Frequently Asked Questions
- What is the difference between Group Insurance and Individual Insurance?
- What are the various ways in which an individual or family
may obtain health insurance coverage?
- What is an HMO?
- What is a PPO?
- What is a deductible?
- What is coinsurance?
- How are prescription drugs covered under health care plans?
- Are there different types of drug plans?
- What is a Health Savings Account (H.S.A.)
The primary difference between group and individual health insurance involves an enrollees ability to prove insurability. To purchase individual insurance, a person must generally answer a health questionnaire and undergo a medical examination before they can be approved for coverage. Often times applicants can be denied coverage based on their personal health, medical history, age, or any other factors that the insurance companies deems a risk. Most group insurance, however, will not decline an applicant coverage based upon health issues, age or medical history. Because the insurance company will not decline an applicant, premiums on group insurance tend to be higher for the applicant unless covered by an employer.
Individuals may obtain coverage through group insurance plans, individuals insurance or they may also be covered under federal and state government-sponsored programs such as Medicare and Medicaid. Some people may purchase insurance privately or through groups such as trade associations.
A health maintenance organization (HMO) is an organization that provides comprehensive health care to a voluntarily enrolled population at a predetermined price. Members pay fixed, periodic fees directly to the HMO and in return receive health care services as often as needed.
A preferred provider organization (PPO) is an association that contracts with a group of doctors, dentists, hospitals or other health care service providers to provide care at prearranged rates or discounts.
It is a specific dollar amount that an individual must pay (or “satisfy”) before reimbursement for expenses begins. The higher the deductible, the lower the cost of the health insurance plan.
It is a specific dollar amount that an individual must pay before an insurance company will begin reimbursement for medical expenses. The higher the deductible, the more the insured will pay out of pocket, but the premium on the health insurance plan will be lower.
Generally, only prescription drugs that are for treatment of an illness or injury are covered, subject to applicable deductibles and coinsurance. Many plans do not cover contraceptive prescription drugs, for example, or nicotine chewing gum prescribed for smokers who are trying to quit.
There are a number of variations, but the principal types of prescription medication plans are open panel, closed panel, mail order and prescription drug card plans.
For those who purchase a Qualified High Deductible Health Insurance Plan (HDHP), they are eligible to set up a Heath Savings Account. A Qualified High Deductible Health Insurance Plan (HDHP) is a health insurance plan with higher than normal deductibles (Typically $1,150 for an individual or $2300 for a family). An H.S.A. is an account that is usually set up with a bank or other financial institution that allows individuals and families to set aside money, if they choose, for future medical expenses. Benefits of a H.S.A. are that you can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you do not itemize your deductions on Form 1040. Contributions to your H.S.A. made by your employer may be excluded from your gross income and the interest or other earnings on the assets in the account are tax free if the distributions are used to pay for qualified medical expenses. For a healthy individual or family who has a good emergency savings in place, an H.S.A. eligible health insurance plan can be a good option for lower premiums and tax efficient savings for future medical expenses.