Understanding Some Health Insurance Basics


With thanks to advocate and guest blogger, Gabrielle Hochberg.
Find Gabrielle’s advocacy profile here: Health Advocate Experts

One area you may not know as much about is health insurance.  And what I want you to understand is that you have rights and choices.

Did you know that each State has the authority to regulate Insurance Companies through the McCarran-Ferguson Act of 1945? Federal laws prohibit Insurers from engaging in coercion or intimidation, and they offer experimental payment models that insurers can participate in.

State regulation is involved in licensing Insurers, sales producers, approving Insurer’s policy and premiums, and offering consumer services.  You have the right to complain to a State Insurance regulator who will investigate your claim if you feel your insurer is not treating you properly.

One of the rules for Insurance companies is that they must remain solvent.  How do they achieve that?  They do it by abiding by the Medical Loss Ratio, or the 80/20 rule.  Insurers must spend 80% of the premiums they take in on health care for the individual and small business markets and 85% on the large business market.  The remaining 20% or 15% goes to administration, marketing, sales, and profit. Insurers must report their Medical Loss Ratios to the federal Center for Information and Insurance Oversight.  According to the Center for Insurance Policy and Research, Insurers who do not meet the 80 % of health care spent on a given market, must return a rebate to consumers which is then taxable to you.

In the 1980s and 1990s insurers offered Preferred Provider Organizations (PPO) and Health Maintenance Organizations (HMO) with extraordinarily rich benefit options and little cost sharing, except for copayments. A PPO permits you to go to any doctor in their network and an HMO requires you to get a referral from a primary care doctor prior to seeing a specialist.

When the Affordable Care Act (ACA) started in March of 2010, Insurers changed the type of policies they had previously offered. To ensure that every insurer offered the same benefits under ACA, like mental health, preventive care, and acceptance of people with pre-existing conditions, Congress gave insurers authority to base their premiums on age. They effectively traded basing premiums on whether someone has a pre-existing condition, with how old someone is, regardless if they use the health care system or not.  The other major change that occurred with the Affordable Care Act is that insurers changed the generous PPO policies they offered in the past with Major Medical Policies which require everyone to cost share, by not only paying a premium, but also deductibles, coinsurance and copayments.

Another right you have under ACA is that no insurer can place an annual limit on the amount of health care provided to you each year. In effect, there are no annual limits on your policy.

medical cost advocate reviewing medical billsGoing back to the 80/20 rule, what do you get when you pay your premium? You get the opportunity to pay more through deductibles, coinsurance and copayments when you use the American health care system!  This is not progress, but stagnation.

Do you have additional questions about your health insurance, or how to choose the right plan for you?  You can find the help you need in the AdvoConnection Directory.

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