How Health Insurance Plans Work


How Health Insurance Plans Work

Welcome, reading this article on How Health Insurance Plans Work will enable you to make better decisions on how to go about to get a health Insurance for yourself or for your family.

When shopping for a suitable health insurance plan that fits you; it is important to keep in mind the key features that help you decide your budget for health care.

These are allocated into five major features:

Premium: a premium is your monthly bill. Every month a premium is paid to a health insurance company; to access the health insurance plan. However, it is not equal to the amount you pay for the health care services.

-You need to understand that choosing a plan with a lower premium will anticipate higher costs toward the out-of-pocket medical bills.

Deductible: Deductibles are the out-of-pocket costs you pay to utilize health care services before the health insurance takes effect. Once the deductible is paid, the health insurance company will use the copayments and coinsurance to split costs with you (up to the out of pocket maximum, after which the plan pays for 100 percent of the services).

-Plans with lower premiums tend to have higher deductibles.

Copayment: A copayment is a fixed amount paid for a specific service or prescribed medication. Copayments are one of the ways that health insurers will split costs with you after you achieve the plan deductible. In addition, you may have copayments on specific services before you reach your deductible.

-For example, many health insurance plans will have copayments for doctor’s visits and prescription drugs before you reach your targeted deductible. You will pay copayments until you arrive at your maximum out-of-pocket limit.

Coinsurance: Coinsurance is another way that health insurers will split costs with you. Unlike a copayment, coinsurance isn’t a fixed cost (it’s a percentage of the cost that you pay for covered services.)

-For example, if you have a coinsurance of 20 percent, you’ll pay 20 percent of the cost of covered services until you reach your out-of-pocket limit.

Maximum out-of-pocket amount: The maximum out-of-pocket amount, is the maximum amount a consumer pays for covered health care services in a year. Payments made toward your deductible, as well as any copayments and coinsurance payments, go toward your out-of-pocket limit and monthly premiums do not count. Plans with higher premiums tend to have lower out-of-pocket limits.

-Note: maximum out-of-pocket is a consumer protection enacted under the ACA; previously plans didn’t have to cap what a person would be required to spend on health care services. This often meant that insured people who had to undergo very expensive treatments (e.g., for cancer or lifesaving surgery) could face unlimited medical bills.

On-Exchange Private Health Insurance

A private exchange, is an online store or health insurance marketplace where employees or retirees purchase health insurance and other benefits, typically using funds contributed by their employer. This insurance requires 10 essential benefits that must be covered, also other additional services that are mandated by state governments.

Marketplace (ACA) Exchange

On-exchange ACA plans are the only plans for which advanced premium tax credits and cost-sharing reductions (i.e., government subsidies for qualifying applicants) are available.

Off-Exchange Private Health Insurance

Off-exchange private health insurance policies are plans that are sold either directly by the health insurance company, through a third-party broker like Key Health Plans, or a privately-run health insurance marketplace.

Off-exchange plans must cover the ten essential benefits and follow other rules dictated by the Affordable Care Act. The caveat with off-exchange plans is that you cannot apply any subsidies (e.g., the advanced premium tax credit or cost-sharing reductions) to these plans. Off-exchange plans allow an insurer more flexibility in plan coverage options and price.

Overall, if you’re shopping for private health insurance and are ineligible for an advanced premium tax credit, looking at off-exchange plans gives you more options at potentially lower price points.

We Hope that you now have a better understanding of How Health Insurance Plans Work and you will be guided accordingly in selecting what is best for yourself and for your family. 

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