Health Insurance Basics and Medical Expense Policies
Cost-sharing vocabulary
A deductible is paid first; coinsurance is the percentage the insured pays after the deductible; a copay is a flat charge per service; the out-of-pocket maximum caps the insured's annual exposure. Also know inside limits, benefit periods, usual/reasonable/customary fee schedules, preauthorization, and preexisting condition provisions.
Plan types
Indemnity plans reimburse on a fee-for-service basis. HMOs use a closed panel, a primary care gatekeeper and capitation, and cover only emergencies out of network. PPOs pay in-network and out-of-network benefits at different levels with no gatekeeper. POS plans blend the two. EPO plans cover the network only. Managed care tools include utilization review, concurrent review, case management, withholds and DRGs.
Coordination of benefits
The primary plan pays first, the secondary pays up to but never more than 100% of the charge. Dependent children are coordinated by the birthday rule - the parent whose birthday falls earlier in the year is primary.
Reform basics
Guaranteed issue and renewability in the individual market, no preexisting condition exclusions, essential health benefits, metal tiers (bronze 60%, silver 70%, gold 80%, platinum 90%), no annual or lifetime dollar limits, dependent coverage to age 26, and the federal individual penalty reduced to zero.
Trap: coinsurance applies only after the deductible is satisfied, and some copays do not count toward the deductible or out-of-pocket maximum.
Worked example: $2,000 deductible, 80/20 coinsurance, $10,000 claim. Insured pays $2,000 plus 20% of $8,000, or $3,600 total; the insurer pays $6,400.