Health Insurance: A New Language
Table of contents
Motivation
Terminology
Real life example
Motivation
What is health insurance
Why do people buy health insurance? What are they “insuring”?
Health insurance can still improve health by:
- improving affordability of care (by paying for some part of care when needed)
- facilitating availability of care (providers receive lower payments for “cash” patients)
Made more important due to extremely high healthcare prices
How does health insurance work?
- Enrollees pay the insurer
- Fixed amount per month (premium)
- Some amount for care provided (cost-sharing)
- Insurer pays provider
- Negotiated prices
- Pays share of bill depending on cost-sharing terms
- Modern health insurance is very complicated!
- Need to work through some basic terminology before we go much further
Terminology
Managed care
- Health insurance product that encompasses some attempt to manage utilization of health care among its enrollees, often via assigning providers (physicians, hospitals, etc.) into tiers separated based on pricing
- Insurers “manage” care through the use of insurance “networks”
Insurance networks
Set of providers for which the insurer has agreed to pay some amount of care received at those providers, conditional on other cost-sharing terms of the insurance contract
- Preferred Provider Organizations (PPOs): tiered network structure, where patients will be responsible for less of the total cost of care when going to a higher tiered provider
- Health Maintenance Organizations (HMOs): more discrete network structure, with some providers in-network and other providers out-of-network
Premiums
What enrollees pay every month regardless of whether they use any health care
Cost-sharing
Generally refers to the amount of health care expenses that must be paid directly by the patient (as opposed to their insurance plan)
- Dictates how much a patient must pay out-of-pocket for any care received
- Encompasses a deductible, co-insurance, and co-payment
Deductible
The amount of money that a patient must pay out-of-pocket before the insurance company will pay anything
Copayment
A fixed dollar amount for which the patient is responsible after meeting their deductible.
- More common for low-cost, predictable health care services like physician office visits
- Example: $20 co-pay for office visits, which means patients must pay $20 for the visit and the insurance company will pay the rest (after the deductible is met)
Coinsurance
A percentage of costs for which the patient is responsible after meeting their deductible.
- Example: assume you have a 20% co-insurance rate (and you’ve met your deductible)
- Hospital visit with a $5,000 bill
- Patient would pay $1,000 (20% of $5,000) to the hospital as co-insurance
- Insurer pays the remaining 80%
- Co-insurance is common for more complicated or less predictable services, like hospital stays or emergency department visits
Cost-sharing over time
Real-life example
- Let’s look at some real-life health insurance options and descriptions
- Emory’s health insurance plans for its employees
