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Feature Articles: Insurance                          This file is available as a pdf file         

Health Insurance Basics

Brenda Procter, M.S., State Specialist & Instructor Personal Financial Planning, University of Missouri Extension

Ins and Outs of Health Insurance

The U.S. faces a serious health care crisis. Any financial planner will tell you that everyone needs health insurance-period. Yet during 2003, nearly 45 million Americans did not have health insurance. Approximately 18% of non-elderly Americans, including children, went without coverage. Those statistics do not include the substantial numbers of individuals who are underinsured.

In 2003, four out of five of the uninsured were in working families (81%). Two-thirds of the uninsured came from low-income families. According to the Kaiser Foundation, lack of insurance has substantial financial and health impacts. Among the uninsured, nearly half had postponed seeking care in 2003, more than a third (35%) needed care but could not get it, 37% did not fill a prescription because they couldn’t afford it, 36% had problems paying medical bills and 23% had been contacted by a collection agency because of medical bills.

Cuts have already happened in many social insurance programs, and deeper cuts are being considered. In such an environment, it pays to be insurance savvy. Not only can you make the best health insurance choices for yourself and your family, but also you can be prepared to tell your elected and appointed officials what you expect them to do to address the health care crisis.

Many uninsured individuals in Missouri may qualify for MC+, Missouri's health insurance for families. MC+ has programs for children younger than 19, their parents and pregnant women. Coverage ranges from no cost to low cost. Call toll-free 1-877-KIDS-NOW (1-877-543-7669) for more information.


Basic Provisions of Health Insurance Policies

Different types of health insurance coverage include variations on a few basic provisions, some or all of which may be included in individual policies. Companies can be quite creative in the variety of policies and combinations of provisions they offer, so it is important to know what is covered by your own plan.

Provisions include deductibles, coinsurance (or copayments), annual out-of-pocket maximums for the insured, annual stop-losses, lifetime maximum payments for the insured, internal limits, exclusions and pre-existing conditions, waiting periods, options, who is covered, coordination of benefits, grace periods, and convertibility to an individual policy.

  • An annual deductible is the dollar amount that you, the insured, must pay each year before the insurance company pays anything.
  • Coinsurance or copayment is the amount beyond the deductible that the insured pays. An annual out-of-pocket maximum cost is the most you could pay in a given calendar year.
  • The annual stop-loss is the sum of the annual deductible and the maximum annual copayment.
  • The lifetime maximum payment sets a dollar limit on what the insurance company must pay for any one individual's medical costs over a lifetime (often $1,000,000).
  • Internal limits deny payment for certain services or procedures-elective surgery, for example.
  • Exclusions and pre-existing conditions exclude certain illnesses or deny payment on claims that relate to a condition or illness that existed before the coverage began. For example, maternity coverage is denied for someone who purchases insurance after conception, because the pregnancy is viewed as a pre-existing condition.
  • A policy can state a waiting period, a specific length of time that must go by before certain types of coverage start for the insured. Sometimes, for example, maternity benefits will be included only if the insured waits six months before becoming pregnant.
  • Some policies come with options, such as noncancellable, guaranteed renewable, or waiver of premium in the event of disability.
  • Most policies state who is covered and not covered. Sometimes children over a certain age are not covered.
  • Coordination of benefits means that the companies will coordinate benefits payments with one another if you are covered by more than one insurer. This helps avoid double paying to hospitals and doctors.
  • A grace period is usually given that allows you a certain length of time if you pay your premium late before your policy is cancelled.
  • Convertibility to an individual policy is a provision that employers with more than 20 employees must offer to employees who quit or get laid off. If employees leave, they can convert the group policy to an individual insurance policy for up to 18 months. This is required under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). The individual policy usually costs more, but at least there's a way to remain insured. The employer may not charge more than 102% of what the insurer charges to insure you.

For informational brochures on a variety of insurance topics, see


Israelsen, C. Consumer and Family Economics 183, Personal and Family Finance, Winter 2003 Class Lectures, University of Missouri, Columbia, Missouri.

Israelsen, C. & Weagley, R. Personal and Family Finance Workbook, 3rd ed., 2002, Kendall/Hunt Publishing Co., Dubuque, Iowa.

Kaiser Commission on Medicaid and the Uninsured, The Uninsured and their Access to Health Care, November 2004.

Kobliner, B. Get a Financial Life: personal finance in your twenties and thirties, A Fireside Book, New York, NY, 2000.

If you'd like to learn more about this and other personal finance topics, the University of Missouri offers 'Personal & Family Finance' a correspondence course, through the Center for Distance and Independent Study (800-609-3727). Information about this course is available at





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Last update: Tuesday, May 05, 2009