Health Insurance FAQs
Why should I have health insurance?
The cost of health care has risen drastically over the past few decades.
If you do not have medical insurance to help pay bills, a serious injury
or illness can be financially devastating to you and your family. If
you don’t have coverage you can be exposed to high health care
bills; or, if you have too little or the wrong kind of coverage, you
won’t have enough protection.
What Types of Health Insurance Are Available?
Major Medical Plans
This type of policy is usually effective in covering serious illness
or injury where costs are high. Hospital care, drugs and doctors’ visits,
are usually covered. These benefits can be delivered in several different
- Indemnity plans - These major medical plans typically have
a deductible – the amount you pay before the insurance company
begins paying benefits. After your covered expenses exceed the deductible
amount, benefits usually are paid as a percentage of actual expenses,
often 80 percent. These plans usually provide the most flexibility
in choosing where to receive care.
- Preferred Provider Organization (PPO) plans – In these
major medical plans the insurance company enters into contracts with
selected hospitals and doctors to furnish services at a discounted
rate. As a member of a PPO, you may be able to seek care from a doctor
or hospital that is not a preferred provider, but you will probably
have to pay a higher deductible or co-payment.
- Health Maintenance Organization (HMO) plans – These
major medical plans usually make you choose a primary care physician
(PCP) from a list of network providers. Your PCP is responsible for
managing all of your health care. If you need care from any network
provider other than your PCP, you may have to get a referral from your
PCP to see that provider. You must receive care from a network provider
in order to have your claim paid through the HMO. Treatment received
outside the network is usually not covered, or covered at a significantly
- Point of Service (POS) plans – These major medical
plans are a hybrid of the PPO and HMO models. They are more flexible
than HMOs, but do require you to select a primary care physician (PCP).
Like a PPO, you can go to an out-of-network provider and pay more of
the cost. However, if the PCP refers you to an out-of-network doctor
the health plan will pay the cost.
Limited Benefit Plans
These types of policies provide limited coverage for a particular health
care setting, ailment or disease. Here are some of the options that may
be available to you:
- Basic Hospital Expense Coverage – Covers a period
of usually not less than 31 days of continuous in-hospital care and
certain hospital outpatient services.
- Basic Medical-Surgical Expense Coverage – Covers costs
associated with a necessary surgery, including a certain number of
days (usually not less than 21 days) of in-hospital care.
- Hospital Confinement Indemnity Coverage – Covers a
fixed amount (usually not less than $40) for each day that you are
in a hospital. The benefits paid are not based on your actual expenses.
- Accident Only Coverage – Covers death, dismemberment,
disability or hospital and medical care caused by an accident. Specified
accident coverage that covers only certain accidents may also be purchased.
- Specified Disease Coverage - Covers diagnosis and treatment
of a specifically named disease or diseases, such as cancer.
- Other Limited Coverage – You may purchase insurance
covering only dental or vision or other specified care.
Additional Coverage Options
These types of policies provide added protection should you become disabled,
require long-term care, or enroll in Medicare:
- Disability Income - This coverage provides for weekly or
monthly benefit payments while you are disabled after a covered injury
or sickness. The disability payment is usually a set dollar amount
not to exceed a certain percentage of your income. These policies usually
expire when you become eligible for Medicare.
- Long-Term Care Insurance - This policy usually pays for
skilled, intermediate and custodial care in a nursing home, and also
for care in other settings, such as the home, adult day care center
or assisted living facility. The policy usually pays a fixed amount
per day while a person is receiving care.
- Medicare Supplemental Coverage - The federal Medicare program
pays most medical expenses for people 65 or older, or for individuals
under 65 receiving Social Security disability benefits. However, Medicare
does not pay all expenses. As a result, you may want to buy a Medicare
Supplement policy that helps pay for certain expenses, including deductibles
not covered by Medicare.
- Cancer insurance is not a substitute for comprehensive coverage -
Cancer treatment only accounts for a small percentage of the American
public’s health care bill. That is why it is essential to have
insurance coverage for all conditions, not just cancer.
- Consider a major medical policy if your family is not protected
- If you and your family are not protected against catastrophic
medical costs, consider a major medical policy. These policies pay
a large percentage of your covered costs after a deductible is paid.
- You may not need extra coverage - Ask yourself these three
questions: Is my current coverage adequate for these costs? How much
will the treatment cost if I do get cancer? How likely am I to contract
- Duplicate coverage is expensive and unnecessary - Buy basic
coverage first, and then make sure a cancer policy will meet any needs
not covered by your primary plan. Don’t assume that double coverage
will result in double benefits.
- Check the policy’s limitations - Some policies pay
only for hospital care. Many treatments, including radiation, chemotherapy
and some surgery are often given on an outpatient basis. Cancer patients
often face large, non-medical expenses that are not usually covered
by cancer insurance. Examples are home care, transportation and rehabilitation
- No policy will cover cancer diagnosed prior to policy application -
Some policies will deny coverage if you are later found to have had
cancer at the time of purchase, even if you did not know it.
- Most cancer insurance does not cover cancer-related illnesses -
Cancer or its treatment may lead to other physical problems, such as
infection, diabetes or pneumonia.
- Many policies contain time limits - Some policies require
waiting periods of 30 days or even several months before you are covered.
Others stop paying benefits after a fixed period of two or three years.
These are NOT health insurance plans:
- Discount Plans - You may receive advertisements from plans
offering discounts on health care for a monthly fee. These are not
health insurance plans and participants do not have the same protections
as under licensed health insurance plans. Insurance commissioners strongly
recommend that you thoroughly investigate any plan promising deep discounts
for a “low” monthly fee and weigh the benefits against
the cost carefully.
- Non-Licensed Risk-Sharing Plans - You may receive offers
to join a group or association that will take your monthly payments,
put them in a savings account (or trust) with other participants’ money,
and then help pay some of your health care costs, as needed. Such arrangements
are not insurance and the participants do not have the protections
available to purchasers of licensed insurance plans. Insurance commissioners
strongly recommend that you thoroughly investigate such plans before
Can my employer change our health insurance carrier and level
of benefits during the year?
Yes. It is completely up to the employer whether or not they will offer
health insurance to employees at all, and they can change carriers and
level of benefits at any time.
What happens when my group health coverage ends?
You can apply for individual health coverage under the federal law
Health Insurance Portability and Accountability Act (HIPAA). This type
of policy is issued on a guaranteed issue basis if you meet the qualifying
criteria. However, there is no limit on the maximum premium the insurance
company can charge. Care for preexisting conditions may not be excluded
What happens to my group health coverage if I leave my employer?
You may be eligible for protection under the Consolidated Omnibus Budget
Reconciliation Act (COBRA) law and entitled to a minimum of 18 months
of continuation coverage. You can find out more about COBRA continuation
of group health benefits from the Federal Department of Labor Office
of Employee Benefits Security Administration website.
Can health insurance companies deny my application for individual
insurance due to a health condition?
Yes, a company has the right to deny coverage for almost any reason
on a new application. However, once you are accepted for coverage, the
company cannot cancel your policy except for nonpayment of premium.
What is a preexisting condition?
This is normally a physical or mental condition for which medical advice,
diagnosis, care or treatment is recommended or received before the effective
date of the policy.
Is there assistance available?
There are many programs available through the federal or state governments
to assist with the high cost of health care and health insurance. You
may contact your state government to learn about your eligibility for
Medicaid (for low-income and disabled persons), the State Children’s
Health Insurance Program (SCHIP), high-risk pool coverage for individuals
who are denied coverage, prescription drug assistance programs, or other
You may also contact the Department of Health and Human Services for
information about Medicare (including the new prescription drug program
which provides many subsidies). In addition, the federal government provides
tax credits for certain workers who have lost their jobs because of federal
trade agreements or whose pension program has failed.
What is a “self-insured” plan?
An employer may choose to “self-insure” by paying out benefits
from its own funds. Typically, an insurance company administers the program,
but the liability for paying for the care of the employees rests on the
employer. It is important for workers to understand that if their employer “self-insures,” state
patient protections (such as access to internal and external appeals
processes, assurance of certain benefits, and the right to have grievances
heard by their State Insurance Department) do not apply. All federal
protections (i.e., HIPAA and COBRA) do remain.
Where can I go for help?
If you have any questions about your policy, your rights and protections,
or a potential agent or insurer, you can contact
your State Insurance Department for information. You can
also contact your State Insurance Department for assistance if you have
a grievance against a licensed health insurer.
© 1991 - 2013 National Association of Insurance Commissioners. All rights reserved.