The topic of today's subject is health insurance. So, let's get started with a basic definition.
Health insurance is a plan that individuals pay into on a predetermined schedule by which they may cover their health care costs. Sounds kind of like a savings plan doesn't it? It's a bit more complicated than that. I would personally define health insurance as group savings plan that everyone can benefit from.
How does health insurance work? The simple answer is, it's about shared expense. When you sign up for health insurance, you join a group of other people to combine your healthcare purchasing power. Your insurer covers the whole group, rather than individuals, so everyone shares the cost of doctor visits.
There are many options out there, and it can be very confusing if you have no idea what all the terminology is. So now I will cover some of the terminology and attempt to explain what all those big legal words mean.
Let's take a look at the terms of differing kinds of insurance. The most common type of insurance is HMO or PPO. HMO stands for Health Maintenance Organization. Basically this is an organized system consisting of providers who administer comprehensive prepaid health care that have five basic attributes. They provide care in a defined geographic area. Provide or ensure delivery of an agreed-upon set of basic and supplemental health maintenance and treatment services. Provide care to a voluntarily enrolled group of persons. Require their enrollees to use the services of designated providers. Receive reimbursement through a predetermined, fixed, periodic prepayment made by the enrollee without regard to the degree of services provided. In other words you have to use their doctors and they can decide to decline to cover any expense they deem unnecessary. The doctors are contracted to get paid a certain amount for each procedure.
So, what is a PPO? PPO stands for Preferred Provider organization. This is a group of doctors, hospitals and other providers who have an agreement with an insurer or a third-party administrator to provide health services at reduced rates to the insurer's or administrator's clients. This is a type of health insurance plan that offers in-network as well as out-of-network coverage. However, out-of-network coverage is typically subject to either a higher deductible or lower co-insurance than in-network, often times both. No referrals are required in order to access care. So, you have a choice to go to any doctor you want and still have some cost coverage.
So, now we have covered two of the options available. Here are some basic terms that you will encounter in these two options
Coinsurance
The amount you are required to pay for medical care in a fee-for-service health plan after you have met your deductible. The coinsurance rate is usually expressed as a percentage. For example, if the health insurance company pays 80 percent of the health claim, you pay 20 percent.
Co-payment
Another way of sharing medical costs. You pay a flat fee every time you receive a medical service (for example, X amount of $ for every visit to the doctor). The health insurance company pays the rest.
Deductible
The amount of money you must pay each year to cover your medical care expenses before your health insurance policy starts paying.
Maximum Out-of-Pocket Expenses
The most money you will be required pay a year for deductibles and coinsurance. It is a stated dollar amount set by the health insurance company, in addition to regular premiums.
Premium
The amount you or your employer pays in exchange for health insurance coverage.
Covered Expenses
Most health insurance plans, whether they are fee-for-service, HMOs, or PPOs, do not pay for all health care services. Some may not pay for prescription drugs. Others may not pay for mental health care. Covered health care services are those medical procedures the health insurer agrees to pay for. They are listed in the health insurance policy.
Customary Fee
Most health insurance plans will pay only what they call a reasonable and customary fee for a particular health care service. If your doctor charges $1,000 for a hernia repair while most doctors in your area charge only $600, you will be billed for the $400 difference. This is in addition to the deductible and coinsurance you would be expected to pay. To avoid this additional cost, ask your doctor to accept your health insurance company's payment as full payment. Or shop around to find a doctor who will. Otherwise you will have to pay the rest yourself.
Exclusions
Specific conditions or circumstances for which the health insurance policy will not provide benefits.
Pre-existing Condition
A health problem that existed before the date your health insurance became effective.
Coordination of Benefits
A system to eliminate duplication of benefits when you are covered under more than one group health insurance plan. Benefits under the two health insurance plans usually are limited to no more than 100 percent of the health claim.
Non-cancellable Policy
A policy that guarantees you can receive health insurance, as long as you pay the premium. It is also called a guaranteed renewable policy.
Primary Care Doctor
Usually your first contact for health care. This is often a family physician or internist. A primary care doctor monitors your health and diagnoses and treats minor health problems, and refers you to specialists if another level of health care is needed. In many health insurance plans, health care by specialists is only paid for if your are referred by your primary care doctor. An HMO or a PPO plan will provide you with a list of doctors from which you will choose your primary care doctor (usually a family physician, internists, obstetrician-gynecologist, or pedicatrician). This could mean you might have to choose a new primary care doctor if your current one does not belong to the health insurance plan. PPOs allow members to use primary care doctors outside the PPO network (at a higher cost).
Third-Party Payer
Any payer for health care services other than you. This can be a health insurance company, an HMO, a PPO, or the Federal Government.
On that note we will now discuss Government health programs. Medicare is paid for by you. That little deduction on your paycheck every payday that says medicare. This is a 'bank' of funds from every working, taxpaying person that goes to pay health care cost claims for those who are no longer working and are signed up to take back the funds they put in when they were working. Not everyone will get medicare. At present, you have to have paid into this fund to access it. Seems fair to me. Would you want the interest from your personal savings account to go to some nameless person who did not contribute to your account? Now, this does not mean that you will only get out what you paid in. Again this is a group account and each state budgets what amount they can give out each year. Not all services are covered under medicare, and you may still end up paying a small amount or co-payment.
Next up is Medicaid. The two sound similar, but are not. This is a fund that is paid for by all taxpayers. I don't know all the details of the budgeting on this, so this is my best educated guess. Each state sets aside a certain amount for welfare, and that money goes to those in need who either do not qualify for medicare as yet, or have never contributed. Each state will have their own criteria for this program. Some counties also have discount programs and sliding scale fees for those in the lower income bracket.
This takes us to the difference between health insurance and discount programs. Health insurance pays the overall cost of your care and you pay a co-payment. Health discount programs are basically like a coupon. You show them you have the membership and they give you a lower rate for the services in question.
And now for the shameless promotion. While I am in no way on expert on any of these topics, I do have some education on them. If you have found my blog helpful and informative monetary donations sent to my paypal address of tmmyprl@aol.com are always appreciated. :)
Source list:
http://www.goaskalice.columbia.edu/0853.html
http://www.wikipedia.com/
http://www.foreignborn.com/self-help/health_insurance/5-ins_terms.htm
Personal experience and education as a medical office assistant.
Recommended reading:
http://healthinsurance.about.com/od/understandingmanagedcare/a/HMOs_vs_PPOs.htm
http://en.wikipedia.org/wiki/Publicly_funded_health_care
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