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| Types of Private Health Insurance |
Private insurance can either be:
- Employer-provided group coverage or
- Individually-purchased family coverage
Typical health insurance plans include:
Fee-for-service or indemnity plans allow you to choose any medical provider for health care treatment. Following treatment, you pay the bill and then send a claim to your insurer for reimbursement.
Managed care plans provide both insurance and health care services. Instead of paying every time a medical service is delivered, members pay a fixed monthly fee for health care, regardless of the amount of care needed.
Managed care programs also offer coverage for a variety of preventive services.
Health Maintenance Organizations ("HMOs") and Preferred Provider Organizations ("PPOs") are among the most common managed care plans.
HMOs generally require members to use their contracted physicians and facilities. Some HMOs have Point of Service ("POS") options allowing members to utilize medical providers outside the plan's network and still qualify for partial reimbursement.
PPOs generally encourage members to use the medical providers within the plan's network. Members are allowed to consult with providers outside the network, but will have higher out-of-pocket costs.
Self-funded or self-insured plans are frequently employer-provided health plans where companies insure their own workers instead of buying protection from insurance companies.
Unlike traditional plans or managed care plans established by insurance companies which are subject to federal and state regulation, self-funded plans are governed by the federal Employee Retirement Income Security Act of 1974 ("ERISA").
Private Health Insurance Benefits
Health insurance plans contain various benefit provisions including:
- Hospital-surgical benefits cover inpatient hospital services and surgical procedures, including the cost of diagnostic tests, nursing care, and room and board
- Basic benefit provisions may cover specific medical tests, ambulance service, and oxygen
- Comprehensive or major medical benefits cover both inpatient and outpatient physician and hospital services not covered under the basic benefits portion of the health plan
- Separate "riders" providing coverage for items such as prescription medications, eyeglasses, and other benefits
Private Health Insurance Restrictions
In addition to deductibles and co-payments, health insurance policies may contain other restrictions:
- Covered medical treatments or services are generally subject to the condition that the treatment must be medically necessary. The insurer may deny payment for care determined by the insurer to be medically unnecessary, such as experimental or cosmetic treatments.
- Expenses are limited to reasonable and customary charges, generally determined by statistical analysis of physicians' charges for particular procedures within a specific geographic area
- Pre-existing conditions are health problems that have been diagnosed or treated prior to the effective date of the insurance and frequently require waiting periods before coverage is allowed. There may also be restrictions on the ability to renew a policy following the end of a coverage period (generally one year).
Federal Laws Regulating Health Insurance
Federal laws provide for extending health insurance coverage in certain circumstances. The federal Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") allows for the continuation of health insurance benefits for up to 18 months for eligible employees and for up to 36 months for their eligible dependents for certain qualifying events.
A qualifying event is the reason for which a COBRA extension is required and may include:
- Loss of health insurance coverage due to termination of employment or reduction in hours, divorce or death of the employee
- A child reaches the age at which they are no longer eligible for health insurance under their parents' policy
The monthly premium for COBRA coverage is based on 102 percent of the individual's current premium cost.
The federal Health Insurance Portability and Accountability Act of 1996 ("HIPA") makes health insurance available to individuals when changing jobs, and prevents insurers from excluding pre-existing conditions or denying coverage because of health status, claims history, medical history or genetic information.
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