Health Insurance Basics and Policy Provisions
Cost-sharing vocabulary
A deductible is the amount the insured pays before benefits begin. Coinsurance is the percentage split after the deductible (commonly 80/20). A copayment is a flat dollar charge, often for office visits or drugs. The out-of-pocket maximum caps the insured's share of covered expenses for the year. A benefit period is the window in which benefits are payable; an elimination period is a waiting period before benefits start.
Policy provisions
Key provisions mirror life insurance but with health-specific rules: entire contract, grace period (commonly 31 days for individual major medical; shorter for weekly/monthly modes), reinstatement, time limit on certain defenses (incontestability after a stated period, often 2 years), free look, proof of loss deadlines, legal actions (typically starting 60 days after proof and barred after 3 years), change of occupation, misstatement of age, other insurance with this insurer, unpaid premium, and cancellation/renewal clauses.
Renewability
- Noncancellable - insurer cannot cancel or raise rates; the insured may renew to a stated age.
- Guaranteed renewable - insurer must renew but can raise rates by class.
- Conditionally renewable - renewal subject to stated conditions.
- Optionally renewable - insurer may decline renewal at each anniversary.
Coordination and continuation
Coordination of benefits prevents duplicate payment when a person is covered under two plans; the primary plan pays first. COBRA requires employers with 20+ employees to offer continuation (18 months generally, 29 months for disability, 36 months for dependents in certain events).** Pre-existing condition exclusions are largely barred in major medical under the ACA, but the concept still appears for excepted benefits and other products.**
Worked example: a $5,000 covered bill, $1,000 deductible, 80/20 coinsurance. The insured pays $1,000; of the remaining $4,000 the insurer pays $3,200 and the insured pays $800, for a total member cost of $1,800.