What Kind of Insurance Do You Have?
Here's a breakdown of different types of insurance and why you need to know.
Hello Everyone!
Medical insurance coverage can be very confusing. Most people’s eyes glaze over when trying to learn the details. I don’t blame them, it contains non-sensical rules and regulations, and each insurance plan is a little bit tweaked from another. Most times, if someone has a choice in a plan, it seems easier to shut their eyes and point.
As an insurance nerd, I can confirm that it’s essential to understand the basics of different commercial insurance, especially if you have a choice come open enrollment (which won’t happen until the end of the year). For Lipedema surgery, it’s REALLY important to know what type of insurance you have to work with for your preauthorization.
Let’s go through the different types of COMMERCIAL INSURANCE (we will not be discussing Medicare, Medicaid, or Military-type insurance) and you can compare to what you have:
There are different types of insurance, all of which have their own rules and regulations under Federal or State Law.
Fully-insured plans
These are the most traditional and most regulated medical insurance plans. This is when your employer contracts with an insurance carrier (BCBS, UHC, Aetna, or even a local, regional insurance plan, for example) to provide an already-made plan. You pay your employer a premium, and the insurance plan administers all aspects of the plan. The employer is never involved in decision-making.
This would also be a plan for people who buy individual insurance on the marketplace for a broker for those who have a small business. The individual or small business doesn’t have the capital to be self-insured, so they buy the plan that they don’t have to develop themselves.
Self-insured plans
This type of plan is when your employer becomes its own insurance. Large corporations are the ones you’ll see who have self-insurance. About two-thirds of the population have medical benefits through a self-insured plan.
Self-insurance is a very profitable gig. Corporations decide their own plan benefits of what they will or will not pay. They set aside a financial reserve—which is usually in the millions of dollars—to pay for medical coverage. The company then hires a third-party administrator (TPA) to process and pay the medical bills.
Self-insured plans aren’t governed by local or state laws, so they have more flexibility than fully-insured plans in what they will or will not cover. They also have the ability to add or take away benefits in the middle of a plan year.
Self-insured health insurance plans are not subject to state insurance laws and oversight. Instead, they're regulated at the federal level under ERISA (the Employee Retirement Income Security Act) and various provisions in other federal laws like HIPAA and the ACA.
If you work for a large company or business, you likely have a self-insured plan.
HMO plans
These are self-contained systems. The best reference is Kaiser, which has its health plan, but also all the inpatient and outpatient medical services. You must stay within these contracted providers. Going outside the plan is paid at 0%. The only exception is in an emergency; you can go to any emergency room, including if you were admitted into the hospital. Kaiser would still need to cover that medical bill.
HMO’s used to have a stronger presence, but these plans are still around. The plans usually have a more affordable premium payment which is great for the individual or small business on a tight budget.
Co-op insurance
This type of medical coverage is a non-profit organization in which the same people who own the company are insured by the company, usually by employers who share something in common, such as Medi-Share or a farmers co-op. It’s somewhat like self-insurance, owned by the very people who run the plan. The employers/employees pay premiums. Those premiums are placed in a collective bucket and used towards paying members’ medical bills.
The problem I’ve seen with this type of plan is they usually don’t have as large of a financial reserve to operate as a typical medical insurance plan, and therefore some people will not get treatment if they have no money in the reserve for them.
The biggest problem I’ve seen is co-op insurance doesn’t have contracted providers or benefit plan language for coverage. They don’t provide preauthorizations, which are typically needed by the medical insurance industry for guarantee of payment.
I highly recommend that if you decide to have a co-op plan, do your research. Ask if they have a benefit book and if they provide preauthorizations for medical services/procedures. Also, find out if they have a pharmacy plan and a formulary of drugs that they administer.
If they have no plan language nor give preauthorizations, a lot of medical services will not take you on as a patient. Plan language is key to providers getting covered.
In many states, co-ops are not required to follow the same regulations and guidelines as private insurers. If a co-op runs out of money, then other members may not get their bills paid.
It’s important to know the basics of each type of insurance. Knowledge gives you the power to understand which plan is best for you. Each has slightly different rules, especially for going out-of-network for your medical care. Even if you don’t have a choice of insurance plans, you’ll at least know what type of plan you have and the basic rules and regulations you have to work with.
Take care,
Michelle
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