Health Insurance Basics
Medical insurance typically covers expenses that occur as the result of accident, illness, injury and disease. Exactly how much coverage for each expense is determined by the provisions of the particular health insurance policy, but in general, doctor visits, surgery expenses, costs of hospitalization and follow-up therapy are normally covered.
Exclusions
Common exclusions include:
- pre-existing conditions
- dental coverage
- optical coverage
- cosmetic or elective surgery and procedures
- prescription medicine
- mental illness
- attempted suicide
- substance abuse
- procedures determined to be preventive care
- reimbursement through a Workers' Compensation insurance program
Pre-existing conditions are those that have existed for a certain period prior to the inception of the coverage, normally 6 months to a year.
Co-Insurance
Coinsurance, also known as 'percentage participation', requires the insured to share in the cost of medical care. For example, in an 80/20 plan, the insurance will pay 80% of the covered expense, while the policy holder pays the remaining 20%. Most plans have a maximum, out-of-pocket, coinsurance cap, or stop-loss limit. The size of this limit generally ranges from $2,000 to $3,000, depending on the plan, although limits as low as $1,000 are sometimes used. Once this cap has been reached, all eligible expenses above this amount are paid in full, up to the plan's overall limit of coverage.
Co-Payments
Under a co-payment or co-pay provision, the policyholder is usually required to pay a fixed dollar amount (for example, $25) each time a particular medical service is used. This type of provision is often found in medical plans offered by health maintenance organizations (HMOs) where a nominal co-payment is applied to each office visit and to each prescription that is filled.
Coordination of Benefits
Some insurance companies offer plans that recognize the fact that other health insurance may be available to the policyholder, such as coverage available as an employee benefit to a spouse or coverages under automobile insurance, worker's compensation or a state disability program. This provision specifies how multiple coverages will coordinate their payments.