Health Insurance Basics and Individual Policy Provisions
Cost-sharing vocabulary
A deductible is the amount the insured pays before benefits begin; coinsurance is the percentage shared after the deductible; a copay is a flat charge per service; the out-of-pocket maximum caps covered spending. Inside limits cap payment for specific services, and usual, customary, and reasonable (UCR) charges limit reimbursement to prevailing fees.
Renewability
Cancellable policies may be canceled at any time; optionally renewable ones may be refused at each anniversary; conditionally renewable ones may be refused only for stated conditions; guaranteed renewable ones cannot be canceled, but the insurer may raise rates for the entire class; noncancellable ones cannot be canceled and rates cannot be raised. Noncancellable and guaranteed renewable are the most valuable - and the most tested.
Standard provisions
A two-year incontestability (time limit on certain defenses) clause; grace period; reinstatement; change of occupation; misstatement of age; legal action; claim forms and proof of loss; and preexisting-condition limitations.
Coordination
Coordination of benefits determines primary versus secondary payer when two plans cover a person. Nonduplication prevents paying more than 100% of the loss, and subrogation lets the insurer recover from a third party.
Consumer protections
Federal law now mandates guaranteed issue and renewal, prohibition of annual and lifetime limits, essential health benefits, dependent coverage to age 26, preventive services, minimum medical loss ratios with rebates, and appeal rights. State mandates add benefits.
Trap
Question stems often describe a policy that cannot be canceled and ask you to identify it. Check whether the rate can be changed: guaranteed renewable means no cancellation but class rates may rise; noncancellable means neither can happen.