Health Insurance: Medicaid, Medicare, Plans

Understanding Health Insurance Basics

Medicaid vs. Medicare

Medicaid: Medical assistance for low-income persons or families. This is "means-tested," meaning eligibility is based on income.

Medicare: Health insurance for those aged 65 and older, certain individuals under 65 with disabilities, or those with End-Stage Renal Disease. Funded by employer-employee taxes from paychecks.

Medicare Parts

• Part A: Hospital Insurance
• Part B: Medical Insurance (includes options like HMO, PPO, fee-for-service)
• Part D: Prescription Drug Coverage

Medigap (Medicare Supplemental Insurance)

Private insurance plans designed to fill in "gaps" not covered by Medicare.

→ Each policy typically covers one person.

Limits Set by Insurance Companies

• Per Claim Maximum: The maximum amount of money an insurer will pay for a single claim.
• Lifetime Limit: Every dollar spent in claims reduces the amount available to be paid in the future.
• Internal Limits: Defined by an insurer for the maximum amount they will pay for a specific medical event.

How Health Insurance Works

Health insurance provides protection from significant financial loss, access to medical care, and preventative measures.

It works based on the Law of Large Numbers: Spreading the risk of costly medical care among many consumers over many years.

Insurers try to minimize losses and increase profits by insuring as many healthy and as few unhealthy individuals as possible. A pre-existing condition is typically defined as any condition you have been treated for in the past 6 months.

Types of Health Insurance Plans

Insurers provide coverage through:

• Group Plans: Insurance for everyone in a specific group (e.g., employees of a company).
• Individual Plans: Purchased directly from an insurance company by an individual person or family.

Group Plans

Advantages: Often less expensive. Everyone in the group must be able to enroll, even with pre-existing conditions.

Individual Plans

Advantages: Policy can be customized, some individuals may receive discounts, tailored to specific needs.

Disadvantages: More expensive. Pre-existing conditions may not be covered. Requires evidence of insurability and is subject to underwriting factors.

Important Considerations for Policies

Group and/or individual policies often need to consider coverage for:

• Hospitalization
• Hospital outpatient services
• Prescription drugs
• Maternity care

Coverage is needed for regular health care maintenance and for catastrophic illnesses or accidents.

COBRA (Consolidated Omnibus Budget Reconciliation Act)

Firms with 20 or more employees can continue to offer group coverage to an employee after they leave their job.

To continue coverage under COBRA, you must:

• Pay your share of premiums.
• Pay your former employer's share of premiums.
• Pay standard out-of-pocket expenses.

Coverage can typically be kept for 90 days.

HIPAA (Health Insurance Portability and Accountability Act)

Allows for health insurance eligibility to be transferable from employer to employer.

Previously insured family members can receive insurance on the plan of a new employer.

Includes provisions if you switch from group coverage to individual coverage.

Keeps health records private, unless authorized under HIPAA via a signed document.

Calculation Example: Deductible & Coinsurance

If your bill is $1000 and your deductible is $100:

Remaining bill after deductible = $1000 - $100 = $900

Assuming 80/20 coinsurance (insurer pays 80%, you pay 20%):

• Insurer pays: $900 x 0.80 = $720
• Your coinsurance share: $900 x 0.20 = $180

Your total out-of-pocket cost = Deductible + Your coinsurance share = $100 + $180 = $280