Health Insurance Basics and Policy Provisions
Health policy basics
Health insurance reimburses or pays for medical expenses. Key cost-sharing terms are deductible (amount paid before benefits), coinsurance (percentage split after deductible), copayment (flat fee), and out-of-pocket maximum (cap on covered cost sharing). An elimination period is a waiting period before benefits; a benefit period is how long benefits last. Preexisting-condition rules depend on the plan and applicable law, so do not assume every condition is excluded. Renewability matters: noncancellable policies cannot be canceled or have premiums raised individually; guaranteed renewable policies can raise premiums by class but cannot cancel the individual; conditionally renewable policies renew only under stated conditions.
Provisions and traps
Claims provisions require timely notice and proof of loss. Coordination of benefits prevents duplicate payment when more than one plan covers the claim. A waiting period is not the same as a benefit period. Coinsurance is not a copay. A deductible may apply per person, per family, or per benefit period. HIPAA and other federal rules affect portability and special enrollment, but state insurance rules still govern many policy terms.
Worked example
A policy has a $500 deductible and 80/20 coinsurance. For a $2,000 covered expense, the insured pays the $500 deductible plus 20% of the remaining $1,500, or $300, for $800 total; the insurer pays $1,200. Always apply the deductible before coinsurance unless the policy says otherwise.