A lot of people ask how does health insurance work?
A health insurance plan is an agreement between a person and an insurance company, also known as the insurance company. Since the insured person pays an annual premium, the insurance company either partly or completely takes care of the individual’s medical expenses, which include doctor’s appointments and prescriptions, surgeries, etc.
Insurance companies collaborate with certain medical professionals to ensure insured patients are charged a lesser amount at these particular medical facilities and are known as providers in-network. Insurance companies do not cover insured patients in the same way as out-of-network providers. Insurance companies are entitled to decline to cover any expense when the insured receives treatment outside their networks.
Within the United States, individuals and their families can get health coverage through employers, the marketplace, or assistance from an insurance broker.
What is a Premium?
Insurance premiums are the amount the individual has to pay each month to be enrolled in an active insurance plan. An individual insured through their employer can create a recurring payment by way of their paycheck after their pay cycle (weekly bi-weekly, monthly, weekly, or semi-monthly, etc.) instead.
Insurance premiums are due monthly, regardless of how often, just as any membership or subscription fee is.
What is a Deductible?
A deductible is a price one must pay to cover medical expenses before their health insurance policy helps with medical costs. In general, this amount is reset every calendar year. They do not count toward the individual’s deductible.
What is Coinsurance?
Coinsurance is the medical expenses the insurance company will pay after an individual has reached their deductible. For example, a policy of 80/20 is when the insurance company will cover 80 percent of the remaining expenses, and the patient will be responsible for the remaining 20 percent. The sharing formula will continue until the person reaches the limit of their out-of-pocket costs. Further details on that will follow.
What is a Copayment?
Certain plans offer copayments, also known as copays. It is the exact amount that individuals have to be able to pay for certain medical expenses. Copays tend to be lower for a regular doctor’s visit than for an appointment with a specialist. They typically don’t contribute to the deductible; however, as of 2014, they are counted towards the out-of-pocket limit for all new health plans.
What is an Out-of-Pocket Maximum?
The term “out-of-pocket” refers to the sum of money an insured person will pay on medical expenses over the entire year. When an individual reaches their maximum out-of-pocket the insurance company pays the remainder of all medical expenses covered by the policy. The same goes for premiums. They do not count towards out-of-pocket limits.