Good Morning,
Health
Insurance. That is the major focus for all these days. No matter what
or who you believe, it is the all consuming topic. Do you understand
how it all works to provide you with or without what you need to
maintain your health? This morning I'm going to give a brief overview
of the terms, definitions, the process, and an example to help you
understand the complexity of it all.
I wanted to cover
this topic first because I've actually worked for a company, and oversaw
some departments. When I first arrived I felt my head was under water
with how challenging it was to not only learn the information, but to
then be held accountable for successfully delivering service to a large
population of members. I hope you find this of value, and allows you to
be a more informed consumer able to make good decisions concerning your
coverage.
Introduction
When you buy an
insurance plan, you join a group of other people to combine your
healthcare purchasing power. That way, everyone shares the cost of
staying healthy. You also agree to pay a monthly fee in exchange for a
variety of benefits.
Here are several of the most common terms
you’ll come across. Becoming familiar with them will make it easier to
understand the details and total cost of the plan:
Terms
Benefits
Benefits
are payments the plan makes to cover all or part of covered medical
expenses. They vary according to the plan you choose and usually include
a portion of the cost of doctors’ visits, prescription medicine,
hospital charges, ER visits, and more.
Premiums.
These
are the payments you make for your insurance. How do insurance
companies figure out what your premium will be? Rates are affected by
many things, including the cost of the various medical services they
will cover and how likely their policyholders, or customers, are to need
those services.
Healthcare reform introduced some changes
in how premiums may be set: A premium can be based on your age (older
adults can’t be charged more than three times what a younger person is
charged), geography (insurers can charge more in areas where medical
costs are high), family size (an individual versus an individual plus a
spouse and/or children) and tobacco use (those using tobacco products
can’t be charged more than 1.5 times what a non-tobacco user is
charged). You can’t, however, be charged a higher premium based on your
gender or if you’re sick or have a history of health problems.
Deductible
This
is the amount you’re responsible to pay for covered medical expenses
(the medical services that are covered under your plan) before your
insurance begins to pay each year. When you hear that someone has “met
their deductible,” it means they have paid their part of their
healthcare costs. Their plan will begin to pay its portion for
healthcare costs; however, you may still have to pay a co-pay or a
percentage of the cost of care, called coinsurance. Typically, anything
you pay out of your own pocket, except for premiums, co-pays and some
prescription drug costs, will go toward meeting your deductible.
Co-pays
Some
plans include co-pays. These are set prices for various services you
may need. For example, you may pay a $20 co-pay for a visit to your
primary care physician, or a $100 co-pay for a visit to the emergency
room.
Coinsurance.
Coinsurance means the costs of covered
medical services are shared between you and your insurance company after
the deductible has been met. For example, if a plan has 80/20
coinsurance, the plan would pay 80 percent of a covered medical expense,
while you would pay 20 percent of the same covered medical expense.
Maximum Out-of-Pocket
This
is the most money you will be required to pay in a year for deductibles
and co-insurance. It is a specific dollar amount that is part of the
health insurance plan. After you’ve reached that amount, the insurance
company may cover the cost of the rest of your covered medical expenses.
Claims
After
you have a medical service, the doctor or facility that provided that
service will file a claim with your insurance company. A claim is a
formal request asking for payment based on the terms of the insurance
plan. Your insurance company will review the claim to make sure it is
valid. If so, the appropriate amount will be paid out to the insured
person or to the doctor or facility that filed the claim.
Here’s an example of how insurance works:
Let’s
say you develop a serious illness, need surgery, and a hospital stay.
The costs of your covered medical expenses add up to $50,000. Without
health insurance, you would be responsible for paying all $50,000.
That’s a big financial hit! But with insurance, your financial
responsibility is much smaller. For this example, we’ll say these are the terms of your health insurance:
Your deductible is $5,000.
Your coinsurance is 20%.
Your maximum out-of-pocket is $7,000.
In
this case, you are responsible for the first $5,000 in charges. This is
your deductible. After you’ve paid your deductible, there are $45,000
of expenses left. You are responsible for 20% coinsurance – that is 20%
of the remaining cost, or $9,000. This is more than your maximum
out-of-pocket of $7,000. So you pay $5,000 toward the deductible and
only $2,000 of the coinsurance. Your insurance plan pays the rest of
the covered expenses.
Here’s how it breaks out:
Your payments come to $7,000.
Your health insurance pays $43,000.
In
addition, since you’ve reached your maximum out-of-pocket limit for the
year, you won’t have to pay anything for the rest of the year for
covered medical expenses.
For more information visit your state's exchange or insurers websites.
