Health Insurance Basics and Policy Provisions
Health insurance mechanics
Health insurance manages morbidity risk through underwriting, premiums, deductibles, coinsurance, copayments, and out-of-pocket maximums. The deductible is the amount the insured pays before benefits; coinsurance is the percentage split after the deductible; a copay is a flat charge. The out-of-pocket maximum caps covered in-network cost sharing, but premiums generally do not count. Waiting periods delay eligibility for benefits; under the ACA, preexisting conditions cannot be excluded and annual/lifetime dollar limits are prohibited for essential health benefits. Preventive services must generally be covered without cost sharing. Dependent coverage is available to age 26. Guaranteed renewability means the insurer must renew the policy if premiums are paid, though premiums can change by class.
Claims provisions set notice, proof of loss, time of payment, and legal action timelines. Coordination of benefits determines primary/secondary coverage; subrogation lets the insurer recover from a liable third party. HIPAA protects health information and portability. Rescission is cancellation for fraud or misrepresentation.
Traps: coinsurance is not a copay; the deductible does not always apply to preventive care; an out-of-pocket maximum is not the premium; short-term plans are not required to meet ACA rules.
Worked example: $500 deductible, 20% coinsurance, $5,000 covered bill. Pay $500 deductible; coinsurance is 20% of $4,500 = $900; total $1,400, unless the OOP maximum is lower.