122012Jan

Health Insurance 101

Speaking as a person who has worked in the health care industry for 20 years, the following terms are quite normal to me in my daily life. For patient’s that don’t live it every day can be confused by terms that are not clear and you could be potentially paying amounts to providers that should have ultimately been paid by your insurance company.

Since the world of health care, health insurance in particular are changing often, keeping up with understanding your insurance policy and what you will be responsible for when you see a doctor is crucial. I hope the following will help you to understand the continuous evolving world of health insurance. 

Ok…so let’s talk about the different products that could be offered to you by your employer, private insurance company or government payer. There are several types of policies and considering the best selection for you and/or your family is a critical decision. Determining whether a lower monthly premium which brings higher out-of-pocket expense is better than a higher premium with less out-of-pocket expense is an important consideration. The following will be the first round of terms that are necessary to know when selecting health insurance coverage:

  • POS:POS stands for “Point of Service.” POS plans combine elements of both HMO and PPO plans. As a member of a POS plan, you may be required to choose a primary care physician who will then make referrals to specialists in the health insurance company’s network of preferred providers. Care rendered by non-network providers will typically cost you more out of pocket, and may not be covered at all.
    • A POS plan may be right for you if:
      • You’re willing to play by the rules and possibly coordinate your care through a primary care physician
      • Your favorite doctor already participates in the network
  • PPO:PPO means “Preferred Provider Organization.” Like the name implies, with a PPO plan you’ll need to get your medical care from doctors or hospitals on the insurance company’s list of preferred providers if you want your claims paid at the highest level. You will probably not be required to coordinate your care through a single primary care physician, as you would with an HMO, but it’s up to you to make sure that the health care providers you visit participate in the PPO. Services rendered by out of network providers may not be covered or may be paid at a lower level.
    • A PPO may be right for you if:
      • Your favorite doctor already participates in the PPO
      • You want some freedom to direct your own health care but don’t mind working within a list of preferred providers
  • HMO:HMO means “Health Maintenance Organization.” HMO plans offer a wide range of health care services through a network of providers that contract exclusively with the HMO, or who agree to provide services to members at a pre-negotiated rate. As a member of an HMO, you will need to choose a primary care physician (“PCP”) who will provide most of your health care and refer you to HMO specialists as needed. Some HMO plans require that you fulfill a deductible before services are covered. Others only require you to make a copayment when services are rendered. Health care services obtained outside of the HMO are typically not covered, though there may be exceptions in the case of an emergency.
    • An HMO may be right for you if:
      • You’re willing to play by the rules and coordinate your care through a primary care physician
      • You’re looking for comprehensive benefits at a reasonable monthly premium
      • You value preventive care services: coverage for checkups, immunizations and similar services are often emphasized by HMOs 
      • High Deductible Health Plan (HDHP): A type of health insurance plan that compared to traditional health insurance plans require greater out-of-pocket spending, although premiums may be lower. In 2010, an HSA-qualifying HDHP must have a deductible of at least $1,200 for single coverage and $2,400 for family coverage. The plan must also limit the total amount of out-of-pocket cost-sharing for covered benefits each year to $5,950 for single coverage and $11,900 for families.
      • HSA (Health Savings Account): A tax advantaged savings account to be used in conjunction with certain high-deductible (low premium) health insurance plans to pay for qualifying medical expenses. Contributions may be made to the account on a tax-free basis. Funds remain in the account from year to year and may be invested at the discretion of the individual owning the account. Interest or investment returns accrue tax-free. Penalties may apply when funds are withdrawn to pay for anything other than qualifying medical expenses. This is not an insurance policy but will work hand-in-hand with a High Deductible Health Plan (HDHP).
        • EPO(Exclusive Provider Organization): An EPO is a Exclusive Provider Organization. As a member of an EPO, you can use the doctors and hospitals within the EPO network, but cannot go outside of the network for care. There are no out-of-network benefits.
        • Indemnity Plan:Also called “fee-for-service” plans, Indemnity plans typically allow you to direct your own health care and visit whatever doctors or hospitals you like. The insurance company then pays a set portion of your total charges. You may be required to pay for some services up front and then apply to the insurance company for reimbursement. Indemnity plans typically require that you fulfill an annual deductible. Because of the freedom they allow members, Indemnity plans are sometimes more expensive than other types of plans.
          • An Indemnity plan may be right for you if:
            • You want the greatest level of freedom possible in choosing which doctors or hospitals to visit
            • You don’t mind coordinating the billing and reimbursement of your claims yourself
            • Maximum Out-Of-Pocket Costs: An annual limitation on all cost-sharing for which patients are responsible under a health insurance plan. This limit does not apply to premiums, balance-billed charges from out of network health care providers or services that are not covered by the plan.

The following are terms you will need to know when speaking to a physician’s office or when you receive an explanation of benefits from your insurance company. This information is critical to know when being asked to pay money for a medical service.

  • COB (Coordination of Benefits): This is the process by which a health insurance company determines if it should be the primary or secondary payer of medical claims for a patient who has coverage from more than one health insurance policy. This is a question insurance companies will ask each year. When you receive a letter from your insurance company or when your doctor’s office says your insurance has not paid their claim while pending this information you must call your insurance company so they may update their records. Without this information the doctor’s claim will not be paid and you could be responsible for payment.
  • Coinsurance: The amount that you are obliged to pay for covered medical services after you’ve satisfied any co-payment or deductible required by your health insurance plan. Coinsurance is typically expressed as a percentage of the charge or allowable charge for a service rendered by a healthcare provider. For example, if your insurance company covers 80% of the allowable charge for a specific service, you may be required to cover the remaining 20% as coinsurance.
  • Co-payment: A specific charge that your health insurance plan may require that you pay for a specific medical service or supply, also referred to as”co-pay.” For example, your health insurance plan may require a $15 co-payment for an office visit or brand-name prescription drug, after which the insurance company often pays the remainder of the charges.
  • Deductible: A specific dollar amount that your health insurance company may require that you pay out-of-pocket each year before your health insurance plan begins to make payments for claims. Not all health insurance plans require a deductible. As a general rule (though there are many exceptions), HMO plans typically do not require a deductible, while most Indemnity and PPO plans do.
  • COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985): Federal legislation allowing an employee or an employee’s dependents to maintain group health insurance coverage through an employer’s health insurance plan, at the individual’s expense, for up to 18 months in certain circumstances. COBRA coverage may be extended beyond 18 months in certain circumstances. COBRA rules typically apply when an employee loses coverage through loss of employment (except in cases of gross misconduct) or due to a reduction in work hours. COBRA benefits also extend to spouses or other dependents in case of divorce or the death of the employee. Children who are born to, adopted, or placed for adoption with the covered employee while he or she is on COBRA coverage are also entitled to coverage. All companies that have averaged at least 20 full-time employees over the past calendar year must comply with COBRA regulations.
  • Balance Billing: The amount you could be responsible for (in addition to any co-payments, deductibles or coinsurance) if you use an out-of-network provider and the fee for a particular service exceeds the allowable charge for that service.
    Explanation of Benefits (EOB): A statement sent from the health insurance company to a member listing services that were billed by a healthcare provider, how those charges were processed, and the total amount of patient responsibility for the claim.