How Health Insurance Works


When I consider purchasing an individual health insurance plan for myself or my family, do I have any financial obligations beyond the monthly premium and annual deductible?

Answers: It depends on the plan, but some plans have the following cost-sharing elements that you should be aware of.

Co-Payments: Some plans include a co-payment, which is typically a specific flat fee you pay for each medical service, such as $30 for an office visit. After the co-payment is made, the insurance company typically pays the remainder of the covered medical charges.

Deductibles: Some plans include a deductible, which typically refers to the amount of money you must pay each year before your health insurance plan starts to pay for covered medical expenses.

Coinsurance: Some plans include coinsurance. Coinsurance is a cost sharing requirement that makes you responsible for paying a certain percentage of any costs. The insurance company pays the remaining percentage of the covered medical expenses after your insurance deductible is met.

Out-of-pocket limit: Some plans include an out-of-pocket limit. Typically, the out-of-pocket limit is the maximum amount you will pay out of your own pocket for covered medical expenses in a given year. The out-of-pocket limit typically includes deductibles and coinsurance. But, out-of-pocket limits don’t typically apply to co-payments.

Lifetime maximum: Most plans include a lifetime maximum. Typically the lifetime maximum is the amount your insurance plan will pay for covered medical expenses in the course of your lifetime.

Exclusions & Limitations: Most health insurance carriers disclose exclusions & limitations of their plans. It is always a good idea to know what benefits are limited and which services are excluded on your plan. You will be obligated to pay for 100% of services that are excluded on your policy.

Beginning September 23, 2010, the Patient Protection and Affordable Care Act (health care reform) begins to phase out annual dollar limits. Starting on September 23, 2012, annual limits on health insurance plans must be at least $2 million. By 2014 no new health insurance plan will be permitted to have an annual dollar limit on most covered benefits.

Some health insurance plans purchased before March 23, 2010 have what is called “grandfathered status.” Health Insurance Plans with Grandfathered status are exempt from several changes required by health care reform including this phase out of annual limits on health coverage.

If you purchased your health insurance policy after March 23, 2010 and you’re due for a routine preventive care screening like a mammogram or colonoscopy, you may be able to receive that preventive care screening without making a co-payment. You can talk to your insurer or your licensed eHealthInsurance agent if you need help determining whether or not you qualify for a screening without a co-payment.

There are five important changes that occurred with individual and family health insurance policies on September 23, 2010.

Those changes are:
1. Added protection from rate increases: Insurance companies will need to publically disclose any rate increases and provide justification before raising your monthly premiums.
2. Added protection from having insurance canceled: An insurance company cannot cancel your policy except in cases of intentional misrepresentations or fraud.
3. Coverage for preventive care: Certain recommended preventive services, immunizations, and screenings will be covered with no cost sharing requirement.
4. No lifetime maximums on health coverage: No lifetime limits on the dollar value of those health benefits deemed to be essential by the Department of Health and Human Services.
5. No pre-existing condition exclusions for children: If you have children under the age of 19 with pre-existing medical conditions, their application for health insurance cannot be declined due to a pre-existing medical condition. In some states a child may need to wait for the state’s open-enrollment period before their application will be approved.

42 Replies to “How Health Insurance Works”

  1. Be wary of where you receive your facts. Every other OECD nation would beg to differ on just how effective single payer (or public option with a mandate) is. They blow us away in nearly every statistic. Diet and exercise are crucial, but modern-medicine is leagues beyond popping vitamins and hoping you can cure your cancer.

  2.  Was on the affordable health care site and was totally confused. Read a couple of websites explaining how it works, and it helped some, but was still confused about a few things. But after watching this, it helped me finally understand it 100% (I guess it has to do with the simple video which explains visually )

  3. "More funds will strengthen the hold of the health industry over public resources and heighten its prestige and arbitrary power. Such power in the hands of a minority will produce only an increase in suffering and a decrease in personal self-reliance. More money will be invested in tools that only postpone unavoidable death and in services that abridge even further the civil rights of those who want to heal each other." – Ivan Illich 

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  5. Health insurance is now marketed like auto insurance..violating the law by using the term "you must buy"..following this logic will cause to likely go bust

  6. Oh hai! Nice video you have there! Since we are on the same topic; have you thought about " Your Insurance Guy Group Insurance Singapore " (do a search on google)? My HR Manager had some dealings with them and was impressed by their extraordinary knowledge and experience on group insurance in Singapore! 

  7. Holla! Nice video you have there! Since we are on the same topic; have you started communicating with " Your Insurance Guy Group Insurance Singapore " (search on google)? My HR Manager had some dealings with them and was impressed by their incredible knowledge and experience on group insurance in Singapore! 

  8. When healthcare is placed under a capitalistic system its NOT healthcare.  How noble insurance is supposed to work is a said group of people pay into a pool that will be deducted from to cover any members needs.  If the pool is too low the premium goes up, if the pool is ample or even far above what a universal claim would even tap.  Then there would be no premium until the pool is drawn to a certain amount.  Its supposed to be an agreed trust for members.   This example would be a non profit system.   However, America uses a for profit insurance system.  Its in the best interest of the insurance company to receive the highest premium possible and pay out as little as possible.  In the insurance industry bonuses are granted to employees that excel at refusing claims.   This system is inherently against the benefit of the clients.  Its an evil industry that should be met with hostility because so many lives have been lost in exchange for profits.  Id also like to point out that insurance companies receive subsidies from you (the tax payer) to offset their costs.  So you pay taxes and a premium for care that you will never receive or at very high cost.  Yet it baffles me that everyone is totally cool with this assbackwards system.  Would you not rather just pay higher taxes, ( which could be cheaper when including premiums ) to have EVERYTHING covered 100 percent?  That way you can focus on healing and recovering to return to a productive citizen.  For profit Health insurance companies are evil.   The rest of the devolved world has given us plenty of templates for much better systems to choose from, yet we are bound and determined to ensure that life only goes to those that can pay cash for it.

  9. But why do we have to pay deductibles if we pay monthly? Is there any health insurance plan where you don't have to pay deductibles? especially if you rarely go or don't go at all that year. This is why I pay for any doctor, dentist or vision visits in cash.

  10. So you have to pay monthly out of your paycheck just to have insurance, then you have to pay a deductible before your insurance will help you pay for anything, then after the detectable you have to pay a certain percentage of your bill, AND if you have a doctor visit for a cold you have to pay a copay? What kind of bullshit system is this??

  11. We have Blue Cross Blue Shield and this is how these bastards works, wife was kicked out of the hospital after one day after major surgery. go hell you bastards. our insurance was taken away by Obama.

  12. Imagine you have a $100,000 heart surgery, and because you live in a country with universal healthcare, you get the treatment you need at no direct cost to yourself. And imagine that amount of your taxes which pay for that universal healthcare is LESS than the average American pays in tax just to support Medicaid and Medicare – many of whom will not benefit from it for many years if at all. You don't have to imagine it, you just have to live in a country with sensible healthcare for all.

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