How Insurance Works | Health Care Service Corporation

Medical care is expensive. health care costs increase every year. Without health insurance it would be difficult for most people to pay their health care bills.

Health insurance is a way for people to:

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• protect yourself from the extreme financial costs of medical care if you become seriously ill
• ensure they have access to medical care when they need it

There are two types of health insurance:

• taxpayer funded: funded by federal and state taxes; examples are medicare, medicaid, and the children’s health insurance program (chip)
• Privately funded: Provided primarily through employer-sponsored plans; examples are blue cross and blue shield plans, non-blue business plans, hmos, and self-funded employer plans

Taxpayer funded health insurance is funded by state and federal taxes. examples include:

• medication
• medicaid
• tab
• health plans for federal/state employees
• veterans health administration (vha)

private health insurance is financed primarily through benefit plans provided by employers.

• 160 million people are insured through employer-sponsored health insurance
• about 15 million people buy health insurance on their own

examples include:

• blue cross and blue shield health insurance companies
• non-blue commercial health insurance carriers
• health maintenance organizations (hmos)
• employer-sponsored and self-funded benefit plans

To receive health insurance, employees choose to participate in their employer-sponsored plan. they pay a premium. In exchange, they receive an insurance card that gives them access to the doctors, hospitals, and other health care providers that are part of the insurance plan.

health insurance regulations

• States primarily regulate health insurance by setting rules about when and under what conditions a state-licensed health insurer must accept an applicant.
• Federal law also regulates health insurance, including erisa and hipaa.
• erisa sets national standards for employer and union sponsored health plans.
• erisa prohibits states from regulating health plans self-funded by employers and unions.
• hipaa requires private insurers to agree to drop certain people from group coverage in the individual market, regardless of health status and with no pre-existing condition exclusion. however, in most states, if eligible individuals are guaranteed access to coverage in the state’s high-risk pool, private insurers are not required to sell them coverage.

health insurance makes health care more affordable.

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Health insurance helps people pay for health care by compounding the risk of high health care costs across large numbers of people, allowing them (or employers) to pay a premium based on the average cost of health care for the group.

hence, health insurance makes the cost of health care affordable for most people.

health insurance provides security.

When a person has an insurance card, it provides easier access to health care by showing health care providers that most of the person’s covered treatment costs will be paid.

employer-sponsored health insurance

Most private health insurance is provided through employer-sponsored benefit plans.

employers decide…

• whether to offer health benefits
• level of benefits and amount of coverage
• whether to assume the risk and payment of your employees’ health care or have the insurance company assume the risk and payment

employees do this…

• To receive health insurance, employees choose to participate in their employer-sponsored plan.
• pay a premium that varies based on factors affecting the health care needs of the employee group.
• In return, they receive an insurance card that gives them access to doctors, hospitals, and other health care providers who are part of the insurance plan.

how health insurance is regulated

States generally regulate the business of health insurance. At the same time, various federal laws also govern health insurance. we will review two specific federal laws: erisa and hipaa.

state laws:

States set standards that cover when and under what conditions a state-licensed health insurer must accept an applicant. for example, most states require that coverage must be provided to small employers who want it. states mandate the extent to which insurers can vary premiums based on health status, claims experience, and other factors.

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However, states cannot require self-funded employer plans to offer benefits (these plans are governed by erisa).

States have lists of mandatory benefits. some examples are:

• fertilization treatments
• substance abuse treatment
• breast reconstruction surgery after a mastectomy

federal laws:

Employee Retirement Income Security Act of 1974 (ERISA)

• protects workers from losing benefits provided through the workplace
• sets national standards for employee benefits maintained by an employer or an employee organization (union)
• does not regulate insurance provided directly by a private health insurer
• does not allow states to regulate the content or activities of self-funded employee benefit plans
• does not allow states to regulate how third parties, including state-licensed health insurance organizations, provide administrative services to self-funded employee benefit plans

health insurance portability and accountability act (hipaa)

hipaa addresses the concern that:

• people can face gaps in coverage when they change or lose their jobs
• Health coverage providers often exclude benefits for pre-existing health conditions for new enrollees

hipaa requires state-licensed private insurers to agree to drop certain people from group health coverage in the individual market, regardless of health status and without any pre-existing medical condition exclusion period. however, in most states, if eligible individuals are guaranteed access to coverage in the state’s high-risk group, private insurers are not required to sell them coverage.

hipaa also prohibits state-licensed private insurers from considering a member’s health status when determining a member’s eligibility for group coverage.

To help you better understand health insurance, check out our health care glossary and health care FAQs.

Source: https://amajon.asia
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