HEALTH INSURANCE COVERAGE
Several types of health-related insurance are available to provide different kinds of coverage. One type of health insurance is medical insurance. It can be classified as (1) hospital insurance, (2) surgical insurance, (3) regular medical insurance, (4) major medical insurance, and (5) a comprehensive medical policy. Insurance companies also offer combination policies.
Hospital InsuranceAn illness or injury may require you to be hospitalized. In this situation, hospital insurance usually pays most or all of the charges. These include expenses for your room, food, and medical items such as use of an operating room, anesthesia, X-rays, laboratory tests, and medications. Because of the high cost of hospitalization, people purchase hospital insurance more than any other kind of health insurance.
You can buy hospital insurance from insurance companies or from nonprofit corporations, such as Blue Cross. If expenses are more than the amount covered by the hospital insurance plan, the patient must pay the difference.
Surgical InsuranceSurgery is a major reason for hospitalization. It can be very expensive. Surgical insurance covers all or part of the surgeon's fees for an operation. The typical surgical policy lists the types of operations that it covers and the amount allowed for each. Some policies allow larger amounts for operations than others. This, of course, requires that a higher premium be paid. Surgical insurance is often bought in combination with hospital insurance.
Again, you can buy surgical insurance from insurance companies or from nonprofit organizations. Surgical plans cover mainly medical and surgical treatment rather than hospital care. These plans list the maximum amounts that they will pay for different types of surgery. They also cover the doctor's charges for care in the hospital. Some plans pay the doctor's charges for office or home care. The coverage generally does not provide for preexisting conditions or for illnesses or injuries that are covered by other insurance.
Regular Medical InsuranceSometimes normal care provided by a physician can be quite expensive. Regular medical insurance covers fees for nonsurgical care given in the doctor's office, the patient's home, or a hospital. The policy states the amount payable for each visit or call. It also lists the maximum number of visits covered. Some plans provide payments for diagnostic and laboratory expenses.
Regular medical insurance is usually combined in one policy with hospital and surgical insurance. The protection provided by regular medical, hospital, and surgical insurance is often referred to as basic health coverage .
Major Medical InsuranceLong illnesses and serious injuries can be very expensive. Bills of $50,000 to $100,000 and higher are not unusual. Major medical insurance provides protection against the high costs of serious illnesses or injuries. This coverage complements the other forms of medical insurance.
Major medical insurance helps pay for most kinds of extended and specialized health care prescribed by a doctor. It covers the cost of treatment in and out of the hospital, special nursing care, X-rays, psychiatric care, medicine, and many other health care needs. Maximum benefits may be limited, but usually extend to a high amount, such as $500,000 or $1,000,000.
Several types of health-related insurance are available to provide different kinds of coverage. One type of health insurance is medical insurance. It can be classified as (1) hospital insurance, (2) surgical insurance, (3) regular medical insurance, (4) major medical insurance, and (5) a comprehensive medical policy. Insurance companies also offer combination policies.
Hospital InsuranceAn illness or injury may require you to be hospitalized. In this situation, hospital insurance usually pays most or all of the charges. These include expenses for your room, food, and medical items such as use of an operating room, anesthesia, X-rays, laboratory tests, and medications. Because of the high cost of hospitalization, people purchase hospital insurance more than any other kind of health insurance.
You can buy hospital insurance from insurance companies or from nonprofit corporations, such as Blue Cross. If expenses are more than the amount covered by the hospital insurance plan, the patient must pay the difference.
Surgical InsuranceSurgery is a major reason for hospitalization. It can be very expensive. Surgical insurance covers all or part of the surgeon's fees for an operation. The typical surgical policy lists the types of operations that it covers and the amount allowed for each. Some policies allow larger amounts for operations than others. This, of course, requires that a higher premium be paid. Surgical insurance is often bought in combination with hospital insurance.
Again, you can buy surgical insurance from insurance companies or from nonprofit organizations. Surgical plans cover mainly medical and surgical treatment rather than hospital care. These plans list the maximum amounts that they will pay for different types of surgery. They also cover the doctor's charges for care in the hospital. Some plans pay the doctor's charges for office or home care. The coverage generally does not provide for preexisting conditions or for illnesses or injuries that are covered by other insurance.
Regular Medical InsuranceSometimes normal care provided by a physician can be quite expensive. Regular medical insurance covers fees for nonsurgical care given in the doctor's office, the patient's home, or a hospital. The policy states the amount payable for each visit or call. It also lists the maximum number of visits covered. Some plans provide payments for diagnostic and laboratory expenses.
Regular medical insurance is usually combined in one policy with hospital and surgical insurance. The protection provided by regular medical, hospital, and surgical insurance is often referred to as basic health coverage .
Major Medical InsuranceLong illnesses and serious injuries can be very expensive. Bills of $50,000 to $100,000 and higher are not unusual. Major medical insurance provides protection against the high costs of serious illnesses or injuries. This coverage complements the other forms of medical insurance.
Major medical insurance helps pay for most kinds of extended and specialized health care prescribed by a doctor. It covers the cost of treatment in and out of the hospital, special nursing care, X-rays, psychiatric care, medicine, and many other health care needs. Maximum benefits may be limited, but usually extend to a high amount, such as $500,000 or $1,000,000.
All major medical policies have a deductible clause. The clause is similar to the one found in automobile collision insurance. With this clause, the policyholder agrees to pay the first part of the expense resulting from sickness or injury. The deductible may be $500 or more.
Major medical policies usually contain a coinsurance clause. Coinsurance is the sharing of expenses by the policyholder and the insurance company. The policyholder typically pays a deductible and then shares the remaining cost with the insurance company.
For example, the insurance company may pay 80 percent of the cost for medical treatment after the deductible is paid. The policyholder will then pay the remaining 20 percent. The policy-holder's share is limited to a specific dollar amount stated in the policy. Once the deductible and the coinsurance amounts are met, the insurance company reimburses 100 percent of the cost up to the policy's coverage limits.
The deductible clause discourages the filing of minor claims. The coinsurance clause encourages the policyholder to keep medical expenses as reasonable as possible. Thus, both clauses help to lower premiums because they help to reduce payments of insurance claims.
Comprehensive Medical PolicyInsurance providers have developed a comprehensive medical policy that combines the features of hospital, surgical, regular, and major medical insurance. This coverage retains the features of each separate coverage, such as amounts-payable limits. The policy has only one deductible. A combination of coverages will likely be less expensive than the total of the separate coverage.
Dental InsuranceAs dental expenses have increased over the years, insurance companies now offer coverage to help pay for normal dental care. Dental insurance usually includes examinations, X-rays, cleaning, and fillings. It may cover part or all of complicated dental work such as crowns or bridges. This policy also covers dental injuries resulting from accidents.
Most dental plans contain deductible and coinsurance provisions to reduce the cost of premiums. Dental insurance is offered mainly through group plans. It continues to grow in popularity.
Vision Care InsuranceIn anticipation of eye care expenses, many individual consumers and groups purchase vision care insurance. These policies cover eye examinations, prescription lenses, frames, and contact lenses. Some vision care plans now cover the cost of laser eye surgery, which can eliminate the need for glasses. New medical developments may result in additional vision care coverage.
HEALTH INSURANCE PROVIDERS
Health insurance is available from several sources. These options include group health insurance, individual health insurance, health maintenance organizations, preferred provider organizations, and government programs.
Group Health InsuranceThe most popular way to buy health insurance is through a group. As with group life insurance, employers, unions and other organizations offer group health insurance policies.
Companies that sponsor group policies often pay part or all of the insurance premiums for their employees. They provide this as an employment benefit. Employees can usually buy coverage for family members as well.
The cost of group health insurance is lower per insured than the cost of a comparable individual policy. The costs are lower because insurance companies can manage group plans more economically.
Individual Health InsuranceSome people are not eligible for group health insurance. They may be self-employed and have no employer to help buy health insurance. One alternative is to buy individual health insurance. These policies are available to individuals and are adapted to individual needs. Individual health insurance policies are usually rather expensive. They may require a physical exam and have a waiting period before the policy takes effect.
Managed Care PlansVarious alternative health insurance plans have grown in popularity. Known as managed health care or managed care, these programs cover more than two-thirds of Americans who have insurance through their employer. These plans often provide lower-cost, comprehensive health care through networks of medical professionals.
Managed care plans usually have higher monthly premiums. Yet the overall cost of health care may be lower for the consumer because of low or no deductibles, low copayments, and little or no paperwork. A potential drawback is that patients have less control and limited choices of whom they see for health care. Managed care plans have various names, such as HMOs (health maintenance organizations) and PPOs (preferred provider organizations).
The growth of managed care has resulted from large companies trying to control the rising cost of providing health care coverage for employees. Today, many managed care plans are run by insurance companies.
Health Maintenance Organization (HMO)
One managed care choice is a health maintenance organization. A health maintenance organization (HMO) commonly consists of a staffed medical clinic to serve members. You join an HMO for a fixed monthly fee. As a member, you are entitled to a wide range of prepaid health care services, including hospitalization. HMOs emphasize preventive health care. Early detection and treatment of illnesses help reduce hospital visits and keep costs down. Generally, HMOs do not cover treatment or care that is not authorized by a physician or procedures that are above the average cost for the area.
Preferred Provider Organization (PPO)
A popular alternative is the preferred provider organization (PPO) . This system involves several health care providers, such as a group of physicians, a clinic, or a hospital. These medical professionals contract with an insurance company to provide services to members. These providers agree to charge set fees for services.
Members are encouraged, but not required, to use the PPO services through financial incentives. Members are able to get medical treatment through the PPO at a significant discount. They may seek medical treatment elsewhere. However, expenses for treatment outside the PPO may be only partially reimbursed.
State Government AssistanceAn important health insurance program by state governments is workers' compensation. This insurance plan provides medical and survivor benefits for people injured, disabled, or killed on the job. Accidents can occur on almost any job. Employees may suffer injuries or develop some illness because of working conditions. Workers' compensation laws provide medical benefits to employees who are injured on the job or become ill as a direct result of their working conditions. Under these laws, most employers are required to provide and pay for this insurance for their employees.
State governments also administer a form of medical aid to some low-income individuals and families known as Medicaid . The federal government shares with states the cost of providing health benefits to eligible individuals and families. The services covered by Medicaid
include hospital care, doctor services, X-rays, lab tests, nursing home care, and home health care services. States may also offer a health insurance program for people who have trouble obtaining coverage. Past health conditions can result in a person being turned down by most health insurance providers.
Federal Government AssistanceThe nation's Social Security laws provide a national program of health insurance known as Medicare . This insurance is designed to help people aged 65 and older and some disabled people pay for health care. Medicare has two basic parts: hospital insurance and medical insurance.
The hospital insurance plan includes coverage for hospital care, service in an approved nursing home, and home health care up to a certain number of visits. No premium payments are required for the hospital insurance. Almost everyone 65 years old and older may qualify.
The medical insurance portion of Medicare is often called supplementary or voluntary medical insurance. The services covered under this plan include doctor services, medical services, supplies, and home health services. The medical insurance requires a monthly premium. The federal government pays an equal amount to help cover the cost of the medical insurance.
Cost Reduction ActionsHealth care costs have consistently increased faster than the overall cost of living. The cost of health insurance is determined by four main factors: extent of coverage, number of claims filed, age of the policyholder, and number of dependents. You have no control over your age and little control over the number of people who depend on you. However, you can make sure you buy only the kind and amount of insurance you need. You can also take care of yourself and not use medical benefits unnecessarily.
Insurance companies encourage policyholders to play an active role in cost containment , or keeping costs down. The most common methods are coinsurance and deductibles. Also, in the health care industry, patients are encouraged to obtain a second opinion to ensure the necessity of a medical procedure.
Another cost-containment strategy is the use of outpatient services for some surgical procedures. In the past, people undergoing some procedures might have been admitted to the hospital for one or two days. Now, the person comes to the hospital or an outpatient center in the morning. After the surgery, the patient returns home the same day. Recent federal government actions attempt to reduce health care costs while maintaining choice and quality of service for patients. This health insurance legislation is also designed to provide affordable coverage for those who do not have access to medical care.
Major medical policies usually contain a coinsurance clause. Coinsurance is the sharing of expenses by the policyholder and the insurance company. The policyholder typically pays a deductible and then shares the remaining cost with the insurance company.
For example, the insurance company may pay 80 percent of the cost for medical treatment after the deductible is paid. The policyholder will then pay the remaining 20 percent. The policy-holder's share is limited to a specific dollar amount stated in the policy. Once the deductible and the coinsurance amounts are met, the insurance company reimburses 100 percent of the cost up to the policy's coverage limits.
The deductible clause discourages the filing of minor claims. The coinsurance clause encourages the policyholder to keep medical expenses as reasonable as possible. Thus, both clauses help to lower premiums because they help to reduce payments of insurance claims.
Comprehensive Medical PolicyInsurance providers have developed a comprehensive medical policy that combines the features of hospital, surgical, regular, and major medical insurance. This coverage retains the features of each separate coverage, such as amounts-payable limits. The policy has only one deductible. A combination of coverages will likely be less expensive than the total of the separate coverage.
Dental InsuranceAs dental expenses have increased over the years, insurance companies now offer coverage to help pay for normal dental care. Dental insurance usually includes examinations, X-rays, cleaning, and fillings. It may cover part or all of complicated dental work such as crowns or bridges. This policy also covers dental injuries resulting from accidents.
Most dental plans contain deductible and coinsurance provisions to reduce the cost of premiums. Dental insurance is offered mainly through group plans. It continues to grow in popularity.
Vision Care InsuranceIn anticipation of eye care expenses, many individual consumers and groups purchase vision care insurance. These policies cover eye examinations, prescription lenses, frames, and contact lenses. Some vision care plans now cover the cost of laser eye surgery, which can eliminate the need for glasses. New medical developments may result in additional vision care coverage.
HEALTH INSURANCE PROVIDERS
Health insurance is available from several sources. These options include group health insurance, individual health insurance, health maintenance organizations, preferred provider organizations, and government programs.
Group Health InsuranceThe most popular way to buy health insurance is through a group. As with group life insurance, employers, unions and other organizations offer group health insurance policies.
Companies that sponsor group policies often pay part or all of the insurance premiums for their employees. They provide this as an employment benefit. Employees can usually buy coverage for family members as well.
The cost of group health insurance is lower per insured than the cost of a comparable individual policy. The costs are lower because insurance companies can manage group plans more economically.
Individual Health InsuranceSome people are not eligible for group health insurance. They may be self-employed and have no employer to help buy health insurance. One alternative is to buy individual health insurance. These policies are available to individuals and are adapted to individual needs. Individual health insurance policies are usually rather expensive. They may require a physical exam and have a waiting period before the policy takes effect.
Managed Care PlansVarious alternative health insurance plans have grown in popularity. Known as managed health care or managed care, these programs cover more than two-thirds of Americans who have insurance through their employer. These plans often provide lower-cost, comprehensive health care through networks of medical professionals.
Managed care plans usually have higher monthly premiums. Yet the overall cost of health care may be lower for the consumer because of low or no deductibles, low copayments, and little or no paperwork. A potential drawback is that patients have less control and limited choices of whom they see for health care. Managed care plans have various names, such as HMOs (health maintenance organizations) and PPOs (preferred provider organizations).
The growth of managed care has resulted from large companies trying to control the rising cost of providing health care coverage for employees. Today, many managed care plans are run by insurance companies.
Health Maintenance Organization (HMO)
One managed care choice is a health maintenance organization. A health maintenance organization (HMO) commonly consists of a staffed medical clinic to serve members. You join an HMO for a fixed monthly fee. As a member, you are entitled to a wide range of prepaid health care services, including hospitalization. HMOs emphasize preventive health care. Early detection and treatment of illnesses help reduce hospital visits and keep costs down. Generally, HMOs do not cover treatment or care that is not authorized by a physician or procedures that are above the average cost for the area.
Preferred Provider Organization (PPO)
A popular alternative is the preferred provider organization (PPO) . This system involves several health care providers, such as a group of physicians, a clinic, or a hospital. These medical professionals contract with an insurance company to provide services to members. These providers agree to charge set fees for services.
Members are encouraged, but not required, to use the PPO services through financial incentives. Members are able to get medical treatment through the PPO at a significant discount. They may seek medical treatment elsewhere. However, expenses for treatment outside the PPO may be only partially reimbursed.
State Government AssistanceAn important health insurance program by state governments is workers' compensation. This insurance plan provides medical and survivor benefits for people injured, disabled, or killed on the job. Accidents can occur on almost any job. Employees may suffer injuries or develop some illness because of working conditions. Workers' compensation laws provide medical benefits to employees who are injured on the job or become ill as a direct result of their working conditions. Under these laws, most employers are required to provide and pay for this insurance for their employees.
State governments also administer a form of medical aid to some low-income individuals and families known as Medicaid . The federal government shares with states the cost of providing health benefits to eligible individuals and families. The services covered by Medicaid
include hospital care, doctor services, X-rays, lab tests, nursing home care, and home health care services. States may also offer a health insurance program for people who have trouble obtaining coverage. Past health conditions can result in a person being turned down by most health insurance providers.
Federal Government AssistanceThe nation's Social Security laws provide a national program of health insurance known as Medicare . This insurance is designed to help people aged 65 and older and some disabled people pay for health care. Medicare has two basic parts: hospital insurance and medical insurance.
The hospital insurance plan includes coverage for hospital care, service in an approved nursing home, and home health care up to a certain number of visits. No premium payments are required for the hospital insurance. Almost everyone 65 years old and older may qualify.
The medical insurance portion of Medicare is often called supplementary or voluntary medical insurance. The services covered under this plan include doctor services, medical services, supplies, and home health services. The medical insurance requires a monthly premium. The federal government pays an equal amount to help cover the cost of the medical insurance.
Cost Reduction ActionsHealth care costs have consistently increased faster than the overall cost of living. The cost of health insurance is determined by four main factors: extent of coverage, number of claims filed, age of the policyholder, and number of dependents. You have no control over your age and little control over the number of people who depend on you. However, you can make sure you buy only the kind and amount of insurance you need. You can also take care of yourself and not use medical benefits unnecessarily.
Insurance companies encourage policyholders to play an active role in cost containment , or keeping costs down. The most common methods are coinsurance and deductibles. Also, in the health care industry, patients are encouraged to obtain a second opinion to ensure the necessity of a medical procedure.
Another cost-containment strategy is the use of outpatient services for some surgical procedures. In the past, people undergoing some procedures might have been admitted to the hospital for one or two days. Now, the person comes to the hospital or an outpatient center in the morning. After the surgery, the patient returns home the same day. Recent federal government actions attempt to reduce health care costs while maintaining choice and quality of service for patients. This health insurance legislation is also designed to provide affordable coverage for those who do not have access to medical care.
DISABILITY AND LONG·TERM CARE INSURANCE
The need for health insurance goes beyond various medical expenses. Disability income and long-term care insurance programs protect people in other types of situations.Disability Income InsuranceFor most people, income from employment is their single most important economic resource. Protecting your income is very important. One form of health insurance provides periodic payments if the policyholder becomes disabled. Disability income insurance protects you against the loss of income caused by a long illness or an accident. The insured receives weekly or monthly payments until they are able to return to work.
Disability income policies often include a waiting period. This requires the policyholder to wait a specified time after the disability occurs before payment begins. Monthly payments under disability insurance plans are usually much smaller than the income people earn from their jobs. The amount may be 40–60 percent of the normal income, but many disability payments are not subject to income taxes.
Long-Term Care InsuranceWith people living longer, long-term care insurance is the fastest-growing type of protection. This coverage provides long-term care, which is daily assistance needed because of a long-term illness or disability. This assistance may involve a stay in a nursing home. It may cover help that is provided at home for daily activities such as dressing, bathing, and doing household chores.
The need for health insurance goes beyond various medical expenses. Disability income and long-term care insurance programs protect people in other types of situations.Disability Income InsuranceFor most people, income from employment is their single most important economic resource. Protecting your income is very important. One form of health insurance provides periodic payments if the policyholder becomes disabled. Disability income insurance protects you against the loss of income caused by a long illness or an accident. The insured receives weekly or monthly payments until they are able to return to work.
Disability income policies often include a waiting period. This requires the policyholder to wait a specified time after the disability occurs before payment begins. Monthly payments under disability insurance plans are usually much smaller than the income people earn from their jobs. The amount may be 40–60 percent of the normal income, but many disability payments are not subject to income taxes.
Long-Term Care InsuranceWith people living longer, long-term care insurance is the fastest-growing type of protection. This coverage provides long-term care, which is daily assistance needed because of a long-term illness or disability. This assistance may involve a stay in a nursing home. It may cover help that is provided at home for daily activities such as dressing, bathing, and doing household chores.