The Affordable Care Act requires most Americans to have health insurance under its shared responsibility provision. Some of us are new to having health insurance, and some of us have had it for as long as we can remember. But what exactly is it?
A contract that requires a health insurer to pay some or all of your healthcare costs in exchange for a premium. A health insurance contract may also be called a “policy” or “plan.”
Let’s break that definition down a bit and take a look at some of those terms:
Health insurer – A company that sells health insurance plans/policies.
Benefits – The healthcare costs (e.g., medical services, treatments and supplies) covered by your health insurance policy.
Premium – The dollar amount you (or your employer) pay to an insurance company for the benefits and coverage of an insurance policy. This may be paid monthly, quarterly or annually, depending on your plan and preference.
Policy – The health insurance coverage purchased by an individual or an employer and provided by a carrier. Also referred to as a plan. A policy lasts for a specific amount of time. For an Obamacare plan, it is typically January 1 through December 31 of the same year.
In other words, you buy a health insurance plan (i.e., major medical insurance, Obamacare) from a health insurance company. That plan is a contract that requires the insurer to pay a certain amount for certain types healthcare expenses you incur, as outlined, for a specific amount of time.
Putting it all together. How health insurance works.
You shop for coverage, choose a health insurance plan, and complete an application. Then what? Health insurance helps you pay for medical care, but how does it actually work?
- Your plan will have an effective date—the date at which your policy begins. This date will depend on when you apply for coverage.
Example: Joe buys a health insurance plan on December 12. His policy will begin on January 1 of the new year.
- In the meantime, your health insurance company will send you plan information, including an ID card that you will present when using your benefits at places such as a doctor’s office, pharmacy, urgent care or hospital. Read over these materials, and get to know your plan’s benefits and how they work.
A week before his plan becomes effective, Joe receives his member ID card, which he places in his wallet. He reads over his benefits and takes note of those related to care he frequently uses.
- At some point, you will need to visit the doctor for preventive care or because you are sick. When you check in for your appointment, you will present your health insurance ID card. Depending on your plan benefits, you may or may not be responsible for a copay up front.
Joe needs to visit the doctor for a checkup related to his diabetes. His plan requires he pay a $30 office visit copay when he visits the doctor. He presents his insurance card when he checks in for his appointment and pays this amount upon the receptionist’s request.
- After your visit, your healthcare provider will file a claim with your health insurance company for the services provided to you.
- Your health insurer will send you an explanation of benefits outlining the charges for your care, the portion your plan covers and the amount you will be charged out of pocket.
A few weeks after his visit, Joe receives mail from his health insurance company. Inside is an explanation of benefits, which states “this is not a bill.”
Joe learns that his visit cost $180—this amount is discounted from $200 because he visited a network provider and thereby receives discounted care. His health insurance plan will cover 70 percent of the charge based on the plan’s stated coinsurance amount for such care—Joe has met his $3,500 silver plan deductible for the year, which means he and the insurance company share his cost of care. He will owe $54. At this time, however, he takes no action.
- Your insurer pays your provider their share.
Joe’s insurance company pays his healthcare provider $126 (i.e., 70 percent of his $180 bill). The provider then sends Joe a bill for his share.
- Your provider then bills you for the remaining balance, which you pay directly to them.
Joe receives a bill from his healthcare provider. His provider offers online payment options, so he logs in and pays his $54 bill before it is due.
Of course, this is a basic overview of individual health insurance and how it works. You will also want to learn about your plan deductible and how it works, how to shop for coverage, and supplemental benefits that complement your Obamacare plan.
Don’t go it alone. Work with the professionals!
Contact your health insurance company with questions about your current health insurance plan and the benefits it provides.
If you have questions about buying affordable health insurance or supplemental health plans, work with a health insurance producer. Call the number at the top of your screen to speak with a certified advisor who can answer your questions and help you find Obamacare plans and other types of coverage.