Health Insurance Basics
Cost-sharing vocabulary
A deductible is what the insured pays before benefits begin; coinsurance is the shared percentage afterward (an 80/20 plan means the insurer pays 80%); a copay is a flat fee; the out-of-pocket maximum caps the insured's exposure. Questions test order of operations: deductible first, then coinsurance, then the out-of-pocket cap - and preventive care is often covered without cost sharing.
Delivery systems
Indemnity plans reimburse and allow any provider. Managed care trades choice for cost control: HMOs use a network, a gatekeeper primary care physician, and capitation; PPOs allow out-of-network care at higher cost with no gatekeeper; POS plans blend the two. Network status drives the benefit level, so confirm where the service was rendered.
Individual vs group
Group coverage is typically guaranteed issue, experience rated for large groups, and subject to open enrollment; individual coverage is individually underwritten and rated, except where law prohibits it. COBRA continues group coverage after a qualifying event; HIPAA provides portability and privacy protections.
Vermont overlay
Vermont merged its individual and small-group health markets and applies guaranteed issue and community rating, so individual applicants are not declined or charged more for health status; rates may vary only by permitted factors. Vermont Health Connect is the state exchange.
Coordination of benefits
When two plans cover the same person, the primary plan pays first. The plan covering the person as an employee is usually primary over a plan covering them as a dependent; for a dependent child, the birthday rule typically applies in group plans (the parent whose birthday falls earlier in the year is primary).
Rule of thumb
Before computing a payout, confirm (1) network status, (2) how much of the deductible is met, and (3) which plan is primary.