers 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, as the insurance company
pays according to "reasonable" or "customary"
charges, which may be less than the provider's usual
fee.
Health insurance companies also often have a network
of providers who agree to accept the reasonable and
customary fee and waive the remainder. It will generally
cost the patient less to use an in-network provider.
Health
Insurance companies are now offering Health Incentive
accounts (HIA), to reward users for living healthy and
making healthy choices, like stop smoking and/or losing
weight, may get you funds added into your Health Incentive
Account, which may lower your out of pocket costs. The
health incentive accounts also carry over from year
to year but once you leave the program you lose those
benefits in the HIA.
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