Commercial health insurance is issued by private companies and non-governmental organizations.
Government-sponsored health insurance is usually available for specific groups of people, such as senior citizens, disabled people, people with low income, current military members and their families, veterans, members of Native-American tribes federally recognized.
Government-sponsored insurance includes Medicare, Medicaid, Indian Health Service (IHS), the State Children’s Health Insurance Program (SCHIP), the Veterans Health Administration program, and TRICARE.
These programs are usually funded through taxes and provide medical coverage without returning a profit.
On the other hand, commercial insurance providers are profit-driven companies.
Some, however, operate as non-profit organizations.
Commercial policies are funded by monthly premiums of policyholders.
Their coverage amounts and premiums are made to create the insurance company’s profit.
If your health insurance isn’t a part of the government programs mentioned earlier, it is commercial health insurance.
Group health insurance policies provided by employers are commercial as well as individual plans that people can buy if they don’t have an employer or government benefits.
Besides federal regulations, there are state regulations that govern insurance company requirements.
Therefore, commercial health insurance companies vary from state to state.
Some companies operate only in particular states, and the policies offered through national companies can also vary depending on the state’s requirements.
Article Table of Contents
- 1 How Does Commercial Health Insurance Work?
- 2 Types of Commercial Health Insurance
- 3 What Is Commercial Prescription Drug Insurance?
How Does Commercial Health Insurance Work?
When buying commercial health insurance, you choose a plan that will cover the services you need and has a monthly premium affordable for you.
When you choose a plan, you need to consider the deductible.
It’s the amount of money you should pay within the calendar year before the insurance will pay its share.
With a lower deductible, the monthly premium is usually higher, and vice versa.
To find out the total amount of your yearly deductible, you can look at your insurance card or contact your insurer.
The services and amounts that commercial health insurance covers vary depending on your plan, but generally, insurers pay for a significant share of the covered medical expenses of the person.
Certain procedures that are not always medically necessary aren’t usually covered.
The expenses that commercial health insurance typically covers include doctor visits, routine medical care, emergency services, hospital stays, substance abuse treatment, mental and behavioral health, and preventive services.
Preventive services are needed regularly to detect or prevent potential health issues at the early stages.
That way they can be treated or avoided before getting more serious.
Commercial health insurance covers multiple preventive services with zero costs for patients.
These services include screenings, counseling, annual women’s wellness exams, mammograms, and routine immunization.
When you visit a health provider, their office will check your insurance to see which services it covers, and what they should charge you.
After that, they submit a claim for the provided services to the insurance company, which compensates the covered share for them.
If after the insurance payment some balance remains, you will be responsible for that payment.
The insurance covers the biggest share of the bill if the doctor you visit is in the insurance provider’s network.
Types of Commercial Health Insurance
Commercial health insurance comes in different types.
You need to understand the available options, how they work, and the differences between them.
Some types can also be combined.
For example, health savings accounts and flexible spending accounts can be an addition to other plans to cover the expenses that primary plans don’t.
Below, there are the most common commercial health insurance types.
Health Maintenance Organization:
With HMOs, you have to choose a primary care physician in their network.
Besides emergencies, you must see this PCP for any health issue.
They can refer you to the HMO network specialist if they can’t treat this issue.
This doesn’t apply to gynecologists/obstetricians.
With them, patients can make an appointment directly.
This type usually has the lowest premiums and out-of-pocket expenses, but the choices are limited.
If you want to visit a doctor outside the network, the expenses won’t be covered.
The premium, co-pay, and deductible amounts depend on your plan.
Preferred Provider Organization:
There is also a provider network in PPO but policyholders have more freedom and flexibility.
The co-pay is lower if you see an in-network provider and more services are covered.
If you see an out-of-network provider, you still receive some coverage but it’s smaller, and you will have to pay more out-of-pocket.
To see a specialist, you don’t need to obtain a referral from the PCP.
Similar to HMS, PPOs charge monthly premiums, co-pays, and deductibles.
The prices and amounts depend on your policy.
Exclusive Provider Organizations:
With EPO, you have to see the in-network providers, but you don’t need a referral from the PCP.
Out-of-network visits aren’t covered, so you are limited to in-network healthcare providers.
EPO plans are cheaper than most PPO and HMO plans.
They may be the best option for young and healthy people who don’t require much medical care within the coming year.
The plans include the payment of co-pays, deductibles, and monthly premiums.
The POS plans incorporate elements of PPO and HMO plans.
Under this plan, a PCP provides most services and, if needed, can refer you to a specialist in the network.
Services of the PCP are usually not subject to a deductible.
Similar to PPO, you can see out-of-network providers.
It will be partially covered, but you will pay more out-of-pocket.
You have to pay monthly premiums, co-pays, and annual deductibles.
Flexible Spending Account:
A flexible spending account can be an optional supplement to the health benefits package added by employers who offer health insurance.
You can choose an amount that will be taken from your salary during the year.
It will be tax-free and in equal increments from every paycheck.
This money can be used to pay for any eligible out-of-pocket dental and medical expenses, including co-pays, deductibles, eyeglasses, over-the-counter medications, and other services, devices, and supplies.
High-Deductible Health Plan:
In HDHPs, the charged deductible is higher than in other plans.
The limit is defined as an annual deductible of $1,350 per a single person or $2,700 per family as a minimum.
Here, the monthly premiums are typically lower than offered by HMO or PPO.
HDHP often comes with a health savings account so that a deductible could be more affordable.
This is the most appropriate option for generally healthy people who don’t require much medical care and are able to pay a large sum in case of a medical emergency.
Health Savings Account:
If you have an HDHP, a health savings account can be a useful supplement to it.
With this account, you can put away money to cover your co-pays, deductible, and other healthcare expenses.
Similar to a flexible spending account, the funds in the account are tax-free.
This account is often offered by insurance providers who offer HDHP, but this type of account can also be opened in most banks.
A PFFS a.k.a. Medicare Part C is a Medical Advantage plan managed through a private company.
Only if you are enrolled in Medicare, which is available for people of 65 and older, you can choose a PFFS.
Under this plan, you can visit in-network providers and don’t need a referral to see a specialist.
However, doctors choose which services will be covered depending on the case.
You can also visit out-of-network providers who accept the terms of the plan, but you will have to pay higher out-of-pocket expenses.
You will pay co-pays and monthly Medicare premiums.
What Is Commercial Prescription Drug Insurance?
With commercial prescription drug insurance, you have some portion of the cost for medications prescribed by a doctor and filled by a pharmacy covered.
Commercial prescription drug insurance is often covered by most commercial health insurance plans.
However, there are plans that cover only prescriptions and, if you don’t have this coverage yet, you will have to buy it separately.
Most frequently, large commercial health insurance providers offer such coverage.
Similar to healthcare plans, policyholders pay monthly premiums.
Plans can also include a co-pay and annual deductibles depending on the type of prescribed drugs.
Different drug tiers usually come with different co-pay rates.
Insurance providers typically go with generic drugs, which are the least expensive if available.
Name-brand drugs are more expensive, especially if there is a generic version.
Specialty drugs have their own co-pay as they require special handling.