Health Insurance Basics
Risk and underwriting
Health insurance addresses morbidity-the incidence and duration of illness or injury-rather than mortality. Insurers guard against adverse selection through underwriting, waiting periods, and pre-existing condition provisions, though ACA rules restrict the latter for major medical plans.
Individual versus group
Group coverage is issued to an employer or association and covers members and dependents. It features open enrollment, no individual underwriting, and typically a lower cost per person. Eligibility rules include waiting periods, actively-at-work requirements, and dependent status. COBRA requires employers with 20 or more employees to offer continued coverage after a qualifying event, generally up to 18 months for termination and 36 months for dependents. HIPAA provides portability and limits exclusions in group coverage; ERISA governs employer benefit plans.
Cost-sharing terms
Premium is the amount paid for coverage. The deductible is what the insured pays before benefits begin. Coinsurance is the insured's percentage share, such as 20%. A copay is a flat fee. The out-of-pocket maximum caps the insured's annual share. Coordination of benefits prevents duplicate payment when two plans cover the same person.
Network structures
HMOs use a gatekeeper and generally cover only in-network care; PPOs allow out-of-network care at higher cost; POS plans blend both; EPOs offer no out-of-network benefit.
Government programs
Medicare covers those 65 and older or disabled; Medicaid covers low-income individuals; ACA marketplaces offer subsidized individual plans with essential health benefits and guaranteed issue.
Traps
COBRA applies by employer size. Medicare Part A is premium-free with sufficient work history, and eligibility is not income-tested.
Rule of thumb
Deductible first, then coinsurance, then the out-of-pocket maximum.