Health Insurance Policy Benefits and Claim Procedures: Introduction

When you are shopping for health insurance coverage, what you are shopping for is the covered expenses and payment. The following sample provision is an introduction into the entire claims section of our sample policy.

(Typical wording*):

Benefits and Claim Procedures: Insureds have the right to obtain medical care from the Provider and Hospital of their choice; however, all applicable Benefit payments by Us under this Benefits and Claim Procedures Section of the Policy are limited to the applicable Company Insurance Percentage of Covered Expenses incurred by an Insured. Coverage under this Section of the Policy will be reduced for medical services, supplies, care or treatment obtained from a Non-Participating Provider. The differences between both the Company Insurance Percentages and the Insured Coinsurance Percentages for Participating Providers and for Non-Participating Providers are shown in the Policy Schedule. In addition, We shall never be required to make a payment for Covered Expenses incurred in excess of the amount of the Lifetime Transplant Maximum or the Lifetime Policy Maximum Per Insured.

This all sounds simple enough. As a patient, you can get medical care from whomever and wherever you want. But as an Insured, benefit payments are limited to the applicable "Company Insurance Percentage of Covered Expenses" incurred by you (see below for an explanation). If you use a doctor that is outside your network (called nonparticipating providers), your benefits will be less. You can see the percentage differences by looking at your Policy Schedule. The insurance company will stop paying when certain policy benefit maximums have been paid out.

But let's look a little deeper. "Company Insurance Percentage" means the portion of "covered expenses" your insurer pays when you have meet all the following:

(1) the Co-Pays
(2) the deductibles
(3) the percentage of the cost for health care services you pay after you have met the deductibles .

"Covered Expenses" determines coverage eligibility. It means for the covered items and services listed in the policy (we will discuss these later), the amount of expenses actually incurred by an Insured as a result of being provided appropriate medical, surgical, or diagnostic services, supplies and care. To be a payable expense, the service, supply or care must be Medically Necessary.

"Medically Necessary" means any applicable confinement of the insured and any services (i.e. diagnostic test, lab test, exam, surgery, medical treatment, etc) or supplies needed to diagnose and treat your medical condition, meets the standards of care for medical practice in your area, and not mainly for the convenience of you or your licensed doctor

There is a slightly different definition of "medical necessity" when applied to early diagnosis and preventive care. Then it applies to any applicable service (i.e., diagnostic test, lab test, exam, medical treatment, etc. or supply that is reasonably designed to prevent future sickness, meets the standards of care for medical practice in your area, not mainly for the convenience of you or the doctor, and is given in the most cost effective manner).

You should be aware of the rather stringent and detailed medical necessity requirements. It is not enough that the treatment or test is prescribed, performed or ordered by a licensed provider. The insurance company has its own standard of judgment as to appropriateness that may or may not coincide with your doctor's.

So far, what do we have? The insurance company will pay a certain percentage (sometimes 100%, sometimes less) of Covered Expenses, but only after the insured has satisfied three things – the applicable Co-Pays, deductibles and Insured Coinsurance Percentage. The covered expenses must be listed in the Policy and must be medically necessary. There are a lot of hoops to jump through before a benefit is paid and in order to determine the actual amount of the benefit to be paid.

*Wording may vary from contract to contract and from state to state.