What is Health Insurance?
Health Insurance is the term elected to a contract where the individual contributes to a regular premium while the expectation that if something should happen that requires medical (not dental) attention the insuree will provide a type of reimbursement cost for services depending on the plan, benefit limitation, exclusions and state guidelines.
Network-based Health Benefits Plans
The health benefits plans are all known as PPO which is the acronym for preferred provider organization, POS which is the acronym for Point of Service and EPO which the acronym for Exclusive Provider Organization. A PPO or POS product gives a consumer the option to access services in the carreir’s network, or to go out-of-network health care providers. The individual receives greater benefits when he or she uses in-network health care providers, and when usin in-network providers will not be responsible for any chargers in excess of what has been negotiated between the carrier and health care provider. POS products may require members to obtain referrals for various services, but PPO products do not. EPO products are network-only plans, meaning services and supplies are covered only if the person uses a network provider. EPO plans do not cover services of a non-network provider, except in case of medical emergency or urgent care. With an EPO the carrier may require the person to select a primary care physician (PCP) who generally coordinates the health care services the covered person needs, and provides referrals, as may be required under the EPO plan. Although PPO and POS plans are the only plans that feature out-of-network benefits, all plans cover out-of-network providers under certain circumstances. The phrase “out-of-network” is used to refer to different circumstances. See the out-of-network discussion below.
Types of Plans:
As discussed above, small employers have the opportunity to select from a number of different types of plans. Some plans feature out-of-network benefits while others do not.
Plans with no out-of-network benefits
• HMO – Except for emergency and urgent care, HMO plans require a covered person to use the services of network providers. If a person covered under an HMO plan voluntarily decides to use the services of an out-of-network provider, the HMO will not cover the services.
• EPO - Except for emergency and urgent care, EPO plans require a covered person to use the services of network providers. If a person covered under an EPO plan voluntarily decides to use the services of an out-of-network provider, the EPO will not cover the services.
Plans that include out-of-network benefits
• PPO – A PPO plan provides coverage for the services of network providers as well as the services of out-of-network providers. Generally, the out-of-pocket cost to a person covered under a PPO plan will be less if the person uses the services of a network provider rather than the services of an out-of-network provider. See the discussion below.
• POS - A POS plan provides coverage for the services of network providers as well as the services of out-of-network providers. Generally, the out-of-pocket cost to a person covered under a POS plan will be less if the person uses the services of a network provider rather than the services of an out-of-network provider. See the discussion below.
Coverage of Out-of-Network Services under Plans with Out-of-Network Benefits
PPO and POS plans are the only types of plans that cover services and supplies provided by out-of-network providers when the covered person voluntarily decides to use the services of the out-of-network provider. This circumstance is distinguished from the above circumstances, like emergencies, by the choice the covered person enjoys. Network providers are available, and the covered person may elect to use them. For any number of reasons, the covered person may prefer to use the out-of-network provider instead. In the case of the voluntary use of an out-of-network provider the person is responsible for the out-of-network level cost sharing specified in the PPO or POS plan. Additionally, the covered person is responsible for any difference between the amount the out-of-network provider bills for the service and the allowed charge for the service or supply. This difference is referred to as balance billing.
A covered person deciding whether to utilize an in-network or out-of-network provider will have access to information regarding the allowed charge to enable the person to calculate the cost sharing and balance billing associated with the voluntary use of an out-of-network provider.
Health Savings Accounts and Other Tax-favored Options
The standard plans can be designed as “high deductible health plans” (HDHP) that may qualify for use with a Health Savings Account (HSA). An HSA permits money to be set aside in a federally tax-favored savings vehicle for subsequent distribution without a federal tax liability if used to pay for qualifying medical expenses, set forth in IRS Publication 502. There are differing minimum and maximum deductible and MOOP amounts that an HDHP must meet to qualify for use with an HSA. Not all plans with high deductibles necessarily qualify as HDHPs. Carriers may market both the HDHP and the savings account, or an employer may purchase an HDHP from a carrier and obtain the savings account through another financial institution. For more information, consult IRS Publication 969. In addition, IRS Publication 969 provides information about other employer-sponsored, federally-tax-favored health accounts, such as Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs), which permit employees to pay for qualified medical expenses using pre-tax dollars.
Key Terms in Health Insurance
The deductible is the amount of the allowed covered charges that the covered person must satisfy before the carrier agrees to pay anything towards covered charges. Deductibles are a specified dollar amount, and are usually determined per person and per family when more than one person in a family is covered. The employer may choose among the options available for the per person deductible.
The coinsurance is the percentage of the allowed charges that are shared by the carrier and the covered person after the deductible is satisfied. The carrier and covered person both contribute a specified percentage to the allowed charges until the MOOP amount is satisfied. The MOOP is explained below. Depending upon what plan is chosen, the carrier will pay 50% to 22
90% of the allowed charges, and the covered person will pay 10% to 50% of the allowed charges until the MOOP amount is reached.
A copayment is a specified dollar amount that a covered person pays per visit, per day or per service. In many plan designs copayments are applied to office visits. A copayment may be applied for each day in the hospital (for a limited number of days). A copayment applies for use of a hospital’s emergency department (but the copayment – which is more akin to a penalty – is waived if the person is admitted to the hospital). Copayments accumulate towards the MOOP amount. Services subject to a copayment may not also be subject to coinsurance.
Maximum Out-of-Pocket (MOOP)
MOOP is the term used to refer to the maximum total amount of covered charges that a covered person is required to pay in a calendar year for health care services before the carrier pays 100% of the covered charges for the remainder of the calendar year. The MOOP is satisfied by the covered charges incurred by the covered person as part of the deductible, coinsurance and copayments required under the health benefits plan.
The following do not count towards satisfying the MOOP:
Charges incurred by the covered person for services that are not covered under the terms of the health benefits plan.
Charges that exceed the amount that the carrier considers reasonable and customary (or allowed charges) for the non-network covered services.