How health insurance actually works.
Medicaid, Medicare, MCOs, SCOs, HMOs, PPOs, in-network, out-of-network, deductibles, coinsurance — the vocabulary of getting paid, explained in plain language with calculators you can actually play with.
Three ideas that explain most of it.
01
Public vs. commercial coverage
Where the money comes from shapes everything. Medicare is federal. Medicaid is state-run (MassHealth in Massachusetts). Commercial plans come from employers or the marketplace. Patients on both Medicare and Medicaid are 'dual eligible' — the most complex to bill.
02
Managed care & capitation
Instead of paying each bill, states often hand a private insurer (an MCO) a fixed monthly amount per member — capitation. The insurer keeps what it doesn't spend, which is exactly why how sick a member is rated drives so much behavior.
03
Networks & cost-sharing
In-network means a contracted rate and lower patient cost. Out-of-network means higher cost and possible balance billing. On top of that sit the deductible, coinsurance, and out-of-pocket maximum that decide who pays what.
Want to see how this plays out when a payer controls the assessment? Read why the UnitedHealthcare Medicaid case matters.
Calculators that make it click.
Numbers beat definitions. Adjust the inputs and watch how coverage decisions move real dollars.
In-network vs out-of-network
The same service, billed at the same charge, can cost a patient wildly different amounts depending on network status. Adjust the inputs to see why.
In-network
Patient pays
$0
- Coinsurance$0
- Balance bill$0
- Plan pays$0
Out-of-network
Patient pays
$0
- Coinsurance$0
- Balance bill$0
- Plan pays$0
Educational model. Deductibles, separate OON deductibles, and No Surprises Act protections vary by plan and situation.
Commercial plan types
HMO, PPO, EPO, POS — the four common commercial structures decide whether a patient needs referrals and whether you'll be paid out-of-network. Tap one to explore.
| HMO | PPO | EPO | POS | |
|---|---|---|---|---|
| Primary care physician | Required | Optional | Optional | Required |
| Specialist referral | Required | Not required | Not required | Required |
| Out-of-network coverage | Not covered | Covered (higher cost) | Not covered | Covered (higher cost) |
| Relative cost | $ | $$$ | $$ | $$ |
| Flexibility | Low | High | Medium | Medium |
The insurance glossary.
Every term that shows up in a benefits call, in plain language. Search it or skim it.
Public programs
Medicare
Federal health coverage for people 65+ and some younger people with disabilities. Same rules nationwide; funded by the federal government.
Medicaid
Joint state-and-federal coverage for low-income people. Each state runs its own program with its own rules (Massachusetts calls its version MassHealth).
Dual eligible
A person enrolled in both Medicare and Medicaid — often the sickest, most complex members, with two payment streams tied to the same care.
CHIP
The Children's Health Insurance Program — low-cost coverage for children in families that earn too much for Medicaid but can't afford private plans.
Managed care & payment models
MCO (Managed Care Organization)
A private insurer paid a fixed amount per member per month to manage a population's care, instead of being paid per service. It keeps what it doesn't spend.
SCO (Senior Care Options)
A specific MassHealth managed-care program for dual-eligible seniors, paid by capitation sized to each member's assessed acuity.
Capitation
A fixed per-member, per-month payment. Healthy members are profit; sick members cost more than the check — which is why acuity ratings matter so much.
Fee-for-service (FFS)
Payment for each individual service delivered. The opposite incentive of capitation — more services means more revenue.
Value-based care
Payment tied to outcomes and quality rather than volume of services.
Commercial plan types
HMO
Health Maintenance Organization — lowest cost, requires a PCP and referrals, covers in-network only.
PPO
Preferred Provider Organization — most flexible, no referrals, covers out-of-network at higher cost.
EPO
Exclusive Provider Organization — no referrals, but in-network only.
POS
Point of Service — a hybrid: PCP and referrals like an HMO, but out-of-network coverage like a PPO.
HDHP / HSA
A High-Deductible Health Plan paired with a tax-advantaged Health Savings Account.
Network & access
In-network (INN)
A provider with a contract and negotiated rate with the plan. Lower patient cost, no balance billing.
Out-of-network (OON)
A provider without a contract with the plan. Higher patient cost, lower allowed amounts, and possible balance billing.
Balance billing
When an out-of-network provider bills the patient for the difference between the charge and the plan's allowed amount.
Single case agreement (SCA)
A one-off contract between an out-of-network provider and a payer to cover a specific patient's care.
No Surprises Act
Federal law that protects patients from many surprise out-of-network bills, especially for emergencies.
Prior authorization
Payer approval required before a service is delivered or it won't be covered.
Cost-sharing
Premium
The fixed amount paid (often monthly) to keep coverage active, regardless of whether care is used.
Deductible
The amount a patient pays out of pocket before the plan starts sharing costs.
Copay
A fixed dollar amount for a specific service (e.g., $30 per visit).
Coinsurance
A percentage of the allowed amount the patient pays after the deductible is met (e.g., 20%).
Out-of-pocket maximum
The most a patient pays in a year. After this, the plan covers 100% of covered services.
Revenue cycle
Verification of benefits (VOB)
Confirming a patient's coverage, benefits, and cost-sharing before care begins.
EOB (Explanation of Benefits)
The payer's statement explaining how a claim was processed — what was allowed, paid, and owed.
Medical necessity
The standard a payer uses to decide whether a service — and its level of care — is covered.
Concurrent review
Ongoing utilization review to keep authorizing continued stay at a level of care.
Clean claim
A claim with no errors or missing information that can be paid on first submission.
Clawback
When a payer recovers money already paid, often after an audit.
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Turn this knowledge into collected revenue.
Understanding the rules is step one. We help behavioral health facilities act on them — verifying benefits, optimizing network strategy, and recovering what's owed.