Health Insurance Basics
Risk and renewability
Health insurance pools morbidity (sickness) risk rather than mortality. Underwriting controls adverse selection, though the Affordable Care Act limits it in the individual market with guaranteed issue and no pre-existing-condition exclusions. Renewability categories are heavily tested: noncancellable (the insurer can never cancel or raise premium while premiums are paid), guaranteed renewable (premiums may rise by class, but the policy cannot be cancelled), conditionally renewable (renewal depends on stated conditions), and optionally renewable (the insurer may refuse renewal).
Plan types
Basic medical covers hospital, surgical, and physician services; major medical adds a deductible, coinsurance, and a stop-loss out-of-pocket maximum; comprehensive plans combine both. Managed care: HMO (in-network, gatekeeper, prepaid), PPO (network with out-of-network benefits), POS, and EPO. Consumer-driven plans pair a high-deductible health plan with an HSA (triple tax advantage) or HRA. Indemnity plans reimburse fixed amounts and pay usual, customary, and reasonable charges.
Sources of coverage and gaps
Group coverage through employers; individual policies; Medicare (Part A hospital, Part B medical, Part C Advantage, Part D drugs), Medicaid, CHIP, workers' compensation, and TRICARE. HIPAA provides portability and privacy; COBRA gives continuation for qualified beneficiaries. Coordination of benefits decides which plan pays first when a person is covered twice.
Taxation trap: employer-paid group health premiums are deductible to the employer and not taxable to the employee, and benefits paid are generally tax-free. For individually owned disability or medical policies, the self-employed may deduct premiums - but benefits then become taxable.
Worked example: a guaranteed renewable policy may see a class-wide rate increase at renewal, but the insurer cannot single out one policyholder or cancel the policy.