WHAT IS HEALTH INSURANCE?
• HEALTH INSURANCE BASICS
• HEALTH CARE PLANS
• FEE-FOR-SERVICE CHARGE


WHAT IS HEALTH INSURANCE?

• Health insurance provides payment of benefits for the loss of income and/or the
medical expenses arising from illness or injury, in addition to covering medical
expenses.
• Because of its inclusive nature, it is sometimes called other things, like accident and
sickness insurance or accident and health insurance.
• Often when speaking of health insurance, people refer to group insurance offered by
employers—insurance that covers medical bills, surgery, and hospital expenses, etc.
Group insurance is also called comprehensive or major medical coverage, because
of the broad protection it provides.

HEALTH INSURANCE – BASICS

Types of Health Insurance
The different types of health insurance are determined by:
􀂃 Methods of underwriting
􀂃 Injury or illness covered
􀂃 Types of insurers
􀂃 Types of benefits and services provided
􀂃 Types of losses covered
􀂃 Amount of benefits available
Health coverage today includes insurance policies and government-provided benefits.
There are fee-for-service and managed care plans. People usually know of, or have
heard of, specific kinds of managed care plans such as:
􀂃 Health Maintenance Organizations (HMOs)
􀂃 Preferred Provider Organizations (PPOs)
􀂃 Point-of-Service (POS)
Health insurance comes as either individual or group. Group coverage usually has lower
premiums and hence this is how most people get their health insurance. Group
coverage is typically offered through employers.

Fee-for-service Coverage

􀂃 Under fee-for-service coverage, a medical provider (usually a doctor or hospital)
is paid a fee for services rendered.
􀂃 With fee-for-service insurance, the insured is free to choose his/her doctor, and
free to choose a different one for any reason, anytime. Under this type of policy,
the insured is usually reimbursed a certain percentage of a reasonable service
charge (determined by the existing cost of such medical service in the area).
􀂃 Because of the influence that individual doctors have on determining how much
and what kind of service should be provided, indemnity coverage proves not to
be very effective for containing costs.
Important Point
􀂃 Traditional Fee-for-service insurance is also referred to as indemnity
insurance.
The Fee-for-service plan is limited in three ways:

1. Deductible :

 It is a small fee that is mandatory on the insured to pay first
in order to have the insurance company pay the doctor and hospital bills.
For example, the insurance company might indemnify the insured for all
medical costs after the first $1000 each year, or the first $100 each month.
The deductible is intended to ensure that people only go to the doctor
when they’re really sick.

2. Co-insurance :

 Co-insurance, more than deductible, is specifically
intended to get policyholders to bear part of the cost. The insurance
company agrees to pay a certain portion (80% is common) of the medical
bill, while the rest, the other 20%, is to be paid out-of-pocket by the
insured.

3. Limited Coverage :

 Many indemnity plans do not cover specifically
named services such as prescription drugs or routine doctor visits. Certain
conditions are completely excluded from coverage, such as some
illnesses or even pregnancy and childbirth.
With the indemnity plan, the insured:
• May choose any doctor or hospital
• Can continue treatment with the same doctor even if he/she has changed
jobs or insurance companies
• Be confident that the doctor is not under pressure from the insurance
company to recommend substandard treatment.