How Health Insurance Works

how does health insurance work

imagine you have a $100,000 heart

surgery which is a covered medical

expense under your health insurance plan

and let's say this health insurance plan

has a $1,000 annual deductible 20%

coinsurance after deductible a $2,000

out-of-pocket limit and a 2 million

dollar annual limit on your health

insurance coverage in this video we'll

explain how these different components

of a health insurance policy work before

we begin it's important to note that any

health insurance policy purchased after

September 23rd 2010 will not have a

lifetime maximum limit on most of the

plan benefits and any health insurance

policy purchased after January 1st 2014

will not have an annual limit on most

plan benefits the first thing we'll talk

about in this video is a deductible what

is a deductible typically a deductible

is the amount of money you must pay each

year before your health insurance plan

starts to pay for covered medical

expenses so with a $100,000 heart

surgery bill you are responsible for

paying the first $1,000 after this

$1,000 deductible is met the insurance

company will pay a percentage of the

bill and you will pay the coinsurance

let's talk about coinsurance what is

coinsurance typically coinsurance is a

cost-sharing requirement where you are

responsible for paying a certain

percentage and the insurance company

will pay the remaining percentage of the

covered medical expenses after your

deductible is met

for a health insurance plan with 20%

coinsurance once the deductible is met

the insurance company will pay 80% of

the covered expenses while you pay the

remaining 20% until your out-of-pocket

limit is reached for the year what is an

out-of-pocket limit typically the

out-of-pocket limit is a maximum amount

you will pay out of your own pocket for

covered medical expenses in a given year

for a plan with a $2,000 out-of-pocket

limit you will pay a one thousand dollar

deductible and one thousand dollar

coinsurance while the insurance company

covers the remaining ninety eight

thousand dollars of the heart surgery

bill even if you're hospitalized again

in the same year the insurance company

will pay 100% of your covered expenses

until you reach your annual coverage

limit what is an annual coverage limit

some health insurance plans place dollar

limits upon the claims an insurance

company will pay over the course of a

plan year so if you bought an insurance

policy with an effective date of July

2011 your plan year would run from July

2011 until June 2012 if you have an

annual coverage limit of two million

dollars and you have medical bills that

cost more than two million dollars

during your plan year you would be

responsible for paying those bills out

of your own pocket once your new plan

year begins in July 2012 your deductible

coinsurance out-of-pocket limit and

annual coverage limits would all reset

and the insurance company would once

again begin to pay your covered claims

beginning September 23rd 2010 the

Patient Protection and Affordable Care

Act health care reform begins to phase

out annual dollar limits starting on

September 23rd 2012 annual limits on

health insurance plans must be at least

a two million dollars 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 23rd 2010

have what is called grandfathered status

health insurance plans with

grandfathered status are exempt from

several changes required by health care

including this phase-out of annual

limits on health coverage here's one

more concept you should be familiar with

some health insurance plans offer

co-payments what is a co-payment

typically a co-payment or copay is a

specific flat fee you pay for each

medical service such as $30 for an

office visit after the $30 copay the

insurance company pays a remainder of

the covered medical charges sometimes

subject to the deductible and

coinsurance certain recommended

preventive services immunizations and

screenings are covered with no

cost-sharing or co-payments on health

insurance plans purchased after March

23rd 2010 let's say you're not feeling

well and went to see your doctor who

charges $200 for the office visit if

your insurance plan has an office visit

copay 'men of $30 then you will only be

responsible for the $30 and the

insurance company will cover the

remaining 170 dollars but if you

purchase your health insurance policy

after March 23rd 2010 and you're due for

a routine preventive care screening like

a mammogram or colonoscopy you may be

able to receive that screening without

making a co-payment you can talk to your

insurer or your licensed a health

insurance agent if you need help

determining whether or not you qualify

for screening without a copay there are

five important changes that occurred

with individual and family health

insurance policies on September 23rd

2010 those changes are added protection

from rate increases insurance companies

will need to publicly disclose any rate

increases and provide justification

before raising your monthly premiums

added protection from having insurance

cancelled an insurance company cannot

cancel your policy except in cases of

intentional misrepresentations or fraud

coverage for preventive care certain

recommended preventive services

immunizations and screenings will be

covered with no cost-sharing requirement

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 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 can be approved if you have

questions that were not covered by this

video please contact a licensed be

health insurance agent at one eight

hundred nine seven seven eight eight six