The Basics of Health Insurance

The approaching end of the year presents a window of opportunity for many Americans – the chance to evaluate your current health insurance benefits and determine if any modifications are in order.  That’s because for many employer-based insurance plans, the annual open enrollment period occurs at the end of the calendar year. That’s the time you can change plans if you want to. 

Additionally, many government health plans allow for enrollment changes around this time.  That’s why this is a good time to assess what your current needs are and determine the options that are best for you and your family. 

Of course, that can be easier said than done.  Health insurance can be confusing and overwhelming, so much so that it can be hard to know where to even begin. 

The health care providers of Privia Medical Group North Texas (PMGNTX) want their patients to have accurate information so they can make the best decisions possible to take care of their health and the health of their families without undue financial stress.  That starts with understanding why health insurance is so important and then learning to navigate the various options.

Why Have Health Insurance?

The purpose of health insurance, like all forms of insurance, is to protect the consumer from unacceptable levels of financial risk.  Many younger adults may question the need for health insurance if they rarely have to go see a doctor and when they do, it’s for a minor illness.  That may well be the case, most of the time. 

But what of the unexpected serious injury that lands them in the hospital or the unexpected diagnosis of a serious illness, like cancer?  Those are some of the main reasons to have health insurance – to guard against the unexpected and not be forced into financial ruin when and if those serious events arise. 

Just as with homeowners or auto insurance, the premise behind health insurance is one of spreading risk.  By having many customers, insurance companies collect premiums from a broad base and then use a portion of those funds to pay policyholders’ claims.  For many people, those claims aren’t any more expensive than a routine check-up or physical once a year.  However, other medical needs are much more expensive, such as delivering a baby, treatment for cancer or various types of surgery.  Commonly used diagnosis and screening tools, such as an MRI or a CT scan, can also be costly. 

Health insurance isn’t perfect.  It is confusing for patients and even for the doctors who deal with it every day.  Some plans can leave patients and doctors footing the bill for legitimate health care costs that should have been covered.  Nonetheless, there have been positive developments in health insurance.  The COVID-19 pandemic underscored the importance of telemedicine, allowing patients to see doctors virtually.  Now, more of those visits are covered by insurance.  Additionally, mental health care is better covered by insurance than it used to be. 

The ABCs of Health Insurance

The health insurance industry seems to have its own language, which can be confusing at times.  Here’s a look at some of the common health insurance terms and acronyms every consumer should familiarize themselves with:

• HMO: Health Maintenance Organization. HMOs are insurance plans in which enrollees can only see providers who are part of the HMO’s network.  A visit to an out-of-network provider will not be covered, except in cases of medical emergency or if the insurer has agreed in advance that it is a medical necessity.
• PPO: Preferred Provider Organization. This type of health insurance plan allows enrollees to see out-of-network providers, though usually at a greater out-of-pocket cost.  There are also fewer restrictions on seeing specialists without a referral from a primary care provider. 
• EPO: Exclusive Provider Network.  This plan has some characteristics of both HMOs and PPOs.  As with an HMO, there is generally no coverage for out-of-network providers.  But like PPOs, EPOs do not require you to first get a referral from a primary care doctor before seeing a specialist. 
• In-network: Insurance plans have a group of health care providers they refer to as a “network.”  These are providers, such as physicians, hospitals and labs, with which the insurer has a contract that stipulates what the provider will be paid by the insurance company.  The bottom line for the patient is that it’s cheaper to see a doctor or go to a hospital that is in-network.  Sometimes, however, it is not always practical.
• Out-of-network: This refers to providers who are not in your insurer’s plan.  You may pay more to see providers who are out-of-network.  Some patients will choose to see a provider out-of-network if they believe that’s the best health care available for their situation.  In other instances, such as a medical emergency, it may not be practical to get to an in-network provider in a timely manner.
• Premium: This is the amount you pay each month to maintain your health insurance coverage. 
• Deductible: This is the sum you pay out-of-pocket before your insurance company begins to pay your claims. It is generally a fixed dollar amount each year.
• Co-pay/co-insurance: This is the amount you pay at each visit to a health care provider. This is a fixed dollar amount, or in some cases, a percentage of the total bill.  There are co-pays for visiting a doctor, a specialist, getting an x-ray, having lab work done, filling a prescription, getting hearing aids, using an ambulance and going to an urgent care clinic or emergency room.
• PCP: This is the abbreviation for primary care provider, often a doctor of family medicine, internal medicine or obstetrician/gynecologist. PCP is an important term for insurance purposes; your insurance company will want to make sure you have one and will sometimes require a referral from your PCP before you can see a specialist. 
• EOB: This stands for the “explanation of benefits” your insurer will send you after you’ve used your health insurance. The EOB will explain what the total charges were, how much your insurance covered and what amount, if any, you may still owe to the provider.  The EOB is not a bill. 
• Prior Authorization: In some cases, your physician may need to obtain prior authorization for a medical procedure, screening or prescription drug. In these cases, the procedure or prescription in question may not automatically be covered and your provider must explain to the insurance company why it is medically necessary and why it should be covered. 
• Preventative Services: This is a category of health care services that are available to consumers and do not require a co-pay or co-insurance; they are fully covered by the insurance plan. This includes services such as flu vaccines, some screening tests and wellness visits. 

Where do you get health insurance?

People obtain health insurance in a variety of ways:

• Your employer: This is the traditional way most non-seniors in America have health insurance.  You select a plan offered by your employer and you pay a premium that is deducted from your paycheck, before taxes.  Generally, the employer pays a share of the employee’s coverage and in some cases, a share of the employee’s family members’ coverage. 
• The Health Insurance Marketplace: The Marketplace was established by the Affordable Care Act and is an option for American citizens under 65 to purchase health insurance.  People generally use this option if coverage is not available through their employer.  Some plans have low premiums and high deductibles, which could make sense for younger, healthy people who don’t have a lot of medical needs.  Other plans are more expensive but cover more, which make sense the older you get.  Some enrollees may qualify for a federal income tax credit when they enroll, depending on income. Open enrollment in the Marketplace begins November 1.  People should enroll by December 15 to have coverage effective on January 1. Visit healthcare.gov for more information. 
• Medicare: This is the federal health insurance program for American citizens age 65 and older.  People who are approaching the age of 65 should visit gov for enrollment information.  Some people are automatically enrolled at age 65, while others need to enroll themselves.  There are three main components of Medicare:
  • Medicare Part A is known as hospital insurance, covering hospital stays and some long-term care needs.
  • Medicare Part B is medical insurance, covering physician visits and medical screenings and labs.
  • Medicare Part D is a prescription drug insurance program.

Some people choose to delay enrollment in Medicare Parts B and D if they have health insurance through an employer that they prefer to keep while they are still working.  However, a late enrollment penalty may apply. 

• Medicare Advantage: These are private plans that some seniors choose to purchase to supplement the coverage provided by Medicare.  Medicare Advantage plans are offered by private companies but must be approved by Medicare.  Those with a Medicare Advantage plan still have Medicare coverage, but they receive their benefits through the plan directly, not traditional Medicare. 

The purpose of Medicare Advantage plans is to provide additional coverage beyond that provided by traditional Medicare.  These added benefits may include dental, hearing and vision coverage.  Out-of-pocket expenses vary between Medicare Advantage plans, as do the provider networks they offer. For these reasons, it is important to compare Medicare Advantage plans just as you would employer-based plans, taking into account a variety of factors.  

Important Note: For Medicare Part D and Medicare Advantage, you can make changes to your plans and switch plans during an open enrollment period that runs from October 15 – December 7 each year.  You can also disenroll from a Medicare Advantage plan (either selecting a new Advantage plan or reverting to traditional Medicare) between January 1 – March 31 each year. 

• Veterans Administration: Veterans of the United States Armed Forces may be eligible for varying degrees of health benefits through the VA, depending on a variety of factors, including length of time served, discharge circumstances, income and service-connected disability. For more information, visit gov.
• Tricare: Tricare is health insurance for active-duty military personnel, as well as some military retirees. For more information, visit mil.
• Medicaid and CHIP: Medicaid and the Children’s Health Insurance Program (CHIP) primarily serve lower-income families.  In Texas, Medicaid eligibility is usually limited to children and women who are pregnant.  New mothers may now remain on Medicaid for six months after giving birth.  CHIP is available for some families who earn too much to qualify for Medicaid.  Visit healthcare.gov or the Texas Health & Human Services Commission.

There are some products available that do not offer the same level of financial security as health insurance. Examples include discount cards and health sharing ministries – these may offer some value but should not be considered a replacement for traditional health insurance.  Additionally, there are some alternative plans available that may exclude coverage of preexisting conditions or essential health benefits, such as mammograms.  Be very careful when considering options such as these. 

Selecting a Plan

If you have employer-based health insurance or will be shopping for insurance in the Health Insurance Marketplace, you will likely have a few options to choose from.  You may have a choice between an HMO, a PPO or an EPO.  Carefully evaluate the differences between these options.  An HMO may be less expensive but may also provide fewer benefits or not allow you as many provider options.  On the other hand, if you are relatively young and healthy, a less-expensive plan may be right for you.  Your employer probably has Human Resources staff knowledgeable about available benefits – if so, take advantage of that and make an appointment to get your questions answered. 

On the Health Insurance Marketplace, you will find a variety of plans at varying costs: bronze, silver, gold and platinum.  You’ll pay the least for bronze and also get the fewest benefits; at the other end of the scale, platinum is the most expensive but provides the most comprehensive overall coverage. 

You can also compare additional plans on the Texas Department of Insurance (TDI) website. 

When comparing costs on any plan, be sure to consider four separate cost factors:

1. Premium: the amount you pay each month to maintain coverage.
2. Copay: the amount you will pay each time you visit a provider or get a prescription filled.
3. Coinsurance: a percentage of the total bill you will pay, after you have met your deductible.
4. Deductible: the amount you must pay out-of-pocket each year before your health plan begins to cover the cost of medical services.

You may find an inexpensive plan but later discover you have to meet a high deductible before you benefit from any coverage from the plan.  You may also find that your co-pay for each visit, procedure or prescription is higher than you expected.  For some people, these low premium/high-deductible plans work just fine; just make sure you have all the facts before making a decision. 

An additional tool some employers offer for people who opt to enroll in a high-deductible plan is a health savings account (HSA).  This is essentially a medical savings account that people can contribute pre-tax income to and then spend later to cover deductibles and other out-of-pocket costs. 

Insurance Networks

Understanding an insurer’s network is critical to making a decision about a health insurance plan.  No matter what type of plan you select, you will pay higher out-of-pocket costs to see a provider who is not in your plan’s network.  Whenever possible, you want to stay within your network to keep costs down and you definitely want to make sure your primary care provider and any specialists you see are in your plan’s network.  Health insurance plans usually have a directory of providers on their website.  PMGNTX providers are in-network for most major insurance plans in North Texas.

All insurance plans, including HMOs, PPOs and EPOs, are required to maintain adequate networks for their customers.  Network adequacy in Texas is regulated by the Texas Department of Insurance (TDI).  If you believe your insurance provider is not meeting adequacy requirements, you can file a complaint with TDI.  TDI regulates part of the private health insurance market in Texas and does not have jurisdiction over Medicare, VA, Tricare or most aspects of the Health Insurance Marketplace.

Take Your Time & Ask Questions

As you can tell, there’s a lot to absorb when it comes to health insurance.  It can be complex and confusing.  Don’t feel like you have to remember everything and don’t hesitate to ask questions of your employer, your insurer or your doctor.  The more time you spend understanding your benefits and knowing what your options are, the more comfortable you will be navigating the world of health insurance to get the best health plan for your family.