How does health insurance work? This is a question that has always been raised by many. Well, Health Insurance is a major investment that you can ever make. Sicknesses, injuries, and other related medical setbacks can highly be expensive for example, in cases of surgery, or when other serious measures are important. And so maintaining a health cover is the best way to ensure we are not stuck when required to cover medical costs from our pocket. When considering the health insurance plans, differences arise on the services they cover and amount you should pay. For some plans, you will be required to pay a specific amount once you secure the service. This can be termed as coinsurance, or co-payment, based on your plan.
Most of the people can’t really understand how health insurance works and the component of the contract between themselves and the insurance companies. The best way to ensure you doesn’t lack any important coverage whenever you require it is by understanding how the policies work.
Health Insurance and How it Works:
1. Health Insurance Policy
This refers to a legal contract between the owner of the policy and the insurance company. Most of the times, the contract is limited and it requires the policyholder to pay premiums to the insurance company, and the details of the conditions under which the insurance company will stand responsible for the medical care costs by the insurer or his family.
The insurance company has to come up with the costs and the likelihood of various medical treatments which they will be held liable and set an annual premium that should be paid by the insurer. In the United States, most of the medical provider payments are made on the basis of fee for service’ where the provider is supposed to be compensated depending on the type and the number and the type of services offered to the patient instead of the services outcome.
Components of Health Insurance Policy
2. Health Insurance Premiums
Health insurance premium refers to a fee that is paid in order to cover medical treatments known as the policy. Premiums are usually established through a process of underwriting where potential health insurance purchasers are classified under risk categories following factors such as gender, age, and medical history. The premium level should be able to reflect on the likelihood that the insured group will incur costs that are equal to the loss ratio projected.
Health insurance requires the insured to bear a risk portion through payment of initial medical costs up to a level that was agreed before health insurance is responsible for payment. In a situation of the increase of the amount deductible also the premium increases. For example, an annual deductible of $3,000 would compel the insured to pay from their pocket $3,000 of the medical bills before the insurance company pays for any claim. Deductibles are applicable to family groups or individuals.
On the deductibles, the policyholder needs to pay a portion of the cost for every medical treatment covered in order to lower the superficial use of the medical services. As higher co-pays lower down the total exposure of the insurance company, the amount of the co-pay on every incident is seldom high to result in a substantial premium reduction of the policy.
Health insurance policies may not cover all the medical expenses. The expense of the non-covered should be defined following the medical condition, medical treatment and the kind of treatment to be received. For example, many of the health insurers do not provide a cover for the elective cosmetic surgery, for example, tummy tucks surgery, and facelifts except on rare occasions. The policyholders should remain 100% responsible in case of any excluded expense or treatment, and they do not at all apply to amount deductible defined on the policy.
6. Limits of coverage
The Insurance companies restrain the amount of liability exposed through outlining the highest amount which should be remitted for medical costs. These limits may run beginning at $500,000 to $ 1 million and they could be annual, lifetime or both. Before buying a limit, you should pay close attention to the language of the policy. This way you will be able to make sure the required cover is sufficient enough for your potential requirements.
7. Out of Pocket Maximums
This is the opposite of the coverage limit. It applies to the maximum exposure of the insured for any payment while insurance contract of health is active. In case the out-of-pocket is attained, the insurance company should pay all the future cover up to the limit of coverage.
8. Provider Panels
The biggest benefit of the health insurance policyholders is the schedule that is discounted on fee payments negotiated between the medical suppliers and providers and the insurer. In some situations, the amount which is paid for the treatment will range from 30% to 40% of the usual fee of the provider. For example, those services that could cost up to $1,000 to a patient who is not insured could be offered to the holders of the policy at $300 to $400 or less. Every insurer has a right to negotiate the discount with the providers depending on the number of insurer’s policyholders and the utilization of policy providers.
This is the process in which the insurance policyholder is offered a prior approval of a procedure of medical, or the approval to meet a specialist to ensure the visit is well covered. Most of the insurers require prior authorization before they accept to cover a visit to the doctor.
The policyholders should understand that pre-authorization is not an assurance that the service will be covered, although it is an intention of the insurer to cover the claim service pending review and be determined that the services are important. Those treatments that are not critical require pre-authorization, and it’s usually the responsibility of the policyholder to understand whether pre-authorization is necessary. Failure to secure a pre-authorization may lead to denial of the claim compensation.
10. Explanation of Benefits (EOB)
On this, insurers are required to submit a medical payment claim after having been approved by the insurer. EOB describes what had been covered and what might have been excluded and the contracted fees of the service, the number of fees paid by the insurance company and detailed explanation of how different amounts were tabulated. It is the responsibility of the policyholder to thoroughly review the EOB to determine whether payments followed the health insurance policy understanding.
11. Appealing a Decision for a Claim
You will realize that most of the insurers mostly rely upon older legacy systems of information in order to review and claim payments. These are systems that have been on constant amendment over the years and therefore, errors may occur. As a result, there is a likelihood that claims could be denied or inadequate payment is made.
Having good health is one of the most precious assets that should be protected at any time. Health is a very sensitive issue that should be taken with a lot of seriousness because it’s a matter of life and death. In a situation where you don’t have a health insurance cover, it may lead to delayed treatment and at the same time spend a lot of money. This could even lead to bankruptcy in the event of an accident, development of a chronic condition or deadly illness. Therefore, protect yourself and family by purchasing a health insurance cover that will fit your health needs.