Agribusiness Library LESSON: HEALTH INSURANCE

Objectives 1. Determine the function of health insurance, and define common health insurance terms. 2. Distinguish between HMOs and PPOs. 3. Compare insurance plans and rates from various companies.

Terms Coinsurance Copayment (copay) Coverage limit Deductible Exclusion HMO In-network provider Medicaid Medicare Out-of-pocket maximum PPO Pre-existing condition Premium

 The function of health insurance is to help with the cost of healthcare.  For an individual without health insurance, the bill for a simple procedure would reflect 100 percent of the costs for services and medications.  For a premium and within the terms of the policy, health insurance limits the policyholder’s financial responsibility for healthcare.  Often, health insurance also allows an individual to receive routine physical examinations and preventive care, thus identifying potentially serious conditions in their early stages.

 A. Premium —the price of an insurance policy.  B. Deductible —the amount to be paid by the insured during a given period (often each year) before any payment is made by the insurance company.  C. Copayment (copay) —a fee paid by the policyholder at the point of medical treatment.  The copay must be paid before the policy benefits can be activated.

 D. Coinsurance —the percentage of each claim above the deductible to be paid by the policyholder.  For example, for a 20 percent coinsurance clause, the policyholder would pay the deductible plus 20 percent of the covered expense.  E. Exclusion —a stipulation within an insurance policy that eliminates coverage for a certain risk or at a certain location.  F. Coverage limit —the limit determined by the amount of insurance coverage purchased.

 G. Out-of-pocket maximum —the amount the insurance company will require the policyholder to contribute toward healthcare.  The deductible must be met before the out-of-pocket maximum is applied.  H. In-network provider —a physician or a hospital or other facility that agrees to provide healthcare at discounted fees.

 I. Medicaid —a federal/state public assistance program for people whose income and resources are inadequate to pay for healthcare.  It was created in 1965 and is administered by the states.  J. Medicare —a federal program for people 65 or older that pays for part of the costs associated with hospitalization, surgery, doctor bills, home healthcare, nursing care, and prescription drugs.

 K. Pre-existing condition —a condition for which the policyholder has received medical care before (usually within the three months immediately preceding) the effective date of coverage.

 Two common healthcare plans are HMOs (health maintenance organizations) and PPOs (preferred provider organizations).  These plans offer affordable healthcare options.  However, there are important differences between them.

 A. An HMO is a healthcare organization that requires the policyholder to select an in-network primary-care physician to oversee all medical care.  The physician and the healthcare facility used must be within the HMO network for services to be covered by the insurance.  For a patient to visit a specialist, a referral must be obtained from the primary-care physician.  If an individual visits a specialist without a referral, then the visit will not be covered by the HMO policy.  HMOs typically have low copayments, thus reducing out-of-pocket costs.  Also, HMOs typically do not have deductibles.

 B. A PPO is designed to offer a broader network of doctors.  A PPO is a healthcare organization that offers reduced rates to the policyholder for the use of an in-network physician or facility but allows the use of an out-of-network physician or facility at a higher cost.  The freedom to visit specialists also comes with higher premiums.  PPOs typically have higher premiums than HMOs and require deductibles that can range from $ to $2, (average $750.00).

 Health insurance plans are not designed to be the same for everyone.  Healthcare needs are different for different people.  The best healthcare plan will depend on a person’s specific health needs and on those of any family members who will be dependents under the plan.  When comparing health insurance plans, an individual should identify features and options that will affect all those who will be covered.

 The cost of the plan is probably the first factor to be considered.  If a person is willing to pay a higher premium for the freedom to choose from a wide range of doctors, then a PPO may be the right choice.  If the person prefers keeping out-of-pocket costs to a minimum and eliminating a deductible, then an HMO may be the right choice.  Discussing healthcare benefits with one’s employer is also important.

REVIEW What is the function of health insurance, and what are common health insurance terms? What are the differences between HMOs and PPOs? What factors should be considered when comparing insurance plans and rates from various companies?