Health Insurance Basics and Medical Expense Coverage
Delivery models
Indemnity (fee-for-service) plans pay a percentage of usual, customary, and reasonable charges and let members see any provider. Managed care controls cost and utilization: HMOs use closed networks, a primary care gatekeeper, and capitation; PPOs allow out-of-network care at higher cost sharing; POS plans combine HMO and PPO features; EPOs offer a broad network but no out-of-network benefits except emergencies. Care outside the network or without preauthorization may be denied.
Cost-sharing vocabulary
A deductible is paid first; coinsurance is a percentage of the remaining bill; a copay is a flat amount; the out-of-pocket maximum caps member spending on covered essential benefits. Coordination of benefits prevents double payment: the primary plan pays first, the secondary pays the balance. For dependent children, the birthday rule makes the plan of the parent whose birthday falls earlier in the calendar year primary.
Regulation and public programs
HIPAA limits pre-existing condition exclusions in group plans using creditable coverage, guarantees availability and renewability, and protects privacy. The ACA requires guaranteed issue, essential health benefits, no annual or lifetime dollar limits on those benefits, coverage of dependents to age 26, and metal tiers (bronze through platinum) that set actuarial value.
Consumer accounts and Medicare
HSA funds require a qualifying high-deductible plan, roll over, and are tax-free for medical expenses; FSA funds are use-it-or-lose-it with limited carryover. Medicare Part A covers hospitalization, Part B medical services, Part C is Medicare Advantage, and Part D covers drugs.
Worked example: Two parents both cover their child; the mother's birthday is March and the father's is August. The mother's plan is primary under the birthday rule.