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Common Requirements
A good
health insurance policy contains several types of coverage. Basic
insurance includes hospital, surgical, and physicians' expense coverage.
In addition, major medical coverage is necessary in case of a
catastrophic accident or illness. These may be purchased separately, but
you will generally get more complete coverage if they are combined in a
single policy. Your policy should discuss the cost of each type of
coverage and describe exactly what each pays for.
Your health insurance policy also contains important information
regarding your out-of-pocket costs, namely deductibles and co-payments.
The family coverage provisions will be important to you as well, if your
spouse or dependents are covered by the policy. Information about
out-of-pocket maximums and benefit ceilings should also be included.
Basic coverages
Hospital expense insurance
Hospital expense insurance pays your room and board costs if you are
hospitalized. Some plans pay on an indemnity basis, meaning the insurer
pays a specific amount per day for a specified maximum number of days.
Other plans may pay on the actual charges, or a percentage of the actual
charges, regardless of what those charges might be. In addition to room
and board, hospital expense insurance typically covers incidental
expenses, such as use of the operating room, x-rays, drugs, anesthesia,
and laboratory charges.
Surgical expense insurance
Surgical expense insurance pays surgeons' fees and related costs
associated with surgery. Related costs might include fees for an
assistant surgeon, anesthesiologist, or even the operating room if it is
not covered as a miscellaneous hospital item. Surgical expense benefits
are generally paid according to a set schedule, although some plans pay
surgical benefits based on what is considered "usual, customary, and
reasonable" (UCR) in a particular geographic area.
Physicians' expense insurance
Physicians' expense insurance, sometimes called "regular medical expense
insurance," pays for visits to a doctor's office or for a doctor's
hospital visits. Typically, the policy specifies a maximum benefit per
visit, as well as a maximum number of visits per injury or illness.
Major medical insurance
Major medical insurance is designed to protect you against losses from
catastrophic illness or injury. It is usually an extremely broad policy
with a very high maximum benefit. Most major medical policies provide at
least $250,000 of coverage, although $1,000,000 or more in coverage is
preferable. Although coverage can vary from one plan to another, the
following list features items that are included in most major medical
policies:
- Hospital services and supplies (medical and surgical)
- Hospital room and board, including intensive and cardiac care
- Physicians' services (diagnostic, medical, and surgical)
- Nursing services
- Other medical practitioners' services
- Anesthesia and anesthesiologists' fees
- Ambulance service
- Laboratory and diagnostic tests, including x-rays
- Radiology and other therapy
- Blood and plasma
- Oxygen
- Dental treatment resulting from injury
- Prescription drugs
- Outpatient services
- Convalescent nursing home care
- Home health care
- Purchase of prosthetic devices
- Casts, splints, and crutches
Deductibles, co-payments, and coinsurance
Your health insurance plan will include information about deductibles,
co-payments, and coinsurance requirements. These can greatly affect the
overall cost of a health care plan. The deductible is the amount that
you have to pay towards your medical expenses (usually annually) before
the insurer begins to pay claims, while the co-payment is the amount
you'll have to pay each time you visit a health insurance provider.
Coinsurance is the percentage of your medical costs you'll have to pay
after you satisfy any deductibles that apply.
Out-of-pocket maximum
Also called a "stop-loss" or "coinsurance maximum," this provision
limits your liability for medical expenses. Imagine, for example, you
run up $1,000,000 in medical bills. If you're required to pay 20% of
your medical costs after you satisfy your deductible, you'd end up
paying $200,000. Most people could not afford to pay this much. A good
health insurance plan might pay 80% of the first $10,000 and 100% of any
further expenses. Thus, your maximum liability would be $2,000 (plus
any deductible).
Benefit ceiling
The benefit ceiling, or "maximum lifetime payout," is the maximum amount
the insurance policy will pay. Most experts recommend a policy with a
benefit ceiling of at least $1,000,000. While this may seem like an
exorbitant amount, keep in mind that the expenses resulting from a
catastrophic illness or injury can certainly reach this level.
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