How does health insurance work? This question has invaded the hearts of many who seek for good health with less money.
The answer most times are not as detailed as you want it to be.
Your health determines whether your wealth stays or not. For the poor, then worse is the case. Not being able to have an option for health especially when you are not rich enough to handle some health issues.
This may arise as a major source of worry to many.
But, there is always a way out of this, Health insurance.
So, this article will major in telling you what health insurance is all about for beginners.
Also, answering the question of How does health insurance work?
Health insurance helps protect you from the high costs of health care. It helps you pay for doctor visits, hospital stays prescription drugs and important preventive care. You can always select among a list of health insurance plans. They have different levels of coverage, find the one that fits your needs and budget.
Knowing how health insurance works are quite broad, but it will be worth your read.
So, if you are willing to know the answer to this question, how does health insurance work?.
I’ll be glad to take you one step at a time as I unravel things you need to know.
Especially, if you do not have enough funds for health expenses.
When you do not have proper first-hand knowledge of a thing then, trying it outlooks and may sound scary for you.
I’m here to help direct you on how health insurance works and how to get one where you are.
What is Health Insurance?
Health insurance is a type of insurance that covers your medical expenses. While health insurance policy is the agreement between an individual and the insurance company.
The individual who has bought the policy from the insurance pays a certain amount of money on a regular basis. As agreed upon between the insurer and the insured (also called premium).
In return, the insurance company offers financial protection to the policyholder for any medical expenses that may arise.
But this is subject to terms and conditions specified in the policy.
Who Needs Health Insurance?
Health insurance is necessary for all who can get it and keep up with the specific amount paid on a regular basis as agreed.
Health insurance is necessary for Americans due to the high cost of health care. You need it unless you are very wealthy, over 65, or very poor.
So, health insurance is for as many that do not want to go bankrupt because of health problems.
The very wealthy can afford the cost of even extraordinary emergency or chronic medical care. Those over 65 have paid into Medicare. The very poor can qualify for Medicaid.
Everyone else must either buy health insurance or risk medical bankruptcy. Since it is so common, many people have lost sight of its purpose.
It’s like an insurance for your car, home, or apartment. It’s supposed to protect your life savings from the costs of a major accident, or a chronic disease.
But, unlike other insurance, health insurance makes it possible for you to get that health care when you need it. If you don’t have car insurance, you can take the bus until you can afford to get your car fixed. If you break an arm, you can’t splint it yourself until you save up enough to go to the doctor.
Now let’s delve into the heart of the question- how does health insurance work?
First of all, let’s look at the definition of these terms for a clearer understanding.
Knowing these terms and how they are applied will help answer the question.
A company that sells health insurance plans/policies.
These are healthcare costs covered by your health insurance policy.
Which includes, medical services, treatments, and supplies.
The health insurance coverage purchased by an individual or an employer and provided by the insurance company. Also referred to as a plan. A policy lasts for a specific amount of time. For an Obamacare plan, it starts January 1 through December 31 of the same year.
The health insurance premium is the fee that you pay to have coverage of the medical conditions or treatments described in the policy. Premiums are established through an underwriting process where the potential buyers of health insurance are categorized.
These categories are based upon such factors as age, gender, and medical history. The reason for the level of premium is to show the chances that members of the insured group will incur medical costs.
Which are equal to the projected loss ratio or less.
Underwriting is necessary to avoid “adverse selection”.
In other words, premiums are set high enough to deter participation by those that will use the insurance often. Then, low enough to encourage participation by those least likely to use it.
Underwriting ensures that the people who buy health insurance are a true cross-selection of risks.
And not only those who purchase health insurance because they are ill or expect to need it.
They also want to remain on the safe side of bearing cost, you know.
Health insurance requires that the covered policyholder bear a part of the risk by paying initial medical costs. An agreed-upon level before the health insurance is liable for payment.
As the deductible amount increases, the premium decreases. For example, an annual deductible of $3,000 would require the policyholder to pay the first $3,000 in medical bills. He pays it himself and it is known as out-of-pocket. Before the insurance company will pay or reimburse any claim.
In addition to the deductible, policyholders are usually required to pay a portion of the cost of each medical treatment covered to reduce the misuse of medical services.
If not everyone will run to the hospital when they have a slight headache because they are insured.
While higher co-pays reduce the insurance company’s total exposure.
The amount of the co-pay per incident is not always high enough to result in a large reduction of premiums for the policy.
Hence, the co-pay is not high.
In order to share the risk and limit excessive use, policyholders will pay for an agreed-upon level of the expense of 80%. This limit is after the deduction of the co-payment.
Health insurance policies do not always cover all medical expenses. The non-covered expense may be defined by a medical condition, type of treatment, or medical provider.
For example, most health insurers do not cover some cosmetic surgery, such as facelifts, tummy tucks, or bariatric (obesity) surgery.
Except in certain rare occasions.
Policyholders remain 100% responsible for any extra treatment or expense. And these expenses do not apply to the deductible amount defined in the policy.
Some health insurance policies only pay for health care up to a certain dollar amount. These limits sometimes run from $500,000 to $1 million and maybe either lifetime, annual, or both.
The insured person may be expected to pay any charges in excess of the health plan’s limit payment for a specific service.
Also, some insurance company schemes have annual or lifetime coverage limit. In these cases, the health plan will stop payment when they reach the benefit limit and the policy-holder must pay all remaining costs.
This is the money you’ll pay for your health care for the year. It is the reverse of the coverage limit.
Once you’ve reached your health insurance plan’s out-of-pocket maximum for the year. Your plan will pay 100 percent of any other covered medical expenses you have for the rest of the year. Though copays and exclusions remain in effect.
So, if you faced some big health challenges earlier in the year and you’ve already reached your out-of-pocket maximum.
You won’t pay a penny for your surgery.
For example, if your out-of-pocket maximum is $3,000 annually. Once you pay that amount, the insurance company will pay 100% of any additional covered expenses, minus required copays.
One of the biggest ancillary benefits of having a health insurance policy is the schedule of discounted fee payments negotiated between the insurer and medical suppliers and providers.
In some cases, the amount you pay for a covered treatment maybe 30% to 40% less than the provider’s “usual and customary” fees.
For example, a service that would cost uninsured patients $1,000 could cost policyholders $300 to $400 or less.
Each insurer negotiates a discount with providers based on the number of the insurer’s policyholders and the projected utilization of the provider’s services.
Physicians, hospitals, and other medical providers are seen as either “in-network” or “out-of-network.”
In-network practitioners provide the highest discounts. Insurance companies encourage policyholders to utilize in-network providers by covering all or a majority of these providers’ fees at negotiated rates. They may also reduce copays or coinsurance when policyholders use in-network providers.
Practitioners and medical providers who have not negotiated a preferred rate or minimal discounts are designated out-of-network.
If you use an out-of-network provider, you will pay higher fees than for similar services provided by an in-network provider. You may also incur a higher copay and higher coinsurance percentage.
Preauthorization (Prior Authorization)
Preauthorization is getting prior approval for a medical procedure or specialist visit. It is 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. It ensures that the service or visit will be covered.
Many smaller, routine services do not require authorization but most insurers require preauthorization before agreeing to cover a visit to a specialist.
Explanation of Benefits (EOB)
It is a document that is generally sent by an insurer to a patient explaining what was covered for a medical service. Showing how the payment amount and patient responsibility amount were determined.
Insurers generally send an explanation of a medical claim’s payment after it’s adjudicated or approved.
An amount paid by an insurer to a health care provider, for which the provider agrees to treat all members of the insurer.
Having explained all these terms, and I believe you are more in the know of how health insurance works.
So, when you are looking for a good health plan for you and your family, it is good to know these terms. It will help you know what you are going for and the best agreement option for your insurance policy.
Still with me?
We are almost there you know… Hang in there because very soon you can beat your chest and boldly say to yourself or that friend with the question of…
How does health insurance work?
What is the best plan for me on health insurance?
I’ll be answering these questions in this section…
How does health insurance work?
How does health insurance work? Yes, this pertinent question remains the core of this article..
If you’ve read through the explanations of the terms I listed above, which you will see some in your health insurance contract.
Okay, for the newbies in the health insurance industry…
A health insurance contract may also be called a “policy” or “plan”. A health insurance policy offers coverage for treatments that require a minimum of 24 hours of hospitalization.
While this is the basic benefit that is provided, insurance companies also provide coverage for pre-hospitalisation, post-hospitalization, and certain day care procedures that do not require 24 hours of hospitalization.
Before, you sign and agree, make sure you understand the terms and agree to their insurance type of plan. These plans vary with insurance companies.
Insurance companies offer a whole lot of health insurance plans, each with a specific objective.
But before you select a plan, you have to check through various combinations of deductibles, copayments, coinsurance, and premiums.
Health insurance works by protecting your assets from the high cost of medical care. Without it, your entire life savings could vanish by a $300,000 medical bill. In fact, health care costs are the No. 1 cause of bankruptcies.
A few health insurance plans provide daily hospital cash, a few offer coverage for critical illnesses.
Others offer plans specifically for senior citizens. Each of the plans varies in the benefits provided and are hence priced differently.
Find that which suits you and your family more, it’s entirely your decision to make when you visit the insurance provider.
Now, when a person is hospitalized, he/she can ask the insurance company to pay for the expenses or pay for the treatment himself/herself and later ask for a reimbursement of the expenses incurred.
The benefits of a health insurance policy can be availed for planned hospitalization as well as emergency hospitalization.
A policyholder is, in most cases, given two options when it comes to raising a claim.
- One is the reimbursement option which allows the policyholder to submit all the bills with regard to the hospitalization. And claim a reimbursement of the expenses incurred for the treatment.
- The second type is the cashless option which entitles the policyholder to avail all necessary medical facilities and let the insurance company pay the bills directly.
While a few insurance companies settle the claims themselves, some allow Third-party Administrators to handle the formalities. Most insurers typically settle claims in 15-30 days.
Appealing a Claim Decision?
Most health insurers rely on the older method of information systems to review and make claim payments. These systems have been amended over the years, so errors often occur. Some experts claim that errors occur in 8% to 10% of adjudicated claims.
Are you disputing an insurance company’s claim decision, use the following procedure:
- Contact the Insurer. Contact the insurance company with the phone number on the EOB. If you call, follow up your conversation in writing confirming what you understood and the action that will follow.
- Get Names and Contact Information for Anyone You Speak With. Make a note of the name, address, and phone number of anyone you talk with. Use these people’s names to personalize the conversation. It may help them see you as more than just another complaint and make them more willing to help you.
- Keep Good Records. Accurate documentation is essential when disputing a claim decision. Never rely on your memory alone. Insurers are always large bureaucratic organizations with several levels of management. A good outcome could require weeks, or even months, to be completely settled, so make sure to document every step of the process.
- Don’t Give Up. Escalate your request to higher-ups if you run into difficulty, a hostile representative, or a decision you disagree with. A letter to the president of the insurance company and your state’s insurance commissioner will generate activity on your claim, but you should only use it as a last resort.
Conclusion– how does health insurance work?
So, I believe you have all it takes to answer the question of How does health insurance work?
Having good health is your most precious asset, and you should protect it at all costs.
Not having a health insurance can result in delayed treatment.
Hundreds of thousands of dollars in costs, and even bankruptcy in the event of an accident, major illness, or chronic condition.
Protect yourself and your family by being an informed purchaser of health insurance that fits your particular needs and budget.
The value of health insurance is obvious, but can only be accessed by those who are informed.
I know I have done a great deal of justice in answering your question in details
How does health insurance work? like I promised.
Feel free to leave your comments, feedback or questions in the comment section.