To Review a
California Health Insurance Options:
What Our Clients
courteous and knowledgeable. That's why you're still my agent after
10 years, a marriage and two kids. You've been there every step of
- Alan K.,
"Thanks Dom, you really came through for me and made the process of
finding the right health insurance easier than expected. Keep up the
- James P., LA
another agent and all he wanted to do was push a different plan at
me. With you, I got the plan I wanted at a rate I could afford. And
- Twila C.,
"Dom, it was a pleasure to work with you. Thanks for the great
advice on reducing my group health insurance rates."
- Martin R., Fresno
"I went from
confused to insured with just a phone call. Now that's service! You
- Tori H., San
for taking the time to explain everything in a language I
understand... I contacted three agents and you were the only one
honest enough to tell me to stick with my current coverage. If my
situation ever changes, or if anyone ever asks, you're the man"
- Walter L.,
"I used the
online quotes to browse rates and plans. It was convenient and you
were just a phone call away with all the help and advice I needed.
Thanks!" - Karl S., San Francisco
"This is the
first time I ever felt that I got the exact plan I wanted, and not
the plan the agent wanted me to have!"
- Emily A.,
Sense of Health Insurance
How Do I
Get Health Coverage?
What Is Not Covered?
What Happens to My Insurance if I Lose My Job?
Forms of Health Insurance
A Final Word
What types of health
coverage are available? If your employer offers you
a choice of health plans, what should you know
before making a decision? In addition to coverage
for medical expenses, do you need some other kind of
insurance? What if you are too ill to work? Or, if
you are over 65,will Medicare pay for all your
These are questions
that today’s consumers are asking; and these
questions aren’t necessarily easy to answer.
help. It discusses the basic forms of health
coverage and includes a checklist to help you
compare plans. It answers some commonly asked
questions and also includes thumbnail descriptions
of other forms of health insurance, including
hospital-surgical policies, specified disease
policies, catastrophic coverage, hospital indemnity
insurance, and disability, long-term care, and
Medicare supplement insurance.
While we know that
our guide can’t answer all your questions, we think
it will help you make the right decisions for
yourself, your family, and even your business.
The term health
insurance refers to a wide variety of insurance
policies. These range from policies that cover the
costs of doctors and hospitals to those that meet a
specific need, such as paying for long-term care.
Even disability insurance—which replaces lost income
if you can’t work because of illness or accident—is
considered health insurance, even though it’s not
specifically for medical expenses.
But when people talk
about health insurance, they usually mean the kind
of insurance offered by employers to employees, the
kind that covers medical bills, surgery, and
hospital expenses. You may have heard this kind of
health insurance referred to as comprehensive or
major medical policies, alluding to the broad
protection they offer. But the fact is, neither of
these terms is particularly helpful to the consumer.
Today, when people
talk about broad health care coverage, instead of
using the term "major medical," they are more likely
to refer to fee-for-service or managed care. These
terms apply to different kinds of coverage or health
plans. Moreover, you’ll also hear about specific
kinds of managed care plans: health maintenance
organizations or HMOs, preferred provider
organizations or PPOs, and point-of-service or POS
and managed care plans differ in important ways, in
some ways they are similar. Both cover an array of
medical, surgical, and hospital expenses. Most offer
some coverage for prescription drugs, and some
include coverage for dentists and other providers.
But there are many important differences that will
make one or the other form of coverage the right one
The section below is
designed to acquaint you with the basics of
fee-for-service and managed care plans. But
remember: The detailed differences between one plan
and another can only be understood by careful
reading of the materials provided by insurers, your
employee benefits specialist, or your agent or
This type of coverage
generally assumes that the medical provider (usually
a doctor or hospital) will be paid a fee for each
service rendered to the patient—you or a family
member covered under your policy. With
fee-for-service insurance, you go to the doctor of
your choice and you or your doctor or hospital
submits a claim to your insurance company for
reimbursement. You will only receive reimbursement
for "covered" medical expenses, the ones listed in
your benefits summary.
When a service is
covered under your policy, you can expect to be
reimbursed for some, but generally not all, of the
cost. How much you will receive depends on the
provisions of the policy on coinsurance and
deductibles. Here’s how it works:
- The portion of
the covered medical expenses you pay is called
Although there are variations, fee-for-service
policies often reimburse doctor bills at 80
percent of the "reasonable and customary
charge." (This is the prevailing cost of a
medical service in a given geographic area.) You
pay the other 20 percent—your coinsurance.
However, if a medical provider charges more than
the reasonable and customary fee, you will have
to pay the difference. For example, if the
reasonable and customary fee for a medical
service is $100, the insurer will pay $80. If
your doctor charged $100, you will pay $20. But
if the doctor charged $105, you will pay $25.
Note that many fee-for-service plans pay
hospital expenses in full; some reimburse at the
80/20 level as described above.
- Deductibles are
the amount of the covered expenses you must pay
each year before the insurer starts to reimburse
you. These might range from$100 to $300 per year
per individual, or $500 or more per family.
Generally, the higher the deductible, the lower
the premiums, which are the monthly, quarterly,
or annual payments for the insurance.
typically have an out-of-pocket maximum. This
means that once your expenses reach a certain
amount in a given calendar year, the reasonable
and customary fee for covered benefits will be
paid in full by the insurer. (If your doctor
bills you more than the reasonable and customary
charge, you may still have to pay a portion of
the bill.) Note that Medicare limits how much a
physician may charge you above the usual amount.
- There also may
be lifetime limits on benefits paid under the
policy. Most experts recommend that you look for
a policy whose lifetime limit is at least $1
million. Anything less may prove to be
The three major types
of managed care plans are health maintenance
organizations (HMOs), preferred provider
organizations (PPOs), and point-of-service (POS)
Managed care plans
generally provide comprehensive health services to
their members, and offer financial incentives for
patients to use the providers who belong to the
plan. In managed care plans, instead of paying
separately for each service that you receive, your
coverage is paid in advance. This is called prepaid
For example, you may
decide to join a local HMO where you pay a monthly
or quarterly premium. That premium is the same
whether you use the plan’s services or not. The plan
may charge a copayment for certain services—for
example, $10 for an office visit, or $5 for every
prescription. So, if you join this HMO, you may find
that you have few out-of-pocket expenses for medical
care—as long as you use doctors or hospitals that
participate in or are part of the HMO. Your share
may be only the small copayments; generally, you
will not have deductibles or coinsurance.
One of the
interesting things about HMOs is that they deliver
care directly to patients. Patients sometimes go to
a medical facility to see the nurses and doctors or
to a specific doctor’s office. Another common model
is a network of individual practitioners. In these
individual practice associations (IPAs), you will
get your care in a physician’s office.
If you belong to an
HMO, typically you must receive your medical care
through the plan. Generally, you will select a
primary care physician who coordinates your care.
Primary care physicians may be family practice
doctors, internists, pediatricians, or other types
of doctors. The primary care physician is
responsible for referring you to specialists when
needed. While most of these specialists will be
"participating providers" in the HMO, there are
circumstances in which patients enrolled in an HMO
may be referred to providers outside the HMO network
and still receive coverage.
PPOs and POS plans
are categorized as managed care plans. (Indeed, many
people call POS plans "an HMO with a
point-of-service option.") From the consumer’s point
of view, these plans combine features of
fee-for-service and HMOs. They offer more
flexibility than HMOs, but premiums are likely to be
With a PPO or a POS
plan, unlike most HMOs, you will get some
reimbursement if you receive a covered service from
a provider who is not in the plan. Of course,
choosing a provider outside the plan’s network will
cost you more than choosing a provider in the
network. These plans will act like fee-for-service
plans and charge you coinsurance when you go outside
What is the
difference between a PPO and a POS plan? A POS plan
has primary care physicians who coordinate patient
care; and in most cases, PPO plans do not. But there
HMOs and PPOs have
contracts with doctors, hospitals, and other
providers. They have negotiated certain fees with
these providers—and, as long as you get your care
from these providers, they should not ask you for
additional payment. (Of course, if your plan
requires a copayment at the time you receive care,
you will have to pay that.)
Always look carefully
at the description of the plans you are considering
for the conditions of payment. Check with your
employer, your benefits manager, or your state
department of insurance to find out about laws that
may regulate who is responsible for payment.
Your employer may
have set up a financial arrangement that helps cover
employees’ health care expenses. Sometimes employers
do this and have the "health plan" administered by
an insurance company; but sometimes there is no
outside administrator. With self-insured health
plans, certain federal laws may apply. Thus, if you
have problems with a plan that isn’t state
regulated, it’s probably a good idea to talk to an
attorney who specializes in health law.
HMOs, PPOs, and
fee-for-service plans often share certain features,
including pre authorization, utilization review, and
For example, you may
be asked to get authorization from your plan or
insurer before admission to a hospital for certain
types of surgery. Utilization review is the process
by which a plan determines whether a specific
medical or surgical service is appropriate and/or
medically necessary. Discharge planning is an
approach that facilitates the transfer of a patient
to amore cost-effective facility if the patient no
longer needs to stay in the hospital. For example,
if, following surgery, you no longer need
hospitalization but cannot be cared for at home, you
may be transferred to a skilled nursing facility.
fee-for-service plans apply managed care techniques
to contain costs and guarantee appropriate care; and
an increasing number of managed care plans contain
fee-for-service elements. While the distinctions
among plans are growing increasingly blurred, the
number of options available to consumers increases
Health insurance is
generally available through groups and to
individuals. Premiums—the regular fees that you pay
for health insurance coverage—are generally lower
for group coverage. When you receive group insurance
at work, the premium usually is paid through your
Group insurance is
typically offered through employers, although
unions, professional associations, and other
organizations also offer it. As an employee benefit,
group health insurance has many advantages.
Much—although not all—of the cost may be borne by
the employer. Premium costs are frequently lower
because economies of scale in large groups make
administration less expensive. With group insurance,
if you enroll when you first become eligible for
coverage, you generally will not be asked for
evidence that you are insurable. (Enrollment usually
occurs when you first take a job, and/or during a
specified period each year, which is called open
enrollment.) Some employers offer employees a choice
of fee-for-service and managed care plans. In
addition, some group plans offer dental insurance as
well as medical.
is a good option if you work for a small company
that does not offer health insurance or if you are
self-employed. Buying individual insurance allows
you to tailor a plan to fit your needs from the
insurance company of your choice. It requires
careful shopping, because coverage and costs vary
from company to company. In evaluating policies,
consider what medical services are covered, what
benefits are paid, and how much you must pay in
deductibles and coinsurance. You may keep premiums
down by accepting a higher deductible.
Many people worry
about coverage for preexisting conditions,
especially when they change jobs. The Health
Insurance Portability and Accountability Act (HIPAA)
helps assure continued health insurance coverage for
employees and their dependents. Starting July 1,
1997, insurers could impose only one 12-month
waiting period for any preexisting condition treated
or diagnosed in the previous six months. Your prior
health insurance coverage will be credited toward
the preexisting condition exclusion period as long
as you have maintained continuous coverage without a
break of more than 62 days. Pregnancy is not
considered a preexisting condition, and newborns and
adopted children who are covered within 30 days are
not subject to the 12-monthwaiting period.
If you have had group
health coverage for two years, and you switch jobs
and go to another plan, that new health plan cannot
impose another preexisting condition exclusion
period. If, for example, you have had prior coverage
of only eight months, you may be subject to a
four-month, preexisting condition exclusion period
when you switch jobs. If you’ve never been covered
by an employer’s group plan, and you get a job that
offers such coverage, you may be subject to a
12-month, preexisting condition waiting period.
Federal law also
makes it easier for you to get individual insurance
under certain situations, including if you have left
a job where you had group health insurance, or had
another plan for more than 18 months without a break
of more than 62 days.
If you have not been
covered under a group plan and have found it
difficult to get insurance on your own, check with
your state insurance department to see if your state
has a risk pool. Similar to risk pools for
automobile insurance, these can provide health
insurance for people who cannot get it elsewhere.
While HMO benefits
are generally more comprehensive than those of
traditional fee-for-service plans, no health plan
will cover every medical expense.
Very few plans cover
eyeglasses and hearing aids because these are
considered budgetable expenses. Very few cover
elective cosmetic surgery, except to correct damage
caused by a covered accidental injury. Some
fee-for-service plans do not cover checkups.
Procedures that are considered experimental may not
be covered either. And some plans cover
complications arising from pregnancy, but do not
cover normal pregnancy or childbirth.
policies frequently exclude coverage for preexisting
conditions, but, as explained, federal law now
limits exclusions based on such conditions.
You should also
remember that insurers will not pay duplicate
benefits. You and your spouse may each be covered
under a health insurance plan at work but, under
what is called a "coordination of benefits"
provision, the total you can receive under both
plans for a covered medical expense cannot exceed
100 percent of the allowable cost. Also note that if
neither of your plans covers 100 percent of your
expenses, you will only be covered for the
percentage of coverage (for example, 80 percent)
that your primary plan covers. This provision
benefits everyone in the long run because it helps
to keep costs down.
If you have had
health coverage as an employee benefit and you leave
your job, voluntarily or otherwise, one of your
first concerns will be maintaining protection
against the costs of health care. You can do this in
one of several ways:
- First, you
should know that under a federal law (the
Consolidated Omnibus Budget Reconciliation Act
of 1985, commonly known as COBRA), group health
plans sponsored by employers with 20 or more
employees are required to offer continued
coverage for you and your dependents for 18
months after you leave your job. (Under the same
law, following an employee’s death or divorce,
the worker’s family has the right to continue
coverage for up to three years.) If you wish to
continue your group coverage under this option,
you must notify your employer within 60 days.
You must also pay the entire premium, up to 102
percent of the cost of the coverage.
- If COBRA does
not apply in your case—perhaps because you work
for an employer with fewer than 20 employees—you
may be able to convert your group policy to
individual coverage. The advantage of that
option is that you may not have to pass a
medical exam, although an exclusion based on a
preexisting condition may apply, depending on
your medical history and your insurance history.
- If COBRA doesn’t
apply and converting your group coverage is not
for you, then, if you are healthy, not yet
eligible for Medicare, and expect to take
another job, you might consider an interim or
short-term policy. These policies provide
medical insurance for people with a short-term
need, such as those temporarily between jobs or
those making the transition between college and
a job. These policies, typically written for two
to six months and renewable once, cover
hospitalization, intensive care, and surgical
and doctors’ care provided in the hospital, as
well as expenses for related services performed
outside the hospital, such as X-rays or
possibility is obtaining coverage through an
association. Many trade and professional
associations offer their members health
coverage—often HMOs—as well as basic
hospital-surgical policies and disability and
long-term care insurance. If you are
self-employed, you may find association
membership an attractive route.
What is the first
thing I should know about buying health coverage?
Your aim should
be to insure yourself and your family against the
most serious and financially disastrous losses that
can result from an illness or accident. If you are
offered health benefits at work, carefully review
the plans’ literature to make sure the one you
select fits your needs. If you purchase individual
coverage, buy a policy that will cover major
expenses and pay them to the highest maximum level.
Save money on premiums, if necessary, by taking
large deductibles and paying smaller costs
Can I buy a
single health insurance policy that will provide all
the benefits I’m likely to need?
No. Although you
can select a plan or buy a policy that should cover
most medical, hospital, surgical, and pharmaceutical
bills, no single policy covers everything. Moreover,
you may want to consider additional single-purpose
policies like long-term care or disability income
insurance. If you are over 65, you may want a
Medicare supplement policy to fill in the gaps in
I’m planning to
keep working after age 65. Will I be covered by
Medicare or by my company’s health insurance?
If you work for a
company with 20 or more employees, your employer
must offer you (through age 69) the same health
insurance coverage offered to younger employees.
After you reach age 65, you may choose between
Medicare and your company’s plan as your primary
insurer. If you elect to remain in the company plan,
it will pay first—for all benefits covered under the
plan—before Medicare is billed. In most instances,
it is to your advantage to accept continued employer
But be sure to enroll
in Medicare Part A, which covers hospitalization and
can supplement your group coverage at no additional
cost to you. You can save on Medicare premiums by
not enrolling in Medicare Part B until you finally
retire. Bear in mind, though, that delayed
enrollment is more expensive and entails a waiting
period for coverage.
I’ve had a
serious health condition that appears to be
stabilized. Can I buy individual health coverage?
Depending on what
your condition is and when it was diagnosed and
treated, you can probably buy health coverage.
However, the insurer may do one of three things:
• provide full
protection but with a higher premium, as might
be the case with a chronic disease, such as
• modify the
benefits to increase the deductible;
• exclude the
specific medical problem from coverage, if it is
a clearly defined condition, as long as the
insurer abides by state and federal laws on
One of my medical
bills was turned down by the insurance company (or
health plan). Is there anything I can do?
Ask the insurance
company why the claim was rejected. If the answer is
that the service isn’t covered under your policy,
and you’re sure that it is covered, check to see
that the provider entered the correct diagnosis or
procedure code on the insurance claim form. Also
check that your deductible was correctly calculated.
Make sure that you
didn’t skip an essential step under your plan, such
as pre admission certification. If everything is in
order, ask the insurer to review the claim.
Whether you end up
choosing a fee-for-service plan or a form of managed
care, you must examine a benefits summary or an
outline of coverage—the description of policy
benefits, exclusions, and provisions that makes it
easier to understand a particular policy and compare
it with others.
Look at this
information closely. Think about your personal
situation. After all, you may not mind that
pregnancy is not covered, but you may want coverage
for psychological counseling. Do you want coverage
for your whole family or just yourself? Are you
concerned with preventive care and checkups? Or
would you be comfortable in a managed care setting
that might restrict your choice somewhat but give
you broad coverage and convenience? These are
questions that only you can answer.
Here are some of the
things to look at when choosing and comparing health
- Physician visits
(in the hospital)
- Office visits
- Skilled nursing
- Medical tests
- Mental health
- Drug and alcohol
- Home health care
- Physical therapy
- Speech therapy
- Hospice care
- Maternity care
- Preventive care
- Well-baby care
- Dental care
- Other covered
Are there any medical
service limits, exclusions, or preexisting
conditions that will affect you or your family?
What types of
utilization review, pre authorization, or
certification procedures are included?
How much is the
Are there any
discounts available for good health or healthy
behaviors (e.g., non-smoker)?
How much is the
$_________________________________ per person
$_________________________________ per family
What coinsurance or
_________________________________% after I meet my
$_________________________________copay or %
coinsurance per office visit
$_________________________________copay or %
coinsurance for "wellness" care (includes well-baby, annual physical, etc.)
$_________________________________% copay or
coinsurance for inpatient hospital care
In addition to broad
coverage for medical, surgical, and hospital
expenses, there are many other kinds of health
policies, sometimes called basic health insurance,
provide benefits when you have a covered condition
that requires hospitalization. These benefits
typically include room and board and other hospital
services, surgery, physicians’ non surgical services
that are performed in a hospital, expenses for
diagnostic X-rays and laboratory tests, and room and
board in an extended care facility.
Benefits for hospital
room and board may be a per-day dollar amount or all
or part of the hospital’s daily rate for a
semi-private room. Benefits for surgery typically
are listed, showing the maximum benefit for each
type of surgical procedure.
policies may provide "first-dollar" coverage. That
means that there is no deductible, or amount that
you have to pay, for a covered medical expense.
Other policies may contain a small deductible.
Keep in mind that
hospital-surgical policies usually do not cover
lengthy hospitalizations and costly medical care. In
the event that you need these types of services, you
may incur large expenses that are difficult to meet
unless you have other insurance.
pays hospital and medical expenses above a certain
deductible; this can provide additional protection
if you hold either a hospital-surgical policy or a
major medical policy with a lower-than-adequate
lifetime limit. These policies typically contain a
very high deductible ($15,000 or more) and a maximum
lifetime limit high enough to cover the costs of
Specified or dread
disease policies provide benefits only if you get
the specific disease or group of diseases named in
the policy. For example, a policy might cover only
medical care for cancer. Because benefits are
limited in amount, these policies are not a
substitute for broad medical coverage. Nor are
specified disease policies available in every state.
insurance pays you a specified amount of cash
benefits for each day that you are hospitalized,
generally up to a designated number of days. These
cash benefits are paid directly to you, can be used
for any purpose, and may be useful in meeting
out-of-pocket expenses not covered by other
policies frequently are available directly from
insurance companies by mail as well as through
insurance agents. You will find that these policies
offer many choices, so be sure to ask questions and
find the right plan to meet your needs.
Some policies contain
limitations on preexisting medical conditions that
you may have before your insurance takes effect.
Others contain an elimination period, which means
that benefits will not be paid until after you have
been hospitalized for a specified number of days.
When you apply for the policy, you may be allowed to
choose among two or three elimination periods, with
different premiums for each. Although you can reduce
your premiums by choosing a longer elimination
period, you should bear in mind that most patients
are hospitalized for relatively brief periods of
If you purchase a
hospital indemnity policy, periodically review it to
see if you need to increase your daily benefits to
keep pace with rising health care costs.
insurance, sometimes called Medigap or MedSup, is
private insurance that helps cover some of the gaps
in Medicare coverage.
Medicare is the
federal program of hospital and medical insurance
primarily for people age 65 and over who are not
covered by an employer’s plan. But Medicare doesn’t
cover all medical expenses. That’s where MedSup
supplement policies must cover certain expenses,
such as the daily coinsurance amount for
hospitalization and 90 percent of the hospital
charges that otherwise would have been paid by
Medicare, after Medicare is exhausted. Some policies
may offer additional benefits, such as coverage for
preventive medical care, prescription drugs, or
There are 10 standard
Medicare supplement policies, designated by the
letters A through J. With these standardized
policies, it is much easier to compare the costs of
policies issued by different insurers. While all10
standard policies may not be available to you, Plan
A must be made available to Medicare recipients
Insurers are not
permitted to sell policies that duplicate benefits
you already receive under Medicare or other
policies. If you decide to replace an existing
Medicare supplement policy—and you should do so only
after careful evaluation—you must sign a statement
that you intend to replace your current policy and
that you will not keep both policies in force.
People who are 65 or
older can buy Medicare supplement insurance without
having to worry about being rejected for existing
medical problems, so long as they apply within six
months after enrolling in Medicare.
policies cover the medical care, nursing care, and
other assistance you might need if you ever have a
chronic illness or disability that leaves you unable
to care for yourself for an extended period of time.
These services generally are not covered by other
health insurance. You may receive long-term care in
a nursing home or in your own home.
Long-term care can be
very expensive. On average, a year in a nursing home
costs about $40,000. In some regions, it may cost
much more. Home care is less expensive, but it still
adds up. (Home care can include part-time skilled
nursing care, speech therapy, physical or
occupational therapy, home health aides, and
Bringing an aide into
your home just three times a week—to help with
dressing, bathing, preparing meals, and similar
chores—easily can cost$1,000 a month, or $12,000 a
year. Add in the cost of skilled help, such as
physical therapy, and the costs can be much greater.
Most long-term care
policies pay a fixed dollar amount, typically
from$40 to more than $200 a day, for each day you
receive covered care in a nursing home. The daily
benefit for at-home care is usually half the benefit
for nursing home care. Because the per-day benefit
you buy today may be inadequate to cover higher
costs in the future, most policies also offer an
inflation adjustment feature.
Keep in mind that
unless you have a long-term care policy, you are not
covered for long-term care expenses under Medicare
and most other types of insurance. Recent changes in
federal law may allow you to take certain income tax
deductions for some long-term care expenses and
provides you with an income if illness or injury
prevents you from being able to work for an extended
period of time. It is an important but often
overlooked form of insurance.
There are other
possible sources of income if you are disabled.
Social Security provides protection, but only to
those who are severely disabled and unable to work
at all; workers’ compensation provides benefits if
the illness or injury is work-related; civil service
disability covers federal or state government
workers; and automobile insurance may pay benefits
if the disability results from an automobile
accident. But these sources are limited.
Some employers offer
short- and long-term disability coverage. If you are
self-employed, you can buy individual disability
income insurance policies. Generally:
- Monthly benefits
are usually 60 percent of your income at the
time of purchase, although cost-of-living
adjustments may be available.
- If you pay the
premiums for an individual disability policy,
payments you receive under the policy are not
subject to income tax. If your employer has paid
some or all of the premiums under a group
disability policy, some or all of the benefits
may be taxable.
Whether you are an
employer shopping for a group disability policy or
someone thinking of purchasing disability income
insurance, you will need to evaluate different
policies. Here are some things to look for:
- Some policies
pay benefits only if someone is unable to
perform the duties of their customary
occupation, while others pay only if the person
can engage in no gainful employment at all. Make
sure that you know the insurer’s definition of
- Some policies
pay only for accidents, but it’s important to be
insured for illness, too. Be sure, as you
evaluate policies, that both accident and
illness are covered.
- Benefits may
begin anywhere from one month to six months or
more after the onset of disability. A later
starting date can keep your premiums down. But
remember, if your policy only starts to pay (for
example) three months after the disability
begins, you may lose a considerable amount of
- Benefits may be
payable for a period ranging anywhere from one
year to a lifetime. Since disability benefits
replace income, most people do not need benefits
beyond their working years. But it’s generally
wise to insure at least until age 65 since a
lengthy disability threatens financial security
much more than a short disability.
If you get health
care coverage at work, or through a trade or
professional association or a union, you are almost
certainly enrolled under a group contract.
Generally, the contract is between the group and the
insurer, and your employer has done comparison
shopping before offering the plan to the employees.
Nevertheless, while some employers only offer one
plan, some offer more than one. Compare plans
If you are buying
individual insurance, or any form of insurance that
you purchase directly, read and compare the policies
you are considering before you buy one, and make
sure you understand all of the provisions. Marketing
or sales literature is no substitute for the actual
policy. Read the policy itself before you buy.
Ask for a summary of
each policy’s benefits or an outline of coverage.
Good agents and good insurance companies want you to
know what you are buying. Don’t be afraid to ask
your benefits manager or insurance agent to explain
anything that is unclear.
It is also a good
idea to ask for the insurance company’s rating. The
A.M. Best Company, Standard & Poor’s Corporation,
and Moody’s all rate insurance companies after
analyzing their financial records. These
publications that list ratings usually can be found
in the business section of libraries.
And bear in mind: In
some cases, even after you buy a policy, if you find
that it doesn’t meet your needs, you may have 30
days to return the policy and get your money back.
This is called the "free look."
actuary - a
mathematician in the insurance field. Responsible
for calculating premiums, developing plans and
defining underwriting risk.
agent - a licensed
individual who represents several insurance
companies and sells their products.
benefit - reimbursement
for covered medical expenses as specified by the
brand-name drug -
prescription drug which is marketed with a specific
brand name by the company that manufactures it. May
cost insured individuals a higher co-pay than
generic drugs on some health plans. (see "generic.")
broker - a licensed
insurance professional who obtains multiple quotes
and plan information in the interest of his client.
carrier - insurance
company or HMO insuring the health plan.
Certificate Booklet -
the plan agreement. A printed description of the
benefits and coverage provisions intended to explain
the contractual arrangement between the carrier and
the insured group or individual. May also be
referred to as a policy booklet.
claim - a formal
request made by an insured person for the benefits
provided by a policy.
COBRA (Consolidated Omnibus
Budget Reconciliation Act) - Federal legislation
that requires group health plans to provide health
plan members the opportunity to purchase continued
coverage in the event their insurance is terminated.
Applies only to employer groups with 20 or more
employees. Learn more about
COBRA at the Department of Labor's website.
- Please note this may take a few minutes to appear.
co-insurance - the
percentage of covered expenses an insured individual
shares with the carrier. (i.e., for an 80/20 plan,
the health plan member's co-insurance is 20%.) If
applicable, co-insurance applies after the insured
pays the deductible and is only required up to the
plan's stop loss amount. (see "stop loss.")
co-pay/co-payment - the
amount an insured individual must pay toward the
cost of a particular benefit. For example, a plan
might require a $10 co-pay for each doctor's office
credit for prior coverage
- any pre-existing condition waiting period met
under an employer's prior (qualifying) coverage will
be credited to the current plan, if any interruption
of coverage between the new and prior plans meets
deductible - the dollar
amount an insured individual must pay for covered
expenses during a calendar year before the plan
begins paying co-insurance benefits.
dependents - usually
the spouse and unmarried children (adopted, step or
natural) of an employee.
effective date - the
date requested by an employer for insurance coverage
exclusions - expenses
which are not covered under an insurance plan. These
are listed in the Certificate Booklet/Policy.
Explanation of Benefits (EOB)
- a carrier's written response to a claim for
benefits. Sometimes accompanied by a benefits check.
Generic drug the
chemical equivalent to a "brand name drug." These
drugs cost less, and the savings is passed onto
health plan members in the form of a lower co-pay.
group insurance - an
insurance contract made with an employer or other
entity that covers individuals in the group.
Organization (HMO) - An alternative to
commercial insurance that stresses preventive care,
early diagnosis and treatment on an outpatient
basis. HMOs are licensed by the state to provide
care for enrollees by contracting with specific
health care providers to provide specified benefits.
Many HMOs require enrollees to see a particular
primary care physician (PCP) who will refer them to
a specialist if deemed necessary.
HIPAA - Health
Insurance Portability and Accountability Act of
1996, P.L. 104-91. This law relates to underwriting,
pre-existing limitations, guaranteed renewal, COBRA
and certification requirements in the event someone
terminates from the plan. The new law, commonly
known as the "Kennedy-Kassebaum Bill," establishes
new requirements for self-funded, fully-insured
group plans (including church plans) and Individual
Health policies. The purpose of the law is to:
- Improve portability and
continuity of health insurance coverage in the
group and individual markets
- To combat waste, fraud
and abuse in health insurance and health care
- To promote the use of
medical savings accounts
- To improve access to
long-term care services and coverage
- To simplify the
administration of health insurance
- Learn more about
HIPAA at the Department of Labor's website.
- Please note this may take a few minutes to
pre-certification - an
insurance company requirement that an insured obtain
pre-approval before being admitted to a hospital or
receiving certain kinds of treatment.
ID card/identification card
- card given to insured individuals which advises
medical providers that a patient is covered by a
particular health insurance plan.
indemnity insurance plans
- traditional insurance plans (not HMOs or PPOs)
which permit insured individuals to choose their
doctors and hospitals. Insured individuals do not
have to choose doctors or hospitals from a specific
list of providers. Also called "fee-for-service"
in-network - describes
a provider or health care facility which is part of
a health plan's network. When applicable, insured
individuals usually pay less when using an
lifetime maximum benefit
- the maximum amount a health plan will pay in
benefits to an insured individual.
limitations - a
restriction on the amount of benefits paid out for a
particular covered expense.
long-term disability (LTD)
- insurance which pays employees a percentage of
monthly earnings in the event of disability.
managed care - the
coordination of health care services in the attempt
to produce high quality health care for the lowest
possible cost. Examples are the use of primary care
physicians as gatekeepers in HMO plans and
pre-certification of care.
Multiple Employer Trust
(MET) - an arrangement created to obtain health
and other benefits for participating employer
groups. Small employers can pool their contributions
to receive the advantages of large group
network - a group of
doctors, hospitals and other providers contracted to
provide services to insured individuals for less
than their usual fees. Provider networks can cover
large geographic markets and/or a wide range of
health care services. If a health plan uses a
preferred provider network, insured individuals
typically pay less for using a network provider.
describes a provider or health care facility which
is not part of a health plan's network. Insured
individuals usually pay more when using an
out-of-network provider, if the plan uses a network.
out-of-pocket maximum -
the total of an insured individual's co-insurance
payments and co-payments.
plan administration -
overseeing the details and routine activities of
installing and running a health plan, such as
answering questions, enrolling new individuals for
coverage, billing and collecting premiums, etc.
- health plan which allows the enrollee to choose
HMO, PPO or indemnity coverage at the point of
service (time the services are received).
Pre-admission review and approval of appropriateness
and medical necessity of hospitalization or other
- an illness, injury or condition for which the
insured individual received medical advice,
treatment, services or supplies; had diagnostic
tests done or recommended; had medicines prescribed
or recommended; or had symptoms of typically within
12 months (time periods may vary depending on state
laws) prior to the effective date of insurance
Organization (PPO) - A network or panel of
physicians and hospitals that agrees to discount its
normal fees in exchange for a high volume of
patients. The insured individual can choose from
among the physicians on the panel.
premiums - payments to
an insurance company providing coverage.
provider - any person
or entity providing health care services, including
hospitals, physicians, home health agencies and
nursing homes. Usually licensed by the state.
referral within many
managed care plans, transfer to specialty physician
or specialty care by a primary care physician.
rider - a modification
to a Certificate of Insurance policy regarding
clauses and provisions of a policy. A rider usually
adds or excludes coverage.
risk - uncertainty of
short-term medical -
temporary health coverage for an individual for a
short period of time, usually from 30 days to six
small employer group -
groups with 1 99 employees. The definition of
small employer group may vary between states.
state mandated benefits
- state laws requiring that commercial health
insurance plans include specific benefits.
stop-loss - the dollar
amount of claims filed for eligible expenses at
which the insurance begins to pay at 100% per
insured individual. Stop-loss is reached when an
insured individual has paid the deductible and
reached the out-of-pocket maximum amount of
Third Party Administrator (TPA)
- An organization responsible for marketing and
administering small group and individual health
plans. This includes collecting premiums, paying
claims, providing administrative services and
underwriter - entity
that assumes responsibility for the risk, issues
insurance policies and receives premiums.
waiver of coverage - a
section on the enrollment form which states that an
employee was offered insurance coverage but opted to
waive this coverage.
Insurance - insurance coverage for work-related
illness and injury. All states require employers to
carry this insurance.