What is Private Health Coverage?
Private health coverage pays for a portion of your medical costs when you see a doctor or other healthcare provider or go to the pharmacy. You or your employer pays a private company a monthly premium to be in a plan. The plan has a set of services that it has agreed to pay for under certain circumstances. When you go for medical care, the plan pays part of the cost of approved services. Every health coverage plan will have a different way of organizing costs and will cover different sets of services. For example, one plan might cover prescription drugs and yearly checkups, while another might not cover either. One plan might require you to see a primary care provider, while another might allow you to see a specialist right away. When you sign up for a plan, you’ll receive a booklet, called your evidence of coverage, with details specific to your plan. Reading through this booklet carefully can save you time, money, and frustration.
Costs
The amount you pay depends on the type of plan you have and on the details of the policy. You or your employer will have to pay a premium, which is a set amount of money you have to pay to be part of a plan.
Example:
You have a policy with a $100 monthly premium. You have to pay $100 every month in order to be covered by that policy.
In addition to your premiums, you may have to pay:
- A deductible: a set amount of money that you pay out of your own pocket each year before the insurance company will begin to pay for services.
Example:
You have a policy with a $250 yearly deductible. You go to the doctor and get a bill for $200. You have to pay all of that out of your own pocket. You go back to the doctor the next month and get another bill for $200. You pay for $50 of that and have now met your deductible for the year. Your policy will help pay for the remaining $150 of that second bill, and the full cost of any other covered medical costs you have during that year.
- A copayment (copay): a small amount of money you pay for each medical visit or service. Copays are usually between five and forty dollars.
Example:
You have a policy with a $10 copay for office visits and a $5 copay for each prescription. Every time you go to the doctor, you pay the doctor’s office $10. Each time you get a prescription filled, you pay the pharmacy $5.
- Coinsurance: A set percentage of the cost of the visit or service.
Example:
You have a policy that pays for 80% of medical services. You have a doctor’s visit that costs a total of $200. The policy will pay for $160 (that’s 80% of $200) while you pay for the remaining $40.
Getting Private Health Coverage
There are a number of ways to get private health coverage. You can buy individual coverage directly from a private company or insurance agent. If you have a job, you may also be able to get health coverage through your employer, called employer-sponsored coverage. The most important differences between employer-sponsored and individual coverage have to do with cost, your medical history, and how to sign up for a plan. Generally, for those with a medical condition, employer-sponsored coverage costs less and has more legal protections than individual coverage.
You may also be able to get health coverage from unions or professional associations; many self-employed people get health coverage this way.
Individual Coverage
Medical History: Depending on your previous health coverage,
individual plans might be able to deny you coverage based on your medical history. If they decide to cover you, they might be able to charge you more based on your medical history. They might also be able to decide to cover you, but to not cover
pre-existing conditions for a certain period of time, called an
exclusionary period. There are rules about what constitutes a pre-existing condition, how long these exclusionary periods can last, and how they might be shortened if you have had recent health coverage. These and other rules for how individual health coverage plans deal with your medical history are laid out by a federal law called HIPAA and similar California laws. DB101 has
detailed descriptions of these rules in the section on HIPAA and California protections.
Signing Up: Call an insurance company or agent to sign up for a plan. There are also many websites where you can buy insurance directly. If you can’t get coverage through an individual plan because of your medical history, or the coverage you’re offered is too expensive, and you have no other options for coverage, you may be eligible for the
Major Risk Medical Insurance Program (MRMIP)
.
Employer-Sponsored Coverage
Medical History: When you apply for group coverage through an employer, you
cannot be turned down because of your medical history. Employer-sponsored plans can, however, refuse to pay for care of
pre-existing conditions for a certain period of time, called an
exclusionary period. There are rules about what constitutes a pre-existing condition, how long these exclusionary periods can last, and how they might be shortened if you have had recent health coverage. The rules for how employer-sponsored health coverage plans deal with your medical history are laid out by a federal law called HIPAA and similar California laws. DB101 has
detailed descriptions of these rules in the section on HIPAA.
Signing Up: Speak to the human resources manager at your office. It’s important to sign up for coverage when it is first offered, otherwise you may face longer pre-existing condition exclusionary periods. You may have to be working for a certain period of time, called a service wait, before your coverage begins.
Union and Association-Sponsored Plans
Types of Health Coverage
There are four main kinds of health coverage plans. It’s easy to get confused by definitions and acronyms. While learning about the different types of plans, remember that the main differences between them are cost, how you choose the doctor you see, and how much time you have to spend to get the insurance company to pay its portion of the medical bill.
Health Maintenance Organizations (HMOs)
HMOs sign contracts with doctors or groups of doctors. They agree on certain fees for medical services. The doctors who have signed contracts with an HMO make up its network. You pay a premium to the HMO and choose a primary care provider (PCP) from their network. When you have a medical problem that isn’t an emergency, you must first go to your PCP. Whenever you see your PCP, you may have to pay a small fee called a copayment (copay). Copays are generally between $5 and $40. If your PCP thinks you need to see a specialist, they will write you a referral to see another doctor in the network. You may have to pay a copay when you see the specialist as well. You usually don’t have to fill out insurance claims or forms. Instead, you just show an insurance card when you visit the doctor or pharmacy.
The HMO will expect you to get all of your health care from medical providers in their network, and you should be able to do so. If you need to see a doctor or get services outside of the HMO network and you want the HMO to pay for those services, you must get permission (pre-authorization) from your HMO. They will review your request and decide whether they consider it necessary for you to get services outside of the network. If you get pre-authorization, you may have to pay more to see the out-of-network doctor. If the HMO doesn’t agree to let you get the services outside of the network, you can appeal their decision or decide to pay for the services on your own.
The Bottom Line: HMOs have low costs and little paperwork. Generally, you can only see doctors in the network, and you will need a referral from a primary care provider to see a specialist.
Indemnity Plans
Indemnity plans are also called fee-for-service plans. There is no network of doctors, and you don’t need a primary care provider (PCP). They usually cover illnesses and injuries and might not pay for preventative care like yearly check-ups. You pay a premium to enroll in an indemnity plan and usually have to meet a yearly deductible before the insurance will help pay for your medical costs. Once you’ve met your deductible, you usually pay coinsurance at a set percentage. For example, if you have met your deductible and go to the doctor to get a $100 shot, your plan might pay for $80 while you would have to pay $20.
Depending on the doctor’s office, you may have to pay for the bill yourself and then file a claim with the insurance company. The insurance company would then pay you for what it has agreed to cover. Other healthcare providers may find out from the insurer what you owe, bill you this amount, and submit a claim to the insurer for the balance.
The Bottom Line: With an indemnity plan, you can choose your doctors, but costs can be high, and you may have to do more paperwork to get reimbursed by the insurance company.
Preferred Provider Organizations (PPOs)
PPO plans have a network of doctors that the insurance company has signed contracts with. You can see any doctor in the network. You don’t need a referral from a primary care provider (PCP) to see a specialist, although some plans encourage you to have one.
You pay a premium to join a PPO plan. When you see a doctor in the network, you pay a small copayment for each visit or service. Most PPOs also have a yearly deductible you must meet before they will help pay for your costs. Once you meet the deductible, the insurance company will pay for most or all of your costs for covered services. You can see a doctor who is not in the PPO network, but you will have to pay a higher portion of the bill.
The Bottom Line: PPO plans offer a great deal of physician choice and don’t require much paperwork if you stay in their network. They do have a deductible and co-payments, and your costs may be higher than in an HMO.
Point of Service Plans (POS)
Point of Service plans offer a combination of the other three kinds of coverage, which you can choose from depending on the situation.
- Like HMOs, Point of Service plans have networks. You can choose to see a primary care provider (PCP) in the network, who may refer you to specialists who are also in the network. Besides the premium, you may pay a small amount for each visit (a copayment).
- Like PPOs, you can choose to see a network provider without a referral from a PCP, but your costs will be higher. You will have to pay a yearly deductible before your insurance helps with costs. You may also have to pay for part of the cost yourself (coinsurance).
- Like Indemnity plans, you can choose to go outside of the network entirely. When you see a doctor who is not in the network, you pay higher copayments and deductibles.
The Bottom Line: If you have a POS plan, you can pay less to have your care managed by your primary care provider, or, you can choose to pay more to have a wider choice of physicians.
Limits
Your policy may have a limit on how much money you have to spend in a year. This is called an out-of-pocket maximum. The out-of-pocket maximum does not count the premiums you pay and certain other costs may or may not be counted.
Example:
Your policy has an out-of-pocket maximum of $5,000 a year. Before you have paid $5,000 in expenses out of your pocket, the plan pays for 80% of a bill for a doctor visit. Once you’ve spent more than $5,000, the plan will pay for the entire bill for covered services.
Companies may have limits on what services they will help pay for. These limits are called exclusions and may include items such as cosmetic surgery, comfort items, and reproductive issues. Insurance companies may also have a lifetime or annual maximum amount of money they will pay while you are on their plan.
Keeping Your Coverage
There are laws that protect you when you are losing access to employer-sponsored health coverage. If you or your dependents are losing coverage, read DB101’s section on COBRA and Continuation Coverage. If you’re switching from one plan to another, initially joining an employer-sponsored plan, or signing up for individual coverage, DB101’s section on HIPAA & California Protections has more information.
Interaction with Public Health Coverage
You can have both private health coverage and public health coverage at the same time. If you become eligible for Medicare or Medi-Cal while on private coverage, don’t give up your existing coverage until you understand exactly what the interactions would be between your public and private benefits.
Who Pays First?
One issue that comes up when you’re on both public and private benefits is which pays first. In general, private benefits will pay first, followed by Medicare, and then Medi-Cal. When you get a medical service that is covered by your private coverage, that policy pays for it. If it’s not covered by private coverage, but is covered by both Medicare and Medi-Cal, Medicare pays for it. If it’s not covered by your private coverage or Medicare, and Medi-Cal covers it, Medi-Cal pays for it.
Example:
You have private coverage, Medicare, and Medi-Cal, and need surgery that requires you to purchase a wheelchair. All three types of coverage cover the surgery, so your private coverage pays for it. But neither your private coverage nor Medicare cover the wheelchair, so Medi-Cal pays for that as long as they approve it.
There are some exceptions where Medicare will pay before the private benefit if you are covered under an employer-sponsored plan and the employer has fewer than 100 employees. For more information on this exception, The Centers for Medicaid and Medicare Services has a helpful pamphlet on “Medicare and Other Health Benefits: Your Guide to Who Pays First”.
Medi-Cal Might Pay Private Coverage Premiums
If you’re on both Medi-Cal and private coverage, it’s important to know that, when it’s cost-effective for them to do so, Medi-Cal pays for private health coverage premiums. DB101’s program description of Medi-Cal has a description of the Medi-Cal Health Insurance Premium Payment (HIPP) program.
Medicare Enrollment
If you have private health coverage when you first become eligible for Medicare because of a disability, you’ll be automatically enrolled in Medicare Parts A and B. If you’d like to dis-enroll from Part B, you can do so, and sign up at a later time without paying a penalty. DB101’s section on Medicare Part B has more information. Along the same lines, you can choose not to elect Medicare Part D, and as long as your current private coverage is at least as good as the Part D benefit, you can sign up for Part D at a later time without paying penalties. DB101’s section on Medicare Part D has more information.
Coverage for Spouses, Domestic Partners, and Dependents
Both individual and group plans may offer coverage to spouses, domestic partners, and dependents. Two California laws that went into effect in 2005 (AB 205 and AB 2208) make fully-insured employer-sponsored plans offer the same benefits to domestic partners as they do to spouses. The law does not apply to self-insured plans. To find out which type of plan you are participating in, ask your employer.
Note that in California, to become a domestic partner, you must be in either a same sex relationship, or an opposite sex relationship where one partner is 62 or over and eligible for Social Security retirement benefits or Supplemental Security Income (SSI) based on age. Some plans, however, have a broader definition and will provide spouse-like benefits to other opposite sex couples. You can find general information on domestic partnerships from the California Secretary of State.
For dependent children, each policy has a different age when it will stop coverage. Many policies end dependent coverage for children when they turn 18, but will continue coverage until age 23 if the child is a student. Plans cannot cut coverage off if your child passes the age limit, but can’t be self-sufficient because of a disability and relies on you for support.
DB101’s sections on COBRA and Continuation Coverage and HIPAA & California Protections have more information on protections for spouses, domestic partners, and dependents when your health coverage changes.
Sources
The following links are provided for those who want detailed information on private health coverage. For those looking for more general information and help, please go to DB101’s Private Health Coverage Resources page.
The Georgetown University Health Policy Institute publishes an excellent "Consumer’s Guide to Getting and Keeping Health Insurance in California". Guides for other states are also available.
Health coverage in California is regulated by the California Department of Insurance and the California Department of Managed Health Care (DMHC). To figure out which agency is in charge in particular case, the DMHC has this helpful chart.
The California Healthcare Foundation details the interaction between state and federal laws in its 2002 paper on "Regulation of ERISA Plans: The Interplay of ERISA and California Law", and summarizes rules on individual coverage in its 2005 Issue Brief on "Rules Governing California’s Individual Insurance Market".
The laws governing private health coverage in California are a complicated patchwork of state and federal regulations:
California’ domestic partner protections are codified in sections 10121.7 and 381.5 of the California Insurance Code.
California’s protections for disabled dependents are codified in section 1373 (d) of the California Health and Safety Code, and section 10278 of the California Insurance Code.
