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What is Health Insurance?
Health Insurance is insurance against loss by sickness or bodily injury. The generic form for those forms of insurance that provide lump sum or periodic payments in the event of loss occasioned by bodily injury, sickness or disease, and medical expense. The term Health Insurance is now used to replace such terms as Accident Insurance, Sickness Insurance, Medical Expense Insurance, Accidental Death Insurance, and Dismemberment Insurance. The form is sometimes called Accident and Health, Accident and Sickness, Accident, or Disability Income Insurance.
Benefits consisting of medical care (provided directly or through insurance or reimbursement) under any hospital or medical service policy, plan contract, or HMO contract offered by a health insurance company or a group health plan. Excludes accident or disability income insurance, workers compensation, automobile insurance with medical coverage, coverage for on-site medical clinics or dental or vision benefits.
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What kinds of health insurance are there?
There are essentially two kinds of heath insurance — Fee-for-Service and Managed Care. Although these plans differ, they both cover an array of medical, surgical and hospital expenses. Most cover prescription drugs and some also offer dental coverage.
What is Fee-for-Service?
The method of billing for health services whereby a physician or other practitioner charges the payer (whether it be the patient or his health insurance plan) separately for each patient encounter or service rendered. It is the method of billing used by the majority of U.S. doctors. Health plans often avoid engaging in fee-for-service payment contracts, since expenditures increase if the doctors fees increase, if more units of service are provided, or if more expensive services are substituted for less expensive ones. This system contrasts with salary, per capita, or other prepayment systems, where the payment to the physician is not changed with the number of services actually used.
What is Managed Care?
Medical plans in which access to health-care services is managed to hold down unnecessary costs. The most common form of managed care is the health maintenance organization, or HMO, which restricts patients to the HMO’s own stable of doctors. Premiums are lower than for traditional fee-for-service health care plans, and the charge for each doctor visit is modest. Some newer arrangements are the point-of-service and preferred-provider plans, which may charge the low per-visit price of an HMO for treatment by doctors in the plan’s network and allow out-of-network treatment with reimbursement at about 70% of eligible costs.
COBRA
Short for Consolidated Omnibus Budget Reconciliation Act. A federal law under which group health plans sponsored by employers with 20 or more employees must offer continuation of coverage to employees who leave their jobs and their dependents. The employee must pay the entire premium. Coverage can be extended up to 18 months. Surviving dependents can receive longer coverage.