Understanding Your Health Insurance Coverage

If you have health insurance coverage, it's essential that you understand the details of your plan. Unless you've got a grasp on, for instance, what services are covered and what procedures you must follow to get the coverage you deserve, you can count on disputes arising with your health insurance company. Besides, you might want to take maximum advantage of all the benefits the plan offers, such as support groups or classes.

This article tells you what you need to know about your health insurance plan and how to find the information you need.

The Costs of Not Understanding Your Health Insurance Coverage

Far too often, when insurance companies deny payment for medical services, it's because the consumer didn't follow the required procedures or failed to understand the limits of coverage. Here are some examples of common (and costly) mistakes:

• A consumer with an HMO visits an orthopedic surgeon. The health plan refuses to pay for the visit because the consumer needed to obtain a referral from his primary care physician first.
• A PPO participant sees a doctor who is not within the PPO network. The participant must pay 80% of the charges. The participant would have paid only 20% if the doctor had been within the network.
• A consumer has surgery without getting the required pre-authorization from the health insurer. None of the costs of the surgery are covered -- it would have been covered in full if the consumer had gotten the pre-authorization.
• A consumer appeals her health plan's decision to deny coverage for a certain procedure. The consumer fails to file the internal appeal within the time limit required and, as a result, automatically loses the appeal.

In order to avoid these and other pricey mistakes, here's what you need to know about your health plan.

What Type of Health Plan Do You Have?

Most plans are one of the following:

Preferred Provider Organization (PPO). In a PPO, the plan contracts with physicians and hospitals to provide services at reduced cost. If you use these in-network medical providers, the plan pays all or most of the cost of treatment. Participants can use out-of-network health care providers, but must pay a larger portion of the cost.

Health Maintenance Organization (HMO). An HMO is a group plan in which members prepay a flat fee and are given access to the services of participating doctors, hospitals, and clinics. Members typically make copayments, but do not need to pay deductibles.

Fee-for-Service (traditional indemnity). This is the traditional plan in which the participant can visit any doctor or health facility (for the most part). The participant pays for the service, and then submits a claim to the insurance company for reimbursement.

Is Your Plan Self-Insured or Employer-Sponsored?

Whether you are self-insured or participate in an employer-sponsored health plan is also important. The type of plan you have determines your rights to appeal a denial of coverage or other negative decision by the health plan.

Self-Insured or Individually Purchased

If you enrolled in a health plan on your own (not through an employer) and pay the premiums entirely yourself, then you are self-insured.

Employer-Sponsored Health Insurance

If you are enrolled in a health plan through work, you have employer-sponsored health insurance.

There are two types of employer-sponsored plans. The type you have is key to your appeal rights if you disagree with a health plan decision to deny coverage. (To learn more about your right to appeal a health plan decision, see Nolo's article Health Plan Disputes: An Overview.) The two types of employer-sponsored plans are:

• Insured plans. Your employer has an insured plan if it buys health coverage from an insurance company (such as Blue Cross) or from an HMO.
• Self-funded plans. Your health plan is self-funded if the employer pays for the health care costs of its employees directly, rather than by purchasing insurance from an insurance company.

Ask your employer's benefits administrator which type of plan you have, since it's not always obvious from the plan's title. Some employers with self-funded plans use a health insurance company to serve as a third party administrator. So, for example, if your plan documents say "Aetna," your plan may be insured through Aetna or it may self-funded by your employer and merely administered by Aetna.

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