Health Insurance Basics

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Health Insurance Basics

Here are some common questions about health insurance. Check out our tips and glossary as well.

1. What is health insurance and how does it work?
2. How do I select a health insurance plan?
3. How long does it take to get health insurance?
4. What if I have a pre-existing condition?
5. What should I do if I switch jobs (or if I am starting my first job)?
6. What should I do if I’m getting married?
7. What should I do if I’m getting divorced?
8. How should I prepare for a baby?
9. Is alternative medicine covered by health insurance?
10. What is the difference between a PPO and an HMO?
11. What is an HSA?
12. What is the difference between Group and Individual health insurance?

What is health insurance and how does it work? (Return to top)

Health insurance exists to protect you from the high (and growing) costs of health care. Here’s how it works:

You pay a monthly fee (premium) to be insured. This entitles you to access to benefits at rates negotiated between providers of health care (e.g., physicians and hospitals) and insurance companies. Insurance can pay all or part of the cost of those benefits. Examples of benefits are doctor visits, prescription drugs, surgery, etc.

Some (not all) health insurance policies require you to pay a minimum amount of medical expenses before the health insurance company will start picking up part of the tab. This minimum amount is the "deductible" and it normally starts over each year.

Once your deductible is satisfied, you will then pay a set percentage (coinsurance) of the bill and your health insurance company will pay the rest. The coinsurance will be lower if you choose a provider in your insurance company's network.

Sometimes, there are certain instances where the requirement to satisfy your deductible first is waived. Some examples include preventive care, office visits and emergencies. This varies by plan, so check your policy for details.

There is a cap on the total amount of money you can possibly pay each year (out-of-pocket maximum). Sometimes this number includes your deductible and sometimes it doesn’t, so check your plan’s policy. The insurance company also caps the total amount of money it will spend on your health care throughout the time you are insured with them (lifetime maximum).

How do I select a health insurance plan?(Return to top)

When selecting a health insurance plan, don't just pick the cheapest plan. Here are some things to consider:

1. Affordability: Think about premiums, co-payments, co-insurance, and your annual out-of-pocket limits.
2. Convenience: Are participating doctors and hospitals near your home? (Convenient hospitals may be especially important in an emergency.) Also does your primary care physician have to refer you to a specialist every time you want to see one?
3. Support: Does the plan offer useful information to help you choose a doctor and make other important decisions? Can you check your claims status online or email customer service ifyou have a question?
4. Health Savings Accounts (HSA): Do you want one? Does the plan offer them? (see What is the difference between an FSA and an HSA?)
5. Benefits: Does the plan include all of the benefits you want and need? Some benefits that frequently get cut in cheaper plans include: office visits, prescription drug coverage, preventative care (physical exam, OB-GYN exam), and chiropractic care.

How long does it take to get health insurance? (Return to top)

Individual health insurance policies usually begin on the 1st or 15th of the month. You will need to give the carrier time to process your application and complete medical underwriting, so it is a good idea to fill out an application for health insurance one month prior to the day you’d like your coverage to begin. The farther in advance you can apply, the better, as it may take the carrier a while to process your application.

If you get your health insurance through your employer, you get one chance each year to rethink your options for the following year. During "Open Enrollment" periods, usually the three months before the effective date of the employer's benefits plan, you can change your benefits packages (as long as you stay within the options that your employer offers) without jumping through hoops. Find out when your Open Enrollment period begins.

What if I have a pre-existing condition? (Return to top)

In almost every state it’s harder to get Individual health insurance if you are already sick or have a chronic condition. When you apply for Individual health insurance you go through a process called “underwriting” whereby the insurance company decides whether or not to cover you, and whether they are going to refuse to cover certain kinds of treatment (exclusions).

Even if the insurance company decides to cover you, they may refuse to cover the cost of treatment for chronic conditions you already have for a given period of time (e.g., 12 months). If you are currently insured and have not had longer than a 63-day gap in coverage, you may be eligible to have your pre-existing conditions covered from the date your Individual coverage begins.

Each state has slightly different laws about this. Check to see if your state has an insurance pool for those who cannot get coverage and for laws prohibiting these practices.

What should I do if I switch jobs (or if I am starting my first job)? (Return to top)

When you leave a job, your employer will stop paying for your health insurance. A Federal law, COBRA, requires that your insurance company allow you to pay your employer’s share + your share and an administrative fee (total of 102% of the total premium) and continue to receive your old benefits for up to a defined period of time (usually 18 months) after you stop work. You may find individual plans that are cheaper than COBRA, so it definitely makes sense to shop around.

When you start your first job you may also find yourself without coverage as many employers don’t cover new employees right away. You may be able to pay to stay on your parents’ insurance plan through COBRA, or in states through laws that extend how long you may be considered a dependent for insurance purposes. You can also purchase sort-term or Individual coverage during this waiting period.

What should I do if I’m getting married?(Return to top)

When you get married you can join your husband’s or wife’s health care plan or you can decide to maintain two separate plans. If you both have plans, you should use the same criteria you would use if selecting your own plan to decide whether combining makes sense for you and which plan to choose.

What should I do if I’m getting divorced? (Return to top)

If your employer doesn’t offer coverage, check to see if your ex’s group insurance allows you to continue receiving group insurance on his or her plan. If they don’t, you may be able to pay to stay on temporarily through COBRA.

How should I prepare for a baby?(Return to top)

1. Plan ahead for increased medical costs. You can use the Baby Expense Calculator to help with this.
2. Check to see if your health plan covers the various kinds of specialists you plan to have help you through your pregnancy. (Obstetrician, midwife, etc.)
3. Add your child to your health plan as soon as possible. Most employers allow you to do this outside of the Open Enrollment period, but give you a limited window in which to do so.

Is alternative medicine covered by health insurance? (Return to top)

Alternative medicine such as naturopathy, chiropractic, and massage therapy isn’t always covered. If having the ability to see alternative practitioners is important to you, make sure alternative medicine is covered. The availability may depend on your geographic location and could result in higher premiums.

What is the difference between a PPO and an HMO? (Return to top)

One main difference is that Health Maintenance Organization (HMO) plans focus around your HMO primary care physician, while Preferred Provider Organization (PPO) plans focus around a network of preferred providers.

With an HMO, you are required to select a primary care physician, from whom you will need to get referrals in order to see specialists and other providers; your primary care physician acts as a "gatekeeper" for additional medical services. You may only choose providers from within your HMO network, as out-of-network care is only covered in an emergency.

With a PPO plan, you are free to go to any provider or specialist without a referral from your primary care physician. Some providers have contracts with the insurance company that offer the medical services for reduced rates ("in-network" providers) and using these in-network providers will result in much lower out-of-pocket expenses for you.

A Point of Service (POS) is sort of a combination of an HMO and a PPO. You can choose to get care from both network and out-of- network physicians, but in many POS plans you pay less for doctor's visits if you go with a referral from a previously identified primary care physician.

Qvisory is offering PPO plans.

What is an HSA? (Return to top)

Health Savings Accounts (HSAs) are tax-favored savings accounts that are used with a high-deductible HSA-eligible health insurance plan to allow you to pay for allowed medical expenses with income-tax free dollars. HSAs are like individual retirement accounts (IRAs) but have some added advantages.

There are no penalties for withdrawing your pre-tax deposits when you use the money to pay for qualified medical expenses. You can take money out for non-medical expenses but those withdrawls will be taxed as normal income and would be subject to a 10 percent penalty if taken before you turn 65.

Any money in an HSA fund not used by the end of the year will remain in your account and earn tax-free interest. Like an IRA, the account belongs to you, but unlike an IRA, your employer can contribute to your HSA. If you leave your employer, you retain your HSA account.

What is the difference between Group and Individual health insurance? (Return to top)

Group health insurance is what you receive through a job, where the employer buys coverage for its employees. Individual insurance is what you buy when you are not covered through work and have to buy directly from an insurance company. 

Group health insurance is often broader in its coverage, paying for things such as maternity and mental health visits.  Individual insurance offerings, particularly the more affordable options, tend to be less comprehensive, leaving out or offering less coverage for maternity and mental health unless mandated by the state.  It is Individual health insurance that is available through Qvisory.