Health Insurance Basics
Delivery models
Indemnity (fee-for-service) plans pay a percentage of usual, customary, and reasonable charges and allow any provider. Managed care controls cost and use: HMO (closed network, primary care gatekeeper, referrals required, often capitated), PPO (network discounts, no referrals, higher cost out of network), POS (a hybrid HMO/PPO), and EPO (network only, no out-of-network benefits).
Cost sharing
Premium, deductible, copay (flat dollar), coinsurance (percentage), and out-of-pocket maximum, the stop-loss after which covered in-network care is paid in full. Preventive care is typically covered before the deductible.
Regulation
HIPAA limits preexisting-condition exclusions, guarantees renewability, and provides portability and special enrollment rights. The ACA eliminated preexisting-condition exclusions and annual and lifetime limits, added essential health benefits, dependent coverage to age 26, and marketplace subsidies. In Washington, individual and small-group coverage is sold through the Washington Health Benefit Exchange (Washington Healthplanfinder), and Apple Health is the state Medicaid program.
Traps
Know the difference between a copay and coinsurance, and between a deductible and an out-of-pocket maximum. Medical necessity and prior authorization questions hinge on utilization review, not on the benefit maximum.
Worked example: a plan with a $2,000 deductible, 20 percent coinsurance, and a $6,000 out-of-pocket maximum. On a $12,000 in-network claim the member pays the first $2,000, then 20 percent of the remaining $10,000 ($2,000), for $4,000 total, which is under the $6,000 cap.