Health Insurance Basics and Individual Policy General Provisions
Cost-sharing vocabulary
Health premiums reflect morbidity (expected claims), expenses, and reserves. The deductible is the amount paid before benefits begin; coinsurance is the insured's percentage of the remaining bill; a copay is a flat fee; the out-of-pocket maximum caps the insured's exposure. Pre-existing condition clauses exclude or limit coverage for conditions treated before the policy - prohibited for major medical under the ACA but still relevant to non-ACA products.
Renewability clauses
- Noncancellable - the insurer cannot cancel and cannot raise the premium.
- Guaranteed renewable - cannot cancel, but can raise premiums by class.
- Conditionally renewable - renews unless specified conditions occur.
- Optionally renewable - insurer may decline renewal.
Mandatory uniform provisions
Know the heavy hitters: entire contract; time limit on certain defenses (after two years the insurer cannot deny a claim based on misstatements, except fraud); grace period; reinstatement; notice of claim (20 days); claim forms (15 days); proof of loss (90 days); time of payment (immediately, typically within 30 days); payment of claims; physical exam and autopsy; legal actions (no suit before 60 days, within 3 years); change of beneficiary. Also the consideration clause, free look, and the insured's right to a copy of the application.
Plan structures
Indemnity plans reimburse; HMOs use a gatekeeper and capitation; PPOs pay more in-network without referrals; POS plans blend the two; EPOs cover only network care. Coordination of benefits prevents duplication when two plans cover the same person.
Trap and rule of thumb
Noncancellable means no cancellation and no rate increase; guaranteed renewable permits class-wide increases. Rule of thumb: the two-year time limit on certain defenses parallels life insurance incontestability.