Health Insurance 101

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Health Insurance

As much as I would like this to be comprehensive tome on health insurance that can be taught in universities across the nation…it won’t be. Through my Nashville health insurance agency I have to advise dozens of people every month and this is just some of the information I have shared with them.

What it will be is a brief description of the most vital parts of most health insurance plans. I say “most” because health insurance plans are quite varied and very few are the same. However, I think that there are some basic aspects that everyone can relate to and the information would still be useful, if not presently, then in the future for sure.

Insurance in general is about the shifting of risk. Risk implies future. Since, if you are already ill, injured or experienced a loss then the risk is gone, the potential is now the actual. So when you buy health insurance you are shifting future financial loss, due to your health, to the health insurance company. Simple enough, right?

That is what current health insurance plans are like. But, in the early days of health insurance the coverage helped pay injured worker’s living expenses since they were missing work. They were expected to pay their own medical bill. Of course, in the late 19th century medical care was much different.

Many unions and labor associations would also kick in money to cover the bills of the injured worker so he or she could recover without the worry of feeding their family and having their lights turned off. These “association” plans still exist today and are the foundation of most private market insurance plans. You have to me a member of a group of some kind i.e. union, employer or association in order to buy health insurance in the United States.

As insurance evolved into the middle 20th century it was very affordable and commonly offered as an incentive to employees to attract and keep valuable staff. But, as the decades rolled on and American became sicker and the cost of health care increased health insurance changed.

Networks got smaller, deductibles and premiums increased and control of personal health care was turned over to your health insurance company in order to save money. The HMO created the Primary Care Physician role in an attempt to regulate the use of benefits. You can only use your benefits as dictated by your PCP in and HMO. (Health Management Organization) It’s entire purpose was to control the insured members access to their benefits and ensure they were not seeing doctors unnecessarily. 

As time when on deductibles entered in and also increased significantly over time. Deductibles were nominal at best, often less than $100. Of course, this is when Americans weren’t using their insurance like time share membership and we were healthier as a society. Now, with the Marketplace the standard deductible is $8150 per person. 

The deductible is the amount that you pay before the insurance starts to pay. So on a $5000 bill you would pay all of that and it would get credited to your $8150 deductible. You would have another $3150 to pay towards the annual deductible. Then the insurance would start paying all or a portion of your bills up to your out of pocket maximum.

With the Marketplace the out of pocket maximum is the same amount as the deductible. But with some plans it’s setup a little different. The deductible is lower, say $5000, and the out of pocket max is $7000. The insurance company would start paying a portion of your bills (called coinsurance) at $5000 instead of $8150.

Coinsurance is another important aspect of health insurance you should be aware of. It can any percentage you agree to. Minimally, it is 50/50. I have not seen it less than that, personally. It can be set at 60/40, 70/30 and so on. The larger number is usually on the insurance company. So if you have a 60/40 plan and you have met your deductible and the balance is $2000, you would pay $800. You would continue to pay that 40% until you spent your out of pocket max for the year. In this example it would $2000 beyond the deductible so you would have another $1200 to go before there was 100% coinsurance. Meaning the insurance company is paying all of your bill through the end of the year.

The next and final aspect I want talk about is the network. There are so many types of networks – PPO, HMO, EPO, POS that we could spend 2 days looking at all the differences and similarities. But, the key thing to understand about your network is that your benefits, in most cases, only cover in network providers. So you must be able to access a list of providers in your area to find someone to see when you need them. Some companies let you search through an online portal to find providers by name and specialty to make it easier. 

Networks can be as small as a single facility in your zip code to as large as a nationwide network with a million different providers to choose from. Depending on how you are buying your coverage you can choose the type of network. You may not have much choice if you are getting your coverage through an employer, unfortunately. But, if you but the coverage on your own you have many choices. 

There is no “best” network. Just like I say about health insurance in general, the best is what fits your needs and budget the best. PPOs do not assign you a doctor as a PCP, which some like and some want to have a doctor assigned to them so they don’t have to hunt around for one. Again, it’s a personal preference. 

Make sure that the hospitals and doctors you want are in the network before you enroll. It can be quite upsetting to show up at your family doctor only to have the nice nurse at the front desk tell you they don’t take your insurance. It’s best to call them personally to make sure. You may be able to look them up in a directory as well that way you are not taking anyone’s word on it.

The other point I tell my clients to pay attention to in regards to networks is for when they are hospitalized. The facility may be in network, but not all of the doctors there will be. There may be doctors there that are staff and are in the network themselves and bill under the hospital’s name to the insurance company or are simply on salary. However the hospital may have a few contracted specialists there to fill in short-staffed areas. 

This means they will not be in network and can bill independently of the hospital. So, if you have ever gotten what seem like random bills after a hospital stay that is why. The independent contractor is billing you directly if the insurance will not pay them their fees since they are out of network. This happens more than you think. 

There was just a front page story in USA Today about a woman that received a $40,000  bill after an elective surgery. She thought she dotted her Is and crossed her Ts. She saved for her deductible, scheduled the time off from work and got OK from her PCP. But, yet she still got this huge bill.

One of the attending physicians at her surgery was NOT in network and the insurance company refused to pay the bill. The main reason is that all of the in-network providers have a contract with insurance company. This contract has pre-negotiated rates that the providers much adhere to when billing the insurance company. Actually, the hospital will bill at full price and the insurance company will apply the network rate to the bills when received.

If you have ever seen a huge hospital bill and your eyes popped out, just know that the insurance company did NOT pay that full rate. I have seen these bills reduced by as much as 85% when the contracted rates are applied.

That is all for now. I hope this was helpful and keep your eyes open other articles of mine around the web.

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