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Health Insurance Guide
How The Cost Of Individual Health Insurance Is Calculated
If you are not familiar with health insurance then the cost of individual health insurance can appear to be somewhat complicated and many people are surprised that, having paid what seems like a small fortune, they find themselves faced with a bill the first time that they submit a claim. Before you are hit with an enormous medical bill therefore, it might be a good idea to take a moment to understand just what sort of costs you can expect to incur on your health insurance plan.
The first and probably most obvious cost is the monthly premium or, if you so choose, the quarterly premium or annual premium. If you are a member of an employer's or union group plan then you will usually be required to meet only a percentage of the premium and this will generally be taken directly from your pay check.
Most health insurance plans also include an annual deductible which is a sum of money that you will be required to pay before your insurer starts to pay out on any claims. In other words, with a yearly deductible of say $1,000 you will need to pay the first $1,000 of your medical bills each year before your insurer will begin paying out. You may be familiar with paying a deductible from your experience with car insurance and, if this is the case, will also know that the more the deductible on your plan the lower your premiums will be. If you have a family plan then this will frequently include deductibles for each family member covered by the policy.
If you live in, or are thinking about moving to, the sunshine state then a Florida high deductible health plan is a great way to get peace of mind.
Most plans will also include a co-payment which is a fixed sum of money that you will be required to pay towards each medical bill. Exactly how much you will be required to pay in co-payments will depend to a large extent on the type of policy you have. For instance, co-payments on HMO plans are frequently less than those on indemnity plans. In addition, the co-payment can also vary between different forms of medical service and, if you have an HMO plan, will usually increase if you seek treatment outside of the HMO network.
In those cases where no co-payment is required you will usually find that this is replaced by co-insurance which is similar and is a sum of money, in this case expressed as a percentage, that you will need to pay towards each medical bill. A typical co-insurance ratio is 80/20 which means that your insurer will pay 80% of any medical bill while you pay 20%. As with co-payments, co-insurance will generally rise if, as an HMO plan holder, you seek treatment outside of the HMO's network. In this event you will also find that, whenever a claim exceeds what is considered by the insurance company to be 'reasonable and customary', you might be required to meet the additional cost.
By this time you will realize that comparing different health insurance plans is about considerably more than simply comparing premiums. As a consequence, it is critically important that you read the details of any quote very carefully and that you avoid the frequent temptation to merely pick the plan which has the smallest monthly premium.
If you want to keep costs low and are in an HMO plan then you should attempt to stick inside the HMO's network and, where you do feel the need to go outside the HMO's network, then compare actual treatment costs to what your insurer considers to be 'reasonable and customary' before undergoing treatment.
You can also keep your costs down on most plans by adjusting your deductible and by opting for higher or lower co-insurance. Just how this can be achieved is beyond the scope of this short article but is a matter of balancing the different costs involved against the probability of having to claim on your plan.
Closed plans: According to the NAIC's Quality Assessment and Improvement Model Act, managed care plans that require covered persons to use participating providers.
Independent practice association (IPA): An organization comprised of individual physicians or physicians in small group practices that contracts with MCOs on behalf of its member physicians to provide health care services.
Open formulary: The provision that drugs on the preferred list and those not on the preferred list will both be covered by a PBM or MCO.
Resource-Based Relative Value Scale (RBRVS): A method used by MCOs of determining provider reimbursement that attempts to take into account, when assigning a weighted value to medical procedures or services, all resources that physicians use in providing care to patients, including physical or procedural, educational, mental (cognitive), and financial resources.
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