Health Insurance Basics
Measuring risk
Health insurance prices morbidity, not mortality. Underwriting examines medical history, occupation, avocations, and lifestyle. Individual policies are medically underwritten, while group coverage is not and the group is rated as a whole.
Cost sharing
A deductible is what the insured pays first; a copay is a flat dollar amount; coinsurance is a percentage of the bill; the out-of-pocket maximum caps the insured's exposure. Benefits usually run on a calendar year or a benefit period.
Delivery systems
An HMO requires a primary care physician and referrals for specialists and generally covers nothing outside the network except emergencies. A PPO contracts with a network but pays some benefit for out-of-network care and has no gatekeeper. A POS blends the two, and an EPO offers no out-of-network coverage at all. Indemnity plans reimburse for care with no network rules but cost more.
Regulation and public programs
The ACA created marketplaces, essential health benefits, guaranteed issue, and no exclusions for pre-existing conditions, with income-based subsidies. Medicare covers people 65 and older and some disabled individuals: Part A hospital, Part B medical, Part C Medicare Advantage, Part D drugs. Medicaid is income-based and jointly funded by state and federal government. HIPAA governs privacy and portability, and COBRA continues group coverage after a qualifying event.
Traps
Questions like to make HMOs pay full out-of-network benefits or to call coinsurance a flat fee. Remember that a copay is fixed and coinsurance is a percentage.
Rule of thumb
Referrals plus a PCP equals HMO. Network optional equals PPO. No out-of-network benefits and no referrals equals EPO.