Things to be Aware of Regarding Health Insurance Policies
- Most health insurance plans set a maximum benefit amount that will be provided for all covered services and supplies over the lifetime of the covered individual. This is called a lifetime maximum. This maximum is often set at $1,000,000.
- Most health insurance plans set a maximum benefit amount that provides for particular services and supplies, such as a maximum benefit of $250,000 for organ transplants.
- Some health insurance plans limit the benefit that will be provided per day for a covered service. This is called a daily maximum. They may also limit the number of days that a service will be covered. These types of limits are generally used for services including mental and nervous disorders, skilled nursing facilities, and home health care.
- Many health insurance plans limit the total benefit that will be provided per year for covered services. This is called an annual maximum. These limits are generally used for those services where it is difficult to assess whether the service is medically necessary.
- Most health insurance plans exclude or limit coverage for a period of time for medical conditions that existed within a certain period, commonly six months, prior to the date coverage began for which medical advice, diagnosis, care or treatment was recommended or received. This is called a preexisting condition waiting period. The waiting period is commonly 12 months. In most cases, insurance companies must reduce this waiting period by the number of days you were covered under prior health insurance plans, as long as you had no more than a 90-day break in your health insurance coverage and the current plan is an employer health plan.
Deductibles, Coinsurance, and Other Charges
- A deductible is a specified dollar amount an individual must pay in each policy period before reimbursement for expenses begin. The primary purpose of the deductible is to encourage individuals to use health care services only when necessary. A separate deductible may be required for specified services such as hospital admissions or prescription drugs. Some health plans may include a provision that allows any claims incurred in the last quarter of the policy period to be carried over and applied to meet the deductible in the next quarter.
- Coinsurance is that percentage of covered services and supplies the insurer will pay for after the individual pays the de-ductible. The individual is responsible for the amount the insurer does not pay. A common coinsurance arrangement is for the insurer to pay 80% of charges for covered services and the individual 20%.
- Out-of-pocket maximum is the maximum dollar amount the individual pays for covered services and supplies during a specified period, generally a calendar year. This maximum may be defined to include or exclude the deductible. Once the out-of-pocket maximum is paid, benefits are paid at 100% of covered charges. However, if covered charges are less than actual charges, you may be responsible for the difference between covered charges and actual charges, regardless of whether you have met the out-of-pocket maximum.
- A copayment is the fixed dollar amount that the individual is required to pay at the time each covered service takes place. Copayments vary by type of service. They are commonly used with emergency services and prescription drugs.
- A usual, customary and reasonable (UCR) charge is an established maximum amount that an insurance company will reimburse for a medical expense covered under your health insurance policy. UCR charges are generally determined based on charges that are actually billed by providers for each medical procedure or service in a geographical area. In order to determine a reasonable charge, UCR charges are commonly calculated as a percentile of the charges billed by providers. The percentile must be at least 80% under Alaska regulation. The 80th percentile is the billed charge amount for which 80% of all charges actually billed by providers for a service or supply are less than or equal to that amount and 20% are greater than that amount.
- Under most health insurance plans, you will be responsible for paying any amount billed by a hospital or physician that is larger than the insurer’s established UCR charges for the service or procedure unless under the insurer’s contract with the hospital and provider, the hospital, or provider agrees to accept the insurer’s payment as payment in full. In this case, you would not be responsible for paying any amount that exceeds the insurer’s UCR charges.
- The following is an example of how the various charges described above impact the amount you may be responsible for paying for medical services:
Coordination of Benefits
This provision applies to the situation where an individual is covered under two or more different health insurance plans. It must be included in all insurance plans. This provision sets forth the rules under which benefits under the plans be coordinated so that the individual does not receive duplicate payments for a service, thereby being reimbursed more than what was spent. Duplicate coverage frequently occurs when an individual is covered under both their own and their spouse’s insurance plans. Most coordination of benefits provisions require that the individual’s own plan pay first on a claim, and the other plan only pay the amounts not covered by the first plan. It is important that this provision be reviewed so that misunderstandings can be avoided regarding the benefit payments each insurer will make.