Health Insurance Basics
Risk and funding
Health insurance addresses morbidity (illness rates) rather than mortality. It is offered by commercial insurers, Blue Cross/Blue Shield plans, HMOs (closed panel, primary care gatekeeper, in-network emphasis), PPOs (in-network discounts, no gatekeeper), POS plans (hybrid), and EPOs. Group coverage is underwritten as a whole group, and individual evidence of insurability is generally not required during initial eligibility; individual coverage is individually underwritten.
Government and employer programs
Medicare: Part A (hospital, usually premium-free with work history), Part B (medical, premium-based), Part C (Medicare Advantage - private plans), and Part D (prescription drugs), plus Medigap supplements. Medicaid is income based. ACA marketplaces (in Rhode Island, HealthSource RI) offer metal tiers (Bronze, Silver, Gold, Platinum), essential health benefits, guaranteed issue, no pre-existing-condition exclusions, and premium tax credits for eligible buyers. Employer plans are governed by ERISA; COBRA provides continued group coverage after a qualifying event; HIPAA governs portability and privacy.
Disability and specialty products
Disability income replaces a percentage of income (commonly 60–70% of gross, subject to underwriting limits) after an elimination period for a benefit period. Short-term vs long-term differ by duration. Business uses include key person disability, business overhead expense, and buy-sell funding. Other products: AD&D, long-term care (activities of daily living triggers), critical illness, hospital indemnity, and dental/vision.
Worked example
A policy has a $500 deductible, 80/20 coinsurance, and a $3,000 out-of-pocket maximum. A covered claim is $5,500. The insured pays the $500 deductible, then 20% of the remaining $5,000 = $1,000, for $1,500 total. The insurer pays $4,000. The out-of-pocket maximum of $3,000 has not been met, so future claims continue to apply coinsurance.
Trap: coinsurance is the insured's share, not the insurer's; the out-of-pocket maximum usually excludes premiums and non-covered services.