A health insurance policy is a contract between an insurance provider (insurance company or government) and an individual or his/her sponsor (employer or a community organization). The contract can be renewable (annually) or lifelong in the case of private insurance, or be mandatory for all citizens in the case of national plans.
THE INDIVIDUAL INSURED PERSON’S OBLIGATIONS MAY TAKE SEVERAL FORMS:
- Premium: The amount the policy-holder or their sponsor (employer) pays to the health plan to purchase health coverage.
- Deductible: The amount that the insured must pay out-of-pocket before the health insurer pays its share. It may take several doctor’s visits or prescription refills before the insured person reaches the deductible and the insurance company starts to pay for care.
- Co-payment: The amount that the insured person must pay out of pocket before the health insurer pays for a particular visit or service.
- Coinsurance: Instead of, or in addition to, paying a fixed amount up front (co-payment), co-insurance is a percentage of the total cost that the insured person may also pay. For example, the member might have to pay 20% of the cost of a surgery over and above a co-payment, while the insurance company pays the other 80%. If there is an upper limit on coinsurance, the policy-holder could end up owing very little, or a great deal, depending on the actual costs of the services they obtain.
- Exclusions: Not all services are covered. The insured are generally expected to pay the full cost of non-covered services out of their own pockets.
- Coverage limits: Some health insurance policies only pay for health care up to a certain amount. The insured person may be expected to pay any charges in excess of the health plan’s maximum payment for a specific service. In these cases, the health plan will stop payment when they reach the benefit maximum and the policy-holder must pay all remaining costs.
- Out-of-pocket maxima: Similar to coverage limits, except that in this case, the insured person’s payment obligation ends when they reach the out-of-pocket maximum, and health insurance pays all further covered costs. Out-of-pocket maxima can be limited to a specific benefit category (such as prescription drugs) or can apply to all coverage provided during a specific benefit year.
- Capitation: An amount paid by an insurer to a health care provider, for which the provider agrees to treat all members of the insurer.
- In-Network Provider: A health care provider on a list of providers preselected by the insurer. The insurer will offer discounted coinsurance or co-payments, or additional benefits, to a plan member to see an in-network provider. Generally, providers in the network are providers who have a contract with the insurer to accept rates further discounted from the “usual and customary” charges the insurer pays to out-of-network providers.
- Prior Authorization: A certification or authorization that an insurer provides prior to medical service occurring. Obtaining an authorization means that the insurer is obligated to pay for the service, assuming it matches what was authorized. Many smaller, routine services do not require authorization.
- Explanation of Benefits: A document that may be sent by an insurer to a patient explaining what was covered for a medical service, and how payment amount and patient responsibility amount were determined.
- Some, if not most, health care providers will agree to bill the insurance company if patients are willing to sign an agreement that they will be responsible for the amount that the insurance company doesn’t pay. The insurance company pays out-of-network providers according to “reasonable and customary” charges, which may be less than the provider’s usual fee. The provider may also have a separate contract with the insurer to accept what amounts to a discounted rate or capitation to the provider’s standard charges. It generally costs the patient less to use an in-network provider.