Frequently Asked Questions about Health Insurance
  • What are the main types of medical expenses health insurance covers?
    Generally, health insurance is broken down into two types of coverage: basic plans and major medical plans.

     
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    Basic plans usually include coverage for hospital or surgical expenses, and often both. Typically, basic plans kick in on a first-dollar basis and give the policyholder 100% coverage. Unfortunately the maximum amount of coverage is relatively low - from $10,000 to $100,000.

    Conversely, major medical plans usually have a deductible that must be satisfied before coverage kicks in. Once the deductible has been met, coverage is usually about 80% of the total medical expense with a relatively high maximum – from $500,000 to $1-million. Beyond this, major medical plans usually cover a wide-array of medical expense from x-ray/lab services to prosthetic limbs to prescription drugs, and much more, depending on the individual plan.

    Thus, major medical plans are far more comprehensive and provide higher limits but will require the policyholder to share in a greater part of the cost. Basic plans cover far less and have lower total coverage, but kick in immediately and cover 100% of the cost.

  • What expenses are not included in comprehensive major medical plans?
    Major medical plans typically exclude a number of expenses including but not limited to: convalescent/custodial care; elective cosmetic surgery; injuries or illnesses arising at work and thus covered by your employer's workers compensation insurance; routine dental and vision expenses – though injuries and surgeries are frequently covered; physical examinations not required for treatment of injury or illness (some plans are now covering this expense).

    Other expenses that may fall out of the sphere of coverage include: benefits provided to veterans and/or government employees and benefits covered by other insurance programs such as Medicare and Medicaid.

  • Does health insurance cover mental illness and substance abuse?
    Yes. Major medical plans usually provide coverage for treatment of both but higher co-insurance and lower total lifetime benefits often apply. Coverage may also largely depend on whether treatment is performed on an inpatient or outpatient basis.

  • What is a co-payment?
    A co-payment or co-pay is a fixed amount the insured pays at the time services are rendered. Typically this amount will range from $5 to $30. Co-pays are more likely to be found as provisions in health maintenance organizations (HMO) where co-payments are typically required for each office visit and prescription fill.

  • What is co-insurance and how does it work?
    Co-insurance or "percentage participation" is insurance where the participants pay a set percentage of medical expenses. For example, someone who has an 80/20 co-insurance clause would pay 20% of the charges; their insurer would pay the remaining 80%. In the event of a catastrophic or massive medical event, the co-insurance will likely have a stop-loss limit or cap, which limits the insured's out-of-pocket expenses to a certain amount, typically around $2,000 to $3,000 per event. Upon reaching the cap, the rest of the amount is paid in full by the insurance carrier up to the plan's maximum.

  • What are some out-of-pocket expenses incurred under major medical plans?
    Under a major medical plan, coverage will include most of the insured's medical expenses, however, some out-of-pocket expenses will arise. You can always expect to pay your deductible as well as any applicable co-payments. If you have a co-insurance policy, you will need to pay your percentage of the costs - usually around 20%. Also, many insurance providers will not cover anything beyond what they deem "reasonable and necessary" though, what constitutes reasonable and necessary will vary from one plan to another.

  • What is a pre-existing condition?
    A pre-existing condition is a medical condition that required treatment during a prescribed period of time – for example, three to six months – prior to insurance policy's effective date. A pre-existing condition clause can be extended to include conditions known to the policy-holder but not treated during the defined period. Pre-existing condition clauses can vary greatly from one insurer to another and may exclude anything up to one year before the effective date of coverage. It is best to completely familiarize yourself with your carrier's pre-existing condition clause.

  • What is an HMO and how does is differ from basic and major medical plans?
    Basic and major medical plans are considered indemnity plans, meaning that the insured is responsible for completing and submitting claim forms for reimbursement for medical expenses. Indemnity plans may usually have deductibles and co-insurance provisions. They may also restrict one from certain medical expenses. Indemnity plans offer one the advantage of being able to choose any physician (primary or specialist) they wish.

    By way of comparison, HMOs have far less freedom-of-choice, restricting the insured to a network of providers and limiting the insured to a primary physician who then decides whether a specialist should be seen. HMOs offer the advantage of having little to no deductible, smaller co-pays, and fewer exclusions. Some HMOs offer indemnity-like services if you seek medical treatment out-of-network.