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Concepts of Health Insurance

Most Americans have health insurance but few understand all the concepts that are involved in the coverage they have. The terms used in health insurance are uniformly used by many of the insurance companies. The concepts of health insurance provide a definition of what the policyholder can expect while defining the obligations and liabilities of the insurance company.

  1. Patient Liability

    • According to the University of California, San Francisco Medical Center there are three separate categories of patient liability: deductible, co-insurance and co-payment. Deductibles hold the patient responsible for a set amount of expense, usually at the beginning of the year. Co-insurance holds the patient responsible for a percentage of the cost after the deductible is met and co-payment is a set fee paid by the patient for certain types of exams or services. The patient liabilities reduce the expenses of the insurance company but also pass a cost directly to the patient if she selects to have medical treatment.

    Ratings

    • Health insurance policies are generally rated, or categorized for pricing, in one of two manners. Pricing for community-rated health insurance policies is determined by lumping all people of the community, town, region or even state, into one group for pricing without regards to past medical treatment use. Policies priced on an experience rating divide the people in the community into subgroups and determine the amount of medical usage expected based on demographics and medical history of the people within the group.

    Preferred Provider Organizations

    • Preferred Provider Organizations (PPO) provide discounted cost agreements between medical providers and the insurance industry. Patients may receive discounted patient liabilities if they seek services from medical providers who have contracted with a PPO that is affiliated with the patient's insurance company.

    Health Maintenance Organization

    • Health Maintenance Organizations (HMO) are more restrictive than PPOs. Under an HMO concept the patient must seek care from a primary care physician (PCP) who serves as the referring physician for any specialty services the patient may need. The patient must seek all treatment from providers they have been referred to by the PCP. Patient liabilities may still apply.

    Point of Service

    • According to the University of California, San Francisco Medical Center, the Point of Service (POS) is the least restrictive form of health insurance. The patient decides what medical providers they will seek services from and the insurance company provides reimbursement either to the medical provider or directly to the patient. Patient liabilities are usually present and depend on the policy contract.

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