Health Insurance Basics
Health insurance is an important coverage that helps protect you and your family from the devastating financial effects of unexpected health problems or catastrophic illness.
You may receive health coverage through an individual insurance policy, through a policy issued to you as a member of an association group, or through employer sponsored health plan. If your employer sponsored health plan is “self insured” it is not subject to regulation by the Oklahoma Insurance Department. Additional information regarding employer sponsored plans is available below. Although there are other forms of health insurance, the three main categories of health insurance are:
• Policies that offer traditional health insurance;
• Policies that provide managed care services;
• Policies that provide limited benefits.
Traditional Health Insurance
Traditional health insurance is often called "fee-for-service" because the insurer pays the bills after you receive the service.
• You can use any doctor or hospital.
• The medical bills must be sent to the insurance company.
• You will likely have to pay a deductible before the policy begins to pay and co-payments each time you have a claim.
• If the policy pays less than the full bill, you may be responsible for paying the rest.
Most group health policies and many individual policies fall under the category of major medical policies. Major medical policies are more expensive because they provide more benefits than basic policies. A major medical policy normally pays a percentage of covered expenses (for example 80%), after you pay the deductible. The remaining expense (20%) is considered to be coinsurance and is paid by you.
Insurance companies use fee schedules to determine the average cost of a procedure, this is often called the usual and customary, or reasonable and customary charge. This cost may differ from the actual charge made by your health care provider. Maximum out-of-pocket limits restrict the amount of coinsurance you pay. Not all policies include such limits, but those that do pay 100 percent of remaining covered expenses after you pay a stated amount of coinsurance. If your health care provider’s charge is greater than the amount allowed by your insurance contract, you are responsible for the difference and those amounts will not be applied toward your out-of-pocket limits. It is imperative that you contact your insurer should you have any question regarding a health provider being an in network or out of network provider. Out of network providers can be far more costly as they are not subject to your insurer’s provider contract/s.
Policies that provide Managed Care Services
The managed care system combines the delivery and financing of health care services. This limits your choice of doctors and hospitals. In return for this limited choice, you usually pay less for medical care (i.e., doctor visits, prescriptions, surgery and other covered benefits) than you would with traditional health insurance. The managed care network controls health care services. The types of Managed Care are:
Preferred Provider Organizations (PPOs) - PPOs offer a provider network to meet the health care needs of an insurance carrier’s insureds. insurer contracts with a group of health care providers, or with a PPO network, to control the cost of providing benefits to their insureds. These providers charge lower-than-usual fees because they require prompt payment and serve a greater number of patients. Insured’s usually choose who will provide their health care, but pay less in coinsurance with a preferred provider than with a non-preferred provider.
Health Maintenance Organization (HMO) - HMO members pay a monthly fixed dollar amount (similar to an insurance premium), which gives them access to a wide range of health care services. In many cases, members also pay a predetermined amount, or copayment, for each doctor or emergency room visit and for prescription drugs, rather than paying the provider in full and obtaining a portion of the reimbursement later. Members must use the HMO’s network of providers, which may include the doctors, pharmacies and hospitals under contract with that particular HMO.
Point of Service plans (POS) - In a POS plan, insured members may choose, at the point of service, whether to receive care from a physician within the plan’s network or to go out of the network for services. The POS plan provides less coverage for health care expenses provided outside the network than for expenses incurred within the network. Also, the POS plan will usually require you to pay deductibles and coinsurance costs for medical care received out of network.
Exclusive Provider Organizations (EPOs) - In an EPO arrangement, an insurance company contracts with hospitals or specific providers. Insured members must use the contracted hospitals or providers to receive benefits from these plans.
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Limited Benefit Coverage Plans
Limited benefit health plans are insurance products with reduced benefits intended to supplement comprehensive health insurance plans, not to be an alternative to them. You may have seen these types of plans marketed as Cancer Only, Specific Disease, Hospital Cash or Indemnity plans.
Limited benefit health insurance plans are not typically required to provide the same level of coverage, so they cover fewer types of medical expenses than a comprehensive policy. These plans also have higher co-insurance percentages, co-payments and deductibles than comprehensive plans.
This means a limited benefit plan will limit the amount of coverage the company will pay per episode of illness, sometimes as low as $1,500 to $5,000 (not counting co-insurance and deductibles paid out-of-pocket by you). These policies also provide limited surgical, preventative care, testing and emergency benefits. And with low maximum benefit limits called “caps,” it may be possible for you to reach your cap quickly, leaving you responsible for the balance of the bill.
Click here for more information on Limited Benefit Coverage Plans.
Accident Only: Pays only when you are treated for accidental injury or if an accident causes death.
Disability Income: Pays a fixed amount for a specified period of time when you are unable to work because of an accident or illness.
Hospital Indemnity: Pays a flat amount (such as $100 per day) when you are hospitalized.
Long-Term Care: Pays to take care of you for an extended time in a nursing home or your own home. For more information, visit www.longtermcare.gov. For information about the Oklahoma Long Term Care Partnership, visit: http://www.okltcpartnership.org/
Medicare Supplement: Pays some medical expenses not paid by Medicare. (See the Choosing a Medigap Policy at www.medicare.gov/publications/pubs/pdf/02110.pdf
Special Need: Pays for health care not covered by typical major medical policies (for example, dental or vision care).
Specific Disease: Pays only for treatment for a disease or condition specifically named in the policy such as cancer.
Home Health Care: Pays for health care delivered to you in your home.
Other types of Plans:
Discount Plans* - Medical Discount Plans, Prescription Discount Plans, Dental Discount Plans, and Vision Discount Plans are programs where a consumer pays a fee to join a plan in return for discounts on products and services from participating vendors and providers. Often, members who join these plans are issued a card similar to an insurance card identifying them as a member. However, these plans are NOT insurance.
How do I Purchase Health Coverage?
Individual vs. Group Coverage
There are two basic ways to buy health coverage: as an individual or through a group.
How you buy health coverage affects your rights and responsibilities.
• You contract directly with a health carrier just like insuring your home or car.
• You are the policyholder. HMOs call the contract-holder (the person in whose name the contract is written) a subscriber, member or enrollee.
• Your individual policy can cover your entire family and each family member would be an insured.
• Any premium increase affects everyone who has the same kind of policy.
• Unless you have made false statements on your application, filed fraudulent claims or failed to pay your premiums on time, the company cannot cancel your policy because of your health or claims.
• Coverage must include specific minimum benefits.
• A group insurance policy may cover two to thousands of people, but it is still only one policy.
• Your employer or association is the master policyholder; you and your fellow group members are certificate holders.
• Each family member covered under your certificate is an insured.
• The master policyholder negotiates the terms of a group policy with the insurance company.
The master policyholder can
• Reduce or change the benefits and coverage,
• Increase your share of the premium,
• Switch to another insurance company, or
• Stop providing any coverage!
In a group contract
• Rates for employer groups are negotiable and are not regulated by the Oklahoma Insurance Department, except in the instance of small group insurance.
• The contract must include specific minimum benefits required by state law —other benefits are negotiated by the master policyholder.
• The master policyholder does not need consent of certificate holders to change companies or policies, cancel the policy or agree to new premiums or benefits.
Large and small employer group contracts
• May cover more conditions than individual contracts.
• May have more generous benefits.
• Cannot reject an application because of poor health as long as the application is made during the eligibility period. Large employer groups are defined as having more than 50 employees.
Small employer groups are defined as having 2 to 50 employees.
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Other Policy Information
What Expenses will I have In Addition to My Premium?
Deductibles: This is the amount of covered health care expenses that must be paid for by the insured before the insurance company will begin paying
Co-Insurance: This is the amount stated in the policy that is the insured’s portion of the claim. For instance, the insurance company may pay 80% of the claim and the insured’s share is 20% of the claim. The co-insurance amount is paid in addition to the deductible.
Co-Payments: Some policies provide for a set amount paid by the insured for a particular service, usually an office visit. In that case, the insured pays their co-pay for the visit and the insurer pays the rest of the bill. Amounts you pay for co-payments may or may not go toward the deductible, depending on the policy.
All costs after coverage benefits are used up under the policy. If you got to a health care provider that is not part of the insurance company’s network, the company’s payment will be based on the allowed amount (often called usual and customary or customary and reasonable). You pay for amounts charged that exceed the allowed amount. Once benefits are exhausted under the insurance policy, the insured is responsible for all health care costs incurred.
How Do I let the Insurance Company Know When I Have a Claim?
Written notice of claim should be given to the insurer within 20 days after the occurrence or commencement of any loss covered by the policy, or as soon thereafter as is reasonably possible. Notice given by or on behalf of the insured or the beneficiary to the insurer at the insurer’s home office, or to any authorized agent of the insurer, with information sufficient to identify the insured, will be considered notice to the insurer.
When the insurance company receives notice of claim, it will furnish forms for filing proof of loss. If the forms are not furnished within 15 days after giving notice, the insurance company must consider that the insured had complied with the requirements of this policy as to proof of loss upon submitting, within the time fixed in the policy for filing proofs of loss, written proof covering the occurrence, the character and the extent of the loss for which claim is made.
Written proof of loss must be furnished to the insurance company within 90 days. Failure to furnish the proof within the time required will not invalidate nor reduce any claim if it was not reasonably possible to give proof within such time, provided such proof is furnished as soon as reasonably possible and in no event, except in the absence of legal capacity, later than 1 year from the time proof is otherwise required.
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Can an Insurance Company Exclude Pre-Existing Conditions?
A group insurance policy may exclude or limit coverage if the exclusion or limitation relates to a condition for which medical advice, diagnosis, care, or treatment was recommended or received within 6 months before the policy was issued and the exclusion or limitation cannot last for more than 12 months. An individual insurance policy may have a longer pre-existing condition limitation period, but that limitation period may not be more than two years.
What Happens If I am Late With My Premium Payment?
The insurance policy must include a grace period during which the policy must continue to be in force. The length of time for the grace period depends on the frequency of premium payments. If the premium is paid on an annual basis, the grace period cannot be less than 31 days. If the premium is due on a weekly basis, the grace period cannot be less than 7 days and not less than 10 days for premiums due on a monthly basis.
Can I Cancel My Policy?
The policy may be cancelled in writing by the insured within 10 days of receiving the policy. If the insured cancels the policy within the first 10 days, the insurance company must refund all premium that has been paid for the policy. If the insured cancels the policy after 10 days the insurance company must refund the pro rata premium that has been paid.
Can I Get My Policy Back If It Gets Canceled?
If the premium had not been paid within the required time but the insurance company accepts the late payment of the premium and it does not require the insured to complete a reinstatement application, the insurance company must reinstate the policy. If the insurance company does require a reinstatement application to be completed, the policy will be reinstated after the insurance company has approved the application. If the insurance company requires an application to reinstate the insurance policy it must notify you within 45 days if the application has been approved. If the insurance company does not give notification within 45 days, the policy gets reinstated automatically. The past due premium must be paid to cover the time during which the policy had expired.
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Is My Family Included in My Policy?
Most policies include family coverage. Read the policy and the schedule page to determine who is insured under the policy.
What Are My Benefit Limits?
Read the policy and the schedule page to determine what you are expected to pay and what the insurance company has agreed to pay.
Are Experimental Treatments Covered?
Read the policy to determine how the company treats experimental treatments.
Employer Health Benefit Plans (ERISA)
If you receive your health coverage through an employer sponsored health benefit plan, your employer may purchase a group insurance policy from an insurance carrier or may decide to self-fund its health care.
What is a self-funded health care plan?
Self-funded or self-insured health care plans pay benefits from a fund established by an employer or organization. Self-funded plans are not insurance plans and therefore do not come under the authority of the Oklahoma Insurance Department. Self-funded health care plans are created under federal law and come under the authority of the federal government.
Can the Oklahoma Insurance Department assist me with complaints about self-funded health care plans?
Self-funded health care plans are usually administered by third party administrators or insurance companies. The Oklahoma Insurance Department has authority over third party administrators and licenses such entities; therefore, we may be able to assist you with some problems by contacting the third party administrator. To access the Oklahoma Insurance Department complaint form, click here https://www.ok.gov/oid/assistance/request.php.
What is a third party administrator?
A third party administrator is a person or organization that processes claims and may perform other administrative services in accordance with a service contract.
What if the third party administrator is not the problem?
If the problem is not with the third party administrator, you may have appeal rights under the Federal Employee Retirement Income Security Act (ERISA) and you may wish to contact the U.S. Department of Labor.
How to contact the U.S. Department of Labor:
U.S. Department of Labor
Employee Benefits Security Administration
525 Griffin Street, Suite 900
Dallas, Texas 75202
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How do I know if my employer-sponsored health care benefit is a self-funded health care plan?
The easiest way to find out if your health care is self-funded or self-insured is to ask your employer. You may also find the answer in the benefit information provided by your employer. Often the word "plan" or "Summary Plan Description" is included as part of the name of the coverage if it is a self-funded health care plan. Most large employers provide health care benefits through self-funded health care plans.
Does a self-funded health care plan have to offer specific benefits?
Most state laws requiring specific health care benefits do not apply to self-funded health care plans.
What happens if my employer goes bankrupt?
If your employer goes bankrupt, you become a creditor. Any unpaid health care claims will be treated like claims for unpaid wages. You might have to pay doctors and hospitals out of your own pocket.
Who handles the administration of a self-funded health care plan?
An employer with a self-funded plan normally hires a third-party administrator (TPA) to collect premiums, pay claims and handle other paperwork.
Many insurance companies contract with self funded health care plans to act as the plan’s TPA This can disguise the fact that your plan is self-funded. The administrator's name appears along with the employer's on your benefits booklet and claim forms, just as if it were your insurance company. Your employer provides the money, decides what benefits to offer and what claims to pay. The TPA follows your employer's instructions.
What other resources are available to me?
The U.S. Department of Labor's website provides information regarding self-funded health care plans and the Employee Retirement Income Security Act (ERISA). For more information please click on the following links:
Click here for a glossary of Health Insurance-related terms.
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