Basics of Health Insurance
Notice: Certain parts of the Affordable Care Act (“Obamacare”) have been modified or removed by government laws and policies. Some rules and regulations that Basics of Health Insurance affect the health insurance market will likely change in the future. Stay up-to-date on Obamacare and other issues relating to health insurance.
Welcome to the world health insurance. Premiums, copays, deductibles and in-network as well as co-pays are all part of the package. Advanced calculus is confusing, you might think.
What is Health Insurance?
People buy health insurance in exchange for coverage on all types of medical care. Many plans include coverage for doctor’s appointments, hospital stays, medication, and emergency room visits.
Insurance is a simple idea. Medical care can be costly. It is not possible for most people to pay it all out of pocket. If a group of people comes together and each person pays a fixed monthly amount (regardless of whether they require medical care at the time), then the risk is spread across the entire group. Because the burden of high healthcare costs is shared, each person is protected.
Are I really going to use it?
Young, you’re more active than an Olympic athlete, you seldom get sick, and your great-grandparents still live at 99. Why spend money on insurance? Aren’t there good odds that you won’t get seriously ill?
We hope so. Every day thousands of otherwise healthy people are injured, need stitches or get in car accidents.
They may not be yours. What if you are one of them? Even a minor accident can cause financial problems. Your family’s savings can be destroyed by a major illness. While insurance may seem expensive, it could end up costing you more to have it.
Every American must have health insurance. People without insurance are subject to increasing penalties. Your parents can keep you on a family plan until you’re 26. You’ll need to purchase your own health insurance or through your employer.
Okay, so maybe I do need it. What can I do to get it?
There are many ways to purchase health insurance. The benefits and costs vary for each. It is important to research the options available to you based on your job, health, and other factors. There will be a lot more health care terminology to learn.
Here are some options for getting insurance.
- The parents’ plan. Children can remain on their parents’ insurance until they turn 26. This applies regardless of whether you are married, have a job, or live in another country.
- COBRA stands for Consolidated Omnibus Budget Resolution Act of 1985. It allows people to keep their existing health plans for a short time and protects them from losing their insurance. COBRA protects people from losing their insurance suddenly.
- Short-term insurance policy. Many insurance providers allow you to buy “student” insurance policies to help bridge the gap between school and your first career. These plans are similar in concept to COBRA but they’re typically more affordable and basic.
- Employer plans. This plan is used by most Americans to get their insurance. This is often the cheapest option as employers will often pay for a portion of the insurance. Many employers provide health insurance coverage for employees starting their first day. Some employers may require you to work for a certain amount of time (e.g., 30, 60, or even 90 days) before offering health insurance coverage.
- Individual policy. It might be more costly to buy health insurance than to share the risk with other people, such as employees or students. If you are considered to be a higher risk, such as if your health is compromised by smoking, you may need to pay more.
- The Health Insurance Marketplace. This allows individuals who are looking for health insurance to make their choice. Sometimes it’s called a Health Insurance Exchange.
- Subsidized State Program. If your income is less than a certain amount and you are under 19 years old, you may be eligible for state assistance through SCHIP (State Children’s Health Insurance Program). Benefits can vary from one state to the next so make sure to contact your state’s Department of Health and Human Services.
- Sometimes, Medicaid is also known as “medical aid.” This is another type of government-funded insurance that is only available to certain individuals, such as low-income adults or people with disabilities. To find out if your state has Medicaid eligibility, visit the Department of Health and Human Development program.
What if I have a health problem?
Insurance companies will call a pre-existing condition if you have been suffering from an illness such as diabetes or asthma. Pre-existing conditions are no longer grounds for insurance companies to refuse coverage.
What type of insurance do I need?
Every insurance plan has its own unique set of features and costs. It can be difficult to choose the right one for you. You want the best benefits at the lowest cost.
Consider all aspects of the plan and not just the price. A plan that has a low monthly premium might not be the most affordable. Your co-pay may be high, or your prescriptions might cost more. This might work for you if you have no health issues. If you visit a doctor regularly or take prescription medication, a higher-priced plan may be more affordable.
It is also important to consider whether your plan covers items that you value. Many plans do not cover alternative therapies such as chiropractic or acupuncture, and many don’t even cover vision or dental care.
Also known as reimbursement or fee-for-service, indemnity plans can also be called fee-for service. This type of plan allows you to see any doctor at any time. The doctor will bill you directly, and then your claim is sent to your insurance company. You get a portion of the total cost back from your insurance company. If your doctor charges $100, you could get 80% or $80 back.
Indemnity insurance plans don’t usually cover preventive care like annual physical examinations. They offer the most options, so the monthly premium is often higher than other types.
Managed Care Plans
A managed care plan is often used to provide insurance for employees. Managed care is when a company offers lower rates to its members by negotiating a contract with specific hospitals and health care providers.
These are the four main types of managed care plans:
- HMO is a Health Maintenance Organization. You choose your primary care doctor when you join an HMO. This doctor coordinates all of your medical care, including annual physicals and hospitalizations. These services are usually quite affordable, but you cannot use hospitals or doctors that are not approved by your plan. Without a written referral, you cannot see any specialist.
- PPO (Preferred Provider Organization). PPO has more flexibility than an HMO. You don’t have to choose a primary care physician. Instead, you can go to any doctor you wish. You will pay less if your doctor is a member of your plan.
- Point of Service (POS) You may be charged more if you go outside your network.
- Exclusive Provider Organization. The EPO network is smaller than a PPO.
Consumer-Driven Health Plan (CDHP)
This plan is relatively new. This plan allows you to set aside money for your health insurance savings. This money can be used to pay for your medical expenses. The deductible that you must meet is often higher than for other types of plans.
It can be strange to buy something you may never use. Consider health insurance an investment in your security and peace of mind. You’ll soon start reaping the health benefits of peace of mind, which means less stress.