Health insurance is insurance against the risk of incurring medical expenses among individuals. By estimating the overall risk of health care expenses among a targeted group, an insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to ensure that money is available to pay for the health care benefits specified in the insurance agreement.
A Health Insurance policy is:
1.A contract between an insurance provider (e.g. an insurance company or a government) and an individual or his/her sponsor (e.g. an employer or a community organization). The contract can be renewable (e.g. annually, monthly) or lifelong in the case of private insurance. The type and amount of health care costs that will be covered by the health insurance provider are specified in writing, in a member contract or "Evidence of Coverage" booklet for private insurance, or in a national health policy for public insurance.
2.Insurance coverage is provided by an employer-sponsored self-funded ERISA(Employee Retirement Income Security Act) plan. The company generally advertises that they have one of the big insurance companies. However, in an ERISA case, that insurance company "doesn't engage in the act of insurance", they just administer it. Therefore ERISA plans are not subject to state laws. ERISA plans are governed by federal law under the jurisdiction of the US Department of Labor. The specific benefits or coverage details are found in the Summary Plan Description. An appeal must go through the insurance company, then to the Employer's Plan Fiduciary. If still required, the Fiduciary’s decision can be brought to the US Department of Labor to review for ERISA compliance, and then file a lawsuit in federal court.
The individual insured person's obligations may take several forms:
Premium: The amount the policy-holder or his sponsor (e.g. an employer) pays to the health plan to purchase health coverage.
Deductible: The amount that the insured must pay out-of-pocket before the health insurer pays its share.
Co-payment: The amount that the insured person must pay out of pocket before the health insurer pays for a particular visit or service. A co-payment must be paid each time a particular service is obtained.
Coinsurance: Instead of, or in addition to, paying a fixed amount a co-payment, the co-insurance is a percentage of the total cost that insured person may also pay.
Exclusions: Not all services are covered. The insured are generally expected to pay the full cost of non-covered services out of their own pockets.
Coverage limits: Some health insurance policies only pay for health care up to a certain dollar amount. The insured person may be expected to pay any charges in excess of the health plan's maximum payment for a specific service. In addition, some insurance company schemes have annual or lifetime coverage maximums. In these cases, the health plan will stop payment when they reach the benefit maximum, and the policy-holder must pay all remaining costs.
Out-of-pocket maximums: Similar to coverage limits, except that in this case, the insured person's payment obligation ends when they reach the out-of-pocket maximum, and health insurance pays all further covered costs. Out-of-pocket maximums can be limited to a specific benefit category (such as prescription drugs) or can apply to all coverage provided during a specific benefit year.
Capitation: An amount paid by an insurer to a health care provider, for which the provider agrees to treat all members of the insurer.
In-Network Provider: A health care provider on a list of providers pre-selected by the insurer. The insurer will offer discounted coinsurance or co-payments, or additional benefits, to a plan member to see an in-network provider. Generally, providers in network are providers who have a contract with the insurer to accept rates further discounted from the "usual and customary" charges the insurer pays to out-of-network providers.
Authorization: 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. Many smaller, routine services do not require authorization.
Explanation of Benefits: A document that may be sent by an insurer to a patient explaining what was covered for a medical service, and how payment amount and patient responsibility amount were determined.
