Health Insurance Explanations

Health insurance policies come in many shapes and sizes, each one with different characteristics designed to suit your particular needs and available budget. By understanding the basics of how health insurance policies work and how each feature affects you and your coverage, your search for the best plan will take less time and create less stress.

Managed Care Plans

• The majority of health insurance plans sold in the United States today use the managed care concept. Insurance carriers created large groups comprised of physicians and facilities willing to accept pre-negotiated prices for common services in exchange for guaranteed income and/or significantly increased exposure to potential new patients. Medical plans either refuse to pay for treatment received by patients from non-participating providers, or require patients to contribute a dramatically higher portion of the overall cost. The premise behind the managed care concept has been that expenses should be reduced because patients will visit only those doctors who have negotiated rates, therefore limiting the carrier's liability for unknown treatment expenses.

Co-Pays

• Visits to your family doctor or a specialist typically require the payment of a small fee between 10 and 50 dollars, known as a co-pay. The co-pay represents the portion of the visit fee deemed your responsibility by the insurance carrier. Any remaining balance for services rendered during your office visit becomes the responsibility of the insurance company, and it is the physician's office's duty to arrange for collection and payment of those fees. Many medical plans require a higher co-pay for visits to specialists because specialists usually charge more for standard office visits.

Deductibles

• Deductibles represent the amount of money you must pay toward your treatment before the insurance carrier begins contributing their portion. Most deductibles range from several hundred to several thousand dollars, and these figures often double when medical plans cover more than one person, such as a married couple or a family. Deductibles are annual amounts, meaning that once you have paid the deductible it will not be imposed again until the following policy year.

Co-Insurance

• Co-insurance, being short for "cooperative insurance," indicates the portion of your medical treatment costs that you must split with the insurance carrier. Co-insurance is expressed as a percentage, with the patient responsibility ranging from 0 to 50 percent. The co-insurance amount is calculated after processing all deductibles and co-pays, and the remaining treatment costs get divided between the patient and insurance carrier per the provisions of the medical plan.

Maximum Out-of-Pocket

• Considering the potentially significant costs of medical treatment, combined with the potential financial liability of deductibles and co-insurance amounts, there exists a possibility that even with insurance, people may find themselves unable to pay medical bills. For this reason, medical insurance plans contain stop-loss figures called "maximum out-of-pocket" amounts, which represent the absolute most a covered person must pay toward her treatment in a given policy year. Maximum out-of-pocket amounts are an annual aggregate comprised of deductibles and co-insurance amounts, but not necessarily co-pays and prescription costs. If an insured person's total expenses toward medical services meet or exceed the maximum out-of-pocket number, any further treatment costs become entirely the responsibility of the insurance carrier.

Preexisting Conditions

• Preexisting conditions may present problems for some people searching for a new health insurance plan. In order to prevent intentional manipulation of medical coverage, insurance carriers are permitted to restrict or limit benefits only to new conditions and procedures for periods ranging from six months to one year. Any conditions for which you received treatment or counsel in the past year may be excluded from your benefits for the upcoming year, or in some cases may make you ineligible to purchase coverage at all. Preexisting condition limitations usually only apply to people purchasing medical coverage for the first time or those who have been uninsured for at least one month. Simply changing insurance plans or carriers does not subject you to such restrictions. Under the Affordable Care Act of 2010, more affordable options will be available to those with preexisting conditions in some states in 2011 and in all states by 2014.