health insurance

Definition

Health insurance is insurance that pays for all or part of a person's health care bills. The types of health insurance are group health plans, individual plans, workers' compensation, and government health plans such as Medicare and Medicaid.

Health insurance can be further classified into feefor-service (traditional insurance) and managed care. Both group and individual insurance plans can be either fee-for-service or managed care plans.

The following are types of managed care plans:

• Health Maintenance Organization (HMO)
• Preferred Provider Organization (PPO)

Purpose

The purpose of health insurance is to help people cover their health care costs. Health care costs include doctor visits, hospital stays, surgery, procedures, tests, home care, and other treatments and services.

Description

Health insurance is available to groups as well as individuals. Government plans, such as Medicare, are offered to people who meet certain criteria.

Group and individual plans can be further classified as either fee-for-service or managed care. Cancer patients may have specific concerns, such as the freedom to select specialists, that play a factor in choosing a health care plan. Fee-for-service plans traditionally offer greater freedom when choosing a health care professional. Managed care often limits a patient to health care professionals listed by the managed care insurance company.

Group Health Plans

A group health plan offers health care coverage for employers, student organizations, professional associations, religious organizations, and other groups. Many employers offer group health plans to employees and their dependents as a benefit of working with that particular employer (medical benefits). The employer may pay for part or all of the insurance cost (premium).

When an employee leaves a job he or she may be eligible for continued health insurance as a result of the Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA). This federal law protects employees and their families in certain situations by allowing them to keep his or her health insurance for a specified amount of time. The individual must, however, pay a premium to keep their insurance plan in effect It is important to note that COBRA only applies under certain conditions, such as job loss, death, divorce, or other life events. The COBRA law usually applies to group health plans offered by companies with more than 20 employees. Some states have laws that require employers to offer continued health care coverage for people who do not qualify for COBRA. Each state's insurance board can provide additional information.

Individual Plans

These type of health care plans are sold directly to individuals.

I currently am on worker's compensation. Can my employer make me pay for my own health insurance while I'm off?

The employer generally has no obligation to maintain health coverage at its expense, although you probably have a right to COBRA it. Also, check the firm's long term and short term disability policies. Depending on what state you work in, your rights may be also different under some states' workers comp laws.

Are there dangers in cancelling health insurance?

There can be potential serious adverse consequences associated with canceling health. If you cancel health insurance before replacement health insurance coverage is confirmed and already available, there may be a gap in your health insurance coverage.

First, there is no assurance that you will be able to obtain new health insurance. You might be denied coverage due to health conditions that developed prior to applying for the new insurance or plan, or go completely uncovered during the underwriting process. Second, even if you are accepted for subsequent health insurance coverage you could face a situation in which certain medical conditions that developed during the prior health insurance coverage are excluded from coverage under the new insurance as "preexisting conditions."

These problems may not exist if you are moving from one group insurance plan to another, as many group policies ignore pre-existing conditions if you move from a similar group health coverage within 30 days of prior coverage. A second exception will probably result in the same continuation of coverage mandated by HIPAA on and after January 1, 1998.

If I cancel do I get my unused premium back?

That may depend on the state involved and the policy you have. You generally do not get back any premiums that have been paid and applied to the period of time for which coverage was available.

Can I cancel my health insurance, and will there be a penalty or adverse consequence?

Generally, there is no prohibition against insured or plan members canceling their health insurance coverage or their participation in a health service plan.

One major exception to this generality is in the case of Medicare assignments. If a Medicare recipient has chosen to obtain private insurance or HMO coverage involving an assignment of the Medicare benefits to the insurer or plan, the Medicare recipient must apply to the Health Care Financing Administration (HCFA) before changing insurers or plans. Otherwise, there is no financial penalty per se to canceling health insurance coverage.

Can a health insurance company or health service plan cancel my policy for membership for any reason?

As a general proposition, insurers and plans cannot cancel an individual's coverage under a policy or plan arbitrarily. In addition, federal and state laws prohibit discrimination based upon race, national origin, gender or age. Some states have been proactive, as well, in the area of discrimination involving particular medical conditions or traits. For instance, some states prohibit insurers and plans from denying health care coverage to, or canceling health care coverage of, persons with mental dementia (such as Alzheimer's disease) or human immunosuppressive virus (HIV) or mental illness.

Health care insurance policies or plans can be canceled (rescinded) if there is a material omissions or misrepresentations made by the insured or member in the application for coverage. Recession, in general, works as follows: when you apply for insurance and sign an application, you answer questions and provide information about the medical history of anyone who will be covered under the policy or plan. In doing so, you must reveal any serious medical condition or treatment that might reasonably affect the decision by the insurer or plan to undertake the risk associated with providing the coverage.

Even if the policy or plan is issued and premiums are paid, the insurer or plan can cancel or rescind the policy later if they discover that the policyholder or insured did not disclose in the application significant medical history. The result is that the insurer or plan does not pay for the care that was rendered, the policy is canceled and the premiums that were paid on the policy are returned to the policyholder less a reasonable cost of insurance associated with the period of time during which the policy was in force.

A limited form of cancellation can occur involving reduction or elimination of benefits. Other than a requirement of reasonable notice, insurers and plans may reduce or eliminate benefits, unless the contract or plan prohibits it or limits it. In some states there is a major exception known as "vesting," which means that if the insured or member already has a claim or has received benefits for a particular injury or illness, they may continue to receive the benefit even if it is otherwise canceled.

General Health Insurance Questions

FAQs

How do I obtain health insurance?

Are there government sponsored programs?

Can a health insurance company or health service plan cancel my policy for membership for any reason?

What is a health insurance policy?

Can the insurer or plan cancel or rescind at any time?

What if the insured lied about a heart attack?

Can I cancel my health insurance, and will there be a penalty or adverse consequence?

If I think certain words in my policy mean something different from what my insurance company says they mean, how do we resolve it?

If I cancel do I get my unused premium back?

How does an insurance policy ‘protect’ me?

Are there dangers in cancelling health insurance?

What will happen to our health insurance for my dependent children and I after the divorce from their father?

What are typical problems that arise in getting health care benefits provided or paid?

My father who has conjestive heart failure and type 2 diabetes recently underwent a quintuple heart bypass. His medical bills are staggering and he has no health insurance. Short of filing bankruptcy, what are his options in getting these amounts reduced?

What can, or must, I do when a health insurance company or plan refuses to pay a claim or provide a benefit or service?

How long will my medical insurance allow my new baby and myself remain in the hospital following childbirth?

Are there any limitations on what an insurance company can charge for insurance?

What is the appeals and grievance process like?

What to Ask Insurance Salespeople When Buying a Medical Insurance Policy

What is a health insurance plan?

I currently am on worker's compensation. Can my employer make me pay for my own health insurance while I'm off?

How does a health insurance policy or health plan protect me?

What are my legal remedies if a health insurance company or plan refuses to pay a claim for a benefit or service?

How do I determine what my health care coverage or benefits are?

Would I need a lawyer to handle my case?

Suppose the contract or booklet is ambiguous or unclear?

What is health insurance?

What are ‘definitions,’ ‘benefits,’ ‘limitations,’ and ‘exclusions?’

What is private indemnity insurance?

Are there any government agencies that regulate how health insurance companies or plans operate?

What are health care maintenance organizations?

Will one of these many agencies be able to help me?

What about employer sponsored plans?