Health Insurance: Important Things You Must Know

What is Health Insurance?

What is health insurance? What are premiums? What if I get health insurance and don’t fall sick? What is coverage? Typically, answers to such questions can be obtained by knowing some basic facts about health insurance. Before delving further into the details of health insurance, we start with defining Health Insurance.

Health Insurance is basically an agreement between you and the insurance company where the company agrees to pay your medical expenses in part or full when a medical condition arises. That sounds simple. Isn’t it! Not really, there’s more to it.

While health insurance does promise financial security when you most need it, the amount that the company pays critically depends on what we call ‘coverage’. Coverage varies a great deal depending on the type of policy. While some policies require you to pay a percentage of the total bill or paying only a little amount as a co-payment or a deductible, others may also require to you pay a co-insurance in addition to the co-pay and deductible or nothing at all.

Now, how much you pay is decided by the type of policy that covers you. In most cases you will be paying some ‘premium’ (amount that you pay to remain covered) towards your policy except when you have been covered under plans offered by the government or an NGO such as the CGHS, ESIS etc.

You may either be covered under a ‘group health insurance’, an ‘individual health insurance’, or ‘family health cover’. Typically, most of the working population will be covered under the group health insurance where the employer offers a group insurance plan that requires each of its employees to pay a fixed amount towards the premium which is often lesser when compared to individual or voluntary health insurance plans where you end up paying everything out of your own pocket. Family health cover promises health care cover for a family of four usually consisting of two adults and two children. For senior citizens however, you might have to consider policies designed especially for them. Individual health insurance on the other hand is way too expensive and one may have to deal with eligibility issues too.

Next, we begin with understanding the types of health insurance policies.

Types of Health Insurance

Health insurance policies can either be purchased voluntarily or can be availed from the employers, government or the NGOs.

Indemnity Insurance / Fee-For-Service (FFS) / Voluntary Health Insurance

Most conventional of all insurance plans, it covers your medical visits, surgeries and related costs while still giving you the freedom of visiting a doctor or a hospital of your choice. At times you may get reimbursed only after having paid the complete annual deductible amount or a fixed amount specified in your policy. Higher the deductible, lower the monthly premiums. FFS or voluntary plans normally will not cover the annual or general check-ups and only pay up to 80% towards the total bill and you end up paying 20% and sometimes even the amount over and above the reasonable and customary charge. Reasonable and Customary charge is the limit set to the amount that should be charged for a medical procedure by the insurance company to save itself from overpaying the doctors. Overall, FFS is a most preferred insurance plan. Most plans offered worldwide however, may even cover complete costs on a case-to-case basis or per the policy guidelines.

Managed Care

While FFS gives you the freedom to choose your doctor or place of treatment, it concentrates only on the treatment costs and does not cover the annual check-up costs, Managed Care schemes such as HMO, PPO or POs focus on preventive health care. This means that Managed Care plans allow coverage for checkups and preventive medical procedures along with reimbursing your treatment costs. Since the managed care health insurance plans work with networks of preferred health care providers such as doctors, hospitals, clinics etc. on contract they offer much affordable insurance schemes offering flexibility and comfort both to the company as well as the individual. In some cases however, there is a limit set on the number of consultation fee reimbursements, injections or even medications. Some of the common types of Managed Care Health Insurance types in the US are:

• Health Maintenance Organization (HMO)
• Point Of Service (POs)
• Preferred Provider Organization (PPOs)

Another form of managed care services are the insurance policies offered by NGOs or what we call the ‘community based health insurance’ and ‘mandatory health insurance schemes’ or ‘government run schemes’ such as the ESIS, CGHS both of which offer medical facilities at no or subsidized costs.

Prescription Benefits

Most health insurance companies offer reimbursement for preferred or generic drugs but do not include the non-generic prescription drugs in their coverage or you might have to pay a higher co-pay amount for claiming the reimbursement. Every insurance company has its own formulary which is a list of prescription drugs that the insurance company is willing to pay for. Cost of any drug outside this formulary will be an expense on your pocket. But, there are procedures that allow leverage on special instances of drug allergy or adverse reactions. It is always advisable to consult your insurance company in such an event.

Insurance Limitations

Normally, health insurance companies have their own limitations in some of the following medical procedures:

• Cosmetic Surgery
• Alternative Medicine
• Mental Health Treatment
• Home Care and Nursing
• Non-preferred Drugs

Decision whether to pay or not to pay for any or all of these procedures is solely at the health insurance company’s discretion.

Health Insurance is all about saving your money for certain special situations when you need it the most.

Search Opportunities By Keywords