Merritt Personal Lines Manual: Health Insurance -- Analyzing Standard Policy Language Introduction
Through the 1990s and 2000s, heath-care costs in the United States have been rising at a rate of more than 10 percent a year, several times the rate of inflation. At the current rate of growth, health care spending will consume almost a third of what is spent on all goods and services by the year 2020.
Despite these disturbing trends, people resist treating health insurance like the commodity it is -- little different than auto insurance.
There are a number of reasons for this unfocused consumer response in the heath-care market. Consumers often lack the expertise or information to decide how much care they need; they must trust their doctor to order what is best. Also, consumers with insurance don't pay the whole bill; thus, they don't respond to prices as they would with other products and incentives to "comparison shop" are reduced. And finally, when it comes to their health, people seldom measure medical procedures in dollars and cents. They should, at least when they compare insurance policies.
Like automobile insurance, major medical policies carry a deductible -- an amount you pay before the insurance company begins paying expenses.
Many major medical policies also have copayments, which means you pay a certain amount of the covered expenses, typically 20 percent, up to a limit.
That limit is called a stop-loss and varies by company and policy.
After the stop-loss is reached, the insurance company begins paying 100 percent of the covered expenses.
The term "basic coverage" is generally used in the medical insurance field to refer to benefits characterized by low or moderate levels of coverage. Small deductibles may apply to some coverages, while other coverages may be provided on a "first dollar" basis -- with no deductible.
There are many variations in basic medical expense policy forms. Some insurance companies issue separate policies to cover the charges a hospital makes on its own behalf for room and board and medical supplies (hospital expense insurance), charges made by surgeons and anesthesiologists for surgical procedures (surgical expense insurance) and charges for doctor visits and miscellaneous services (medical expense insurance). Some insurance companies issue combination policies which include all of these types of benefits in the same contract.
In addition to the more typical basic coverages, many insurance companies offer a variety of additional coverages, which may be added to a policy. Optional coverages may include benefits for normal pregnancy and childbirth, long-term care, intensive care, special nursing services and other treatments and services which are not covered by the basic policy forms.
Whatever the policy form, the persons insured, types of benefits provided, benefit limits and deductibles (if any) are usually shown in a schedule at the beginning of the policy. This information may be called the declarations, policy specifications or simply the policy schedule.
