Health Insurance Basics and Medical Plans: Cost Sharing and Managed Care
Cost-sharing vocabulary
Health plans share cost through a deductible (amount paid before benefits begin), coinsurance (a percentage split after the deductible, often an 80/20 arrangement in which the plan pays 80%), copay (a flat fee per service), and an out-of-pocket maximum (stop-loss) that caps the insured's exposure. Calendar-year deductibles differ from per-cause or per-admission deductibles. Scheduled plans pay fixed amounts per procedure, indemnity plans reimburse a percentage of usual, reasonable and customary charges, and blanket policies cover a defined group.
Managed care
An HMO uses a primary care physician as gatekeeper, often pays providers by capitation, and generally covers only emergency care outside the network. A PPO negotiates discounts without a gatekeeper and still pays something out of network. A POS plan blends the two: choose a PCP for in-network care, with an out-of-network option. An EPO pays only in network. An HDHP pairs a high deductible with a tax-favored HSA.
Rules that drive exam questions
The ACA bars pre-existing-condition exclusions and annual or lifetime dollar limits on essential health benefits, allows dependent coverage to age 26, and requires guaranteed issue in the individual market. Under HIPAA portability rules, group plans may credit prior creditable coverage against a limited exclusion period for late enrollees. COBRA applies to employers with 20 or more employees, continuing coverage 18 months (longer for disability or certain qualifying events). Medicare has Part A (hospital), Part B (medical), Part C (Advantage), and Part D (drugs), with Medigap supplements. Coordination of benefits makes the plan covering a person as an employee primary and the plan covering them as a dependent secondary.
Trap: Old HIPAA-era answers about pre-existing exclusion periods are wrong for non-grandfathered plans under the ACA. Also, when the plan pays 80%, the insured still owes 20% of the charges after the deductible.
Rule of thumb: Deductible first, then coinsurance, until the out-of-pocket maximum is reached.