Basics of health insurance
Notice: Some provisions of the Affordable Care Act (“Obamacare”) may be modified or deleted by laws and government policies. It is possible that rules and regulations governing the health insurance industry will change over time. You can keep up to date with Obamacare and other insurance issues by visiting healthcare.gov.
Welcome to the world that is health insurance. Advanced calculus can be confusing.
What exactly is health insurance?
In exchange for all medical care coverage, people purchase health insurance. Most plans cover doctor’s visits, hospital stays, medications, and emergency room visits.
The basic idea behind insurance is that medical care can be expensive. The majority of people cannot pay for it outright. However, if a group of people come together and each person has to pay a fixed amount each month (regardless if they need medical attention at that time) the risk spreads across the group. High health care costs are not an issue for everyone because the burden is shared equally.
Do I Really Need It
You’re young and you exercise more than any Olympic athlete. A cold is rare, but your great-grandparents live to be 99. Why should you spend your money on insurance? Aren’t the chances pretty good that you won’t get seriously sick?
We hope so. However, every day thousands of healthy people get hurt, have to be stitched, are in accidents with their cars, and find out that they have serious illnesses or need surgery.
It is possible that you will never be one. But what if that happens? Even minor accidents can lead to costly medical bills that can ruin your finances. You can lose your savings if you get a serious illness. Although insurance is expensive, not having it can cost you a lot more.
Everyone in America must now have health insurance. People who do not have insurance must pay increased penalties each year. Your parents can keep you on a family plan until you’re 26. You will need to obtain your own insurance or through your work.
OK, maybe I really do need it. How can I get it?
There are many options for purchasing health insurance. Each one has its own benefits and costs. Consider your medical history, job status, and health needs. It’s likely that you will have to read a lot about health care terms.
These are just a few ways that you could get insurance.
- Parent’s plan. Kids can continue to be covered by their parents’ health insurance plans until 26 years of age in the United States. This is true regardless of whether you’re married or if your spouse lives elsewhere and you have a job.
- COBRA stands short for Consolidated Omnibus budget Reconciliation Act of 1986. This law allows individuals to purchase their current health plan while they wait to lose their health insurance. COBRA is designed for people to prevent them from losing their health insurance.
- Short term policy. Many insurers allow you to purchase short-term or “student” insurance policies in order to bridge the gap from school to your first job. These plans can be similar to COBRA, but are usually simpler and more affordable.
- Employer Plans. This is how most Americans get their health insurance. Employers often contribute to the cost of insurance. This option is usually the most affordable. Some employers offer coverage for health insurance on the first day of employment. Others might require that you work for a set period (30-60, or 90) before they offer health insurance coverage.
- Individual insurance. Owning health insurance can be more expensive than taking on a greater risk, such as students or employees. Higher risk individuals, such as those who smoke, may be required to pay higher premiums.
- The Health Insurance Marketplace. It allows people to purchase their own health insurance and choose the best policy to suit their needs. It is also known as a Health Insurance Exchange.
- Subsidized State Program. For children under 19 and families whose income is below a certain threshold, state assistance may be available through SCHIP, the State Children’s Health Insurance Program. Benefits are different from one state to another, so it’s important to consult your state’s Department of Health and Human Services.
- Medicaid is sometimes called “medical assistance.” It is another form of government-funded healthcare insurance that’s only available to certain people like low-income adults and those with disabilities. Find out if you’re eligible for Medicaid by checking your state’s Department of Health and Human Development.
What happens if I have a medical problem?
Insurance companies refer to a person’s “pre-existing conditions” if they know that you have had a chronic illness like diabetes or asthma. Insurance companies can no longer deny coverage because of pre-existing conditions.
What type of insurance do you need?
There are many options available for insurance plans, including what is covered and what is not. Also, each plan can vary in terms of how much it costs. The decision of which insurance plan is best for you requires some careful consideration.
You should look at all parts of the plan. Not just the price. Low monthly premiums are not always the best. You might have to pay more for prescriptions or co-pays. It might be fine if you don’t have any medical problems. A more expensive plan that covers more of the costs to see a physician or obtain a prescription might be better for you if your health is good.
Also, you need to evaluate whether your plan covers important things. You might not be able to get dental, vision, counseling, or other therapies like chiropractic and acupuncture through most plans.
Indemnity plans may also be known as reimbursement plans or fee-for services. You can go to any doctor you like, whenever you wish. Your doctor pays you directly. Then, your claim goes to your insurance company. Your insurance company will pay you back a portion of your total costs. For example, if you were charged $100 by your doctor, you might be able to get 80% (or $80) back.
Indemnity plans usually don’t cover preventive care such as annual physical exams. The monthly premium for indemnity plans is typically higher than those of other types of health insurance because they give you more options.
Managed Care Programs
Managed care plans are often available when you purchase insurance from your employer. Managed care means that a health insurance company contracts with certain hospitals, doctors, and labs in order to offer lower-cost care for its members.
The following are the basic types of managed-care plans:
- HMO (Health Maintenance Organization). A primary care physician is chosen when you sign up for an HMO. This doctor coordinates all aspects of your medical care from annual physicals to hospitalizations. The co-pay for these services can be quite low. However, you will only be able to use hospitals and doctors who are approved under your plan. You can’t go to any specialist without a written referral.
- PPO – Preferred Provider Organization. A PPO works in the same way as an HMO but with more flexibility. You no longer have to pick a primary doctor. You can choose any doctor that you like. But, you’ll pay less if you choose a participating doctor in your plan.
- POS (Point-of-Service). A POS plan allows you to choose from an in-network physician for most of your care. However, you can go outside the network to see a specialist if you have a medical emergency. You might have to pay more if your care is out of the network.
- Exclusive Provider Organization. A PPO is a similar organization, but the number of participating doctors is smaller.
Consumer-Driven Health Plan (CDHP)
This type plan is quite new. You can set aside a specific amount of money to save for health insurance. The money you set aside for health insurance is yours to use. You will have to pay a higher deductible than with other plans.
It can seem strange to purchase something you won’t use. Think of your health insurance as an investment in peace of mind. Health benefits will begin immediately, since peace of mind equals less stress.