Health insurance

Health insurance is insurance against the risk of incurring medical expenses among individuals. By
estimating the overall risk of health care and health system expenses, among a targeted group, an
insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to ensure
that money is available to pay for the health care benefits specified in the insurance agreement. The
benefit is administered by a central organization such as a government agency, private business, or
not-for-profit entity. According to the Health Insurance Association of America, health insurance is
defined as "coverage that provides for the payments of benefits as a result of sickness or injury.
Includes insurance for losses from accident, medical expense, disability, or accidental death and
dismemberment" (pg. 225).
[1]

A health insurance policy is:
1. A contract between an insurance provider (e.g. an insurance company or a government) and
an individual or his/her sponsor (e.g. an employer or a community organization). The contract
can be renewable (e.g. annually, monthly) or lifelong in the case of private insurance, or be
mandatory for all citizens in the case of national plans. The type and amount of health care
costs that will be covered by the health insurance provider are specified in writing, in a
member contract or "Evidence of Coverage" booklet for private insurance, or in a
national health policy for public insurance.
2. Provided by an employer-sponsored self-funded ERISA plan. The company generally
advertises that they have one of the big insurance companies. However, in an ERISA case,
that insurance company "doesn't engage in the act of insurance", they just administer it.
Therefore ERISA plans are not subject to state laws. ERISA plans are governed by federal
law under the jurisdiction of the US Department of Labor (USDOL). The specific benefits or
coverage details are found in the Summary Plan Description (SPD). An appeal must go
through the insurance company, then to the Employer's Plan Fiduciary. If still required, the
Fiduciarys decision can be brought to the USDOL to review for ERISA compliance, and then
file a lawsuit in federal court.
The individual insured person's obligations may take several forms:
[2]

Premium: The amount the policy-holder or their sponsor (e.g. an employer) pays to the health
plan to purchase health coverage.
Deductible: The amount that the insured must pay out-of-pocket before the health insurer pays its
share. For example, policy-holders might have to pay a $500 deductible per year, before any of
their health care is covered by the health insurer. It may take several doctor's visits or prescription
refills before the insured person reaches the deductible and the insurance company starts to pay
for care. Furthermore, most policies do not apply co-pays for doctor's visits or prescriptions
against your deductible.
Co-payment: The amount that the insured person must pay out of pocket before the health
insurer pays for a particular visit or service. For example, an insured person might pay a $45 co-
payment for a doctor's visit, or to obtain a prescription. A co-payment must be paid each time a
particular service is obtained.
Coinsurance: Instead of, or in addition to, paying a fixed amount up front (a co-payment), the co-
insurance is a percentage of the total cost that insured person may also pay. For example, the
member might have to pay 20% of the cost of a surgery over and above a co-payment, while the
insurance company pays the other 80%. If there is an upper limit on coinsurance, the policy-
holder could end up owing very little, or a great deal, depending on the actual costs of the
services they obtain.
Exclusions: Not all services are covered. The insured are generally expected to pay the full cost
of non-covered services out of their own pockets.
Coverage limits: Some health insurance policies only pay for health care up to a certain dollar
amount. The insured person may be expected to pay any charges in excess of the health plan's
maximum payment for a specific service. In addition, some insurance company schemes have
annual or lifetime coverage maxima. 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 maxima: Similar to coverage limits, except that in this case, the insured person's
payment obligation ends when they reach the out-of-pocket maximum, and health insurance pays
all further covered costs. Out-of-pocket maxima can be limited to a specific benefit category (such
as prescription drugs) or can apply to all coverage provided during a specific benefit year.
Capitation: An amount paid by an insurer to a health care provider, for which the provider agrees
to treat all members of the insurer.
In-Network Provider: (U.S. term) A health care provider on a list of providers preselected by the
insurer. The insurer will offer discounted coinsurance or co-payments, or additional benefits, to a
plan member to see an in-network provider. Generally, providers in network are providers who
have a contract with the insurer to accept rates further discounted from the "usual and customary"
charges the insurer pays to out-of-network providers.
Prior Authorization: A certification or authorization that an insurer provides prior to medical
service occurring. Obtaining an authorization means that the insurer is obligated to pay for the
service, assuming it matches what was authorized. Many smaller, routine services do not require
authorization.
[3]

Explanation of Benefits: A document that may be sent by an insurer to a patient explaining
what was covered for a medical service, and how payment amount and patient responsibility
amount were determined.
[3]

Prescription drug plans are a form of insurance offered through some health insurance plans. In the
U.S., the patient usually pays a copayment and the prescription drug insurance part or all of the
balance for drugs covered in the formulary of the plan. Such plans are routinely part of national health
insurance programs. For example in the province of Quebec, Canada, prescription drug insurance is
universally required as part of the public health insurance plan, but may be purchased and
administered either through private or group plans, or through the public plan.
[4]

Some, if not most, health care providers in the United States 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. The insurance company pays out of network providers according to
"reasonable and customary" charges, which may be less than the provider's usual fee. The provider
may also have a separate contract with the insurer to accept what amounts to a discounted rate or
capitation to the provider's standard charges. It generally costs the patient less to use an in-network
provider.




Advantages and disadvantages of HMO health insurance
Many people enjoy having an HMO as health insurance because the plan
does not require claim forms to see a doctor or during hospital stays. The HMO
member only has to present a card that states proof of insurance at the doctor's
office or hospital. In an HMO the members may have to wait longer for an
appointment than with an indemnity insurance plan. The HMO charges a fixed
monthly fee so its members can receive health care. There will be a small co-
payment for each doctor visit; however with the HMO, fees can be forecasted
unlike a fee-for-service insurance plan. Although freedom of choice is given up,
out-of-pocket expenses are very low. In an HMO there are some
disadvantages. The premium that is paid is just enough to cover the costs of
doctors in the network. The members are stuck to a primary care physician
and if managed care plans change, then the member may not be able to continue
with the same PCP. On major disadvantage is that it is difficult to get any
specialized care because the members must get a referral first. Any kind of care
that is sought that is not a referral or an emergency is not covered. The HMO
plan is one of the fastest growing types of managed care in terms of expenses,
while being the most restrictive type of health care.
Advantages
One of the most significant advantages of having health insurance is the ability to prevent diseases
through early detection and doctor recommended lifestyle changes. This prevention not only keeps
citizens healthier, but it also saves money on the expense of the health care that would otherwise be
required to deal with the problem when it arises.
Those without insurance do not usually have the money to spend on regular preventative visits to the
doctor when there is no apparent problem. It results in more sickness for uninsured people, which
leads to increased health care costs when the industry ends up treating major illnesses without the
ability to collect payment form those patients.

Peace of Mind
Having health insurance leads to peace of mind for those who have it. If a nagging
problem (such as an unusual pain), persists in someone with health insurance they can
go to the doctor without significant out-of-pocket expense and get it checked out even if
it leads to diagnostic testing. When they find out they have nothing to worry about or
that they are set up to receive the proper treatment, it can be a burden off the shoulders
of the patient.
Those without health insurance may suffer with symptoms for months or years without
ever knowing what is causing them simply because they know they cannot afford to have
it diagnosed and treated. This inaction leads to excessive worry about potential health
problems.

Disadvantages
Less Lost Time
People with health insurance who get sick can take a sick day from work, visit the doctor,
get treated and possibly be back to work in a day or two if the illness is minor. It is an
advantage to the employee and employer for this quick and easy access to medical
attention, since it reduces their lost time on the job.
Premiums And Coverage
The main disadvantage of health insurance is the fact that it costs money. Even though it
can potentially save a patient thousands of dollars by having it, there are still monthly
premiums that must be paid in order to take advantage of the benefits.
In addition, the constantly rising premiums do not necessarily indicate a higher level of
coverage. Many insurance policies are cutting back on the amount of care they will cover
and are strictly limiting the services available to those signing up for new policies.
Complicated Rules
Another disadvantage of health insurance is the complicated nature of using it. Many
policies require referrals instead of allowing a patient to go straight to a specialist. They
may exclude certain medications from coverage or refuse to pay for supposed elective
procedures that may not be so elective in the patient or doctors opinion.
Lack Of Choice
A significant disadvantage of many health insurance policies is the inability of the
insured to choose which doctor they see or which hospitals they use. While some policies
offer a wider range of choices, most do not have complete freedom in this regard.