How Does Medical Insurance Work?

Choose Your Own Doctor or Save Money on Medical Insurance

Decide who your doctor is. You have an opportunity to select from traditional plans, Preferred Provider Organizations called PPOs and often Health Maintenance Organizations, which are HMOs. There is a price difference with all the plans and HMOs are usually the cheapest. These are the strictest plans. You need to select from their list of doctors and get a referral for a specialist. If you go to the emergency room, you need to call the company first to get permission. PPOs offer more doctors to choose from and pay less if you don't select one. Point of Service Plans, called POS, are in between PPOs and HMOs. Traditional plans pay any doctor you choose after you meet the deductible.

Deductibles for Medical Insurance

Select the highest deductible for the lowest premium. Some plans have a deductible, which is money you pay before the medical insurance even considers paying. Many PPOs and HMOs don't have an annual deductible, but a small amount paid for each medical treatment. The HMO is actually a prepaid medical plan. The doctors participate in the plan, so it does not cover out of network doctors. Deductibles on most plans accumulate for the year, and those in the last three months may carry over to the following year.

Medical Insurance OOP and Coinsurance

Find out if your plan has coinsurance and an out of pocket limit. Coinsurance requires that you pay a certain percent of the bills, such as 20 percent, until you reach the maximum amount per year--the out of pocket limit--then the company pays 100% of the bill. Traditional plans, POS plans and PPOs have these provisions. On POS and PPO plans, the medical insurance company pays a higher percentage for those health care providers inside the network. The providers agree to charge discounted rates for services to the people enrolled in the plan. This explains why the medical insurance company has a deductible on non-network doctors and a higher out of pocket expense.

Reasonable and Customary Charges and Other Difficult Concepts

See if your doctor's expense is reasonable. When doctors charge more than what the medical insurance company believes to be reasonable and customary costs, they pay exactly what they believe is the right charge. Any additional amount is your responsibility and doesn't count as part of your deductible or OOP. Insurance companies also may refuse to pay charges that they don't believe are necessary.

Get Medical Insurance When You Don't Need It

Buy your health insurance when you're healthy or you may never get it. Once you find you have a serious illness, you may not get coverage, or coverage for everything but that condition. This isn't mean of the insurance companies since they need premiums from healthy people to offset the costs of the ill. Everyone would wait if you could get it when you are sick.