Summary
Health insurance assists you in covering various health and medical services. It is a significant factor, as medical expenses contribute to over 66% of bankruptcies in the U.S. While there is no federal requirement for health insurance, some states impose penalties for those who do not have it. Essentially, health insurance is a contractual agreement with an insurance company to help pay for health services, aiming to mitigate your financial risks associated with accidents or illnesses. Given the high costs of medical care, health insurance can help you access necessary treatment and manage healthcare expenses effectively.
How Does Health Insurance Work?
Health insurance operates as a legal contract where the insurance company agrees to pay or reimburse you for covered healthcare expenses while you commit to paying a monthly premium. In 2014, the federal government started subsidizing health insurance premiums for qualifying Americans under the Affordable Care Act of 2010.
Have you ever wondered about the purpose of health insurance?
In return for your premium, your health insurance may cover costs for doctor visits, medications, hospital stays, and medical equipment. It can also help pay for rehabilitation services or home health care.
Moreover, health insurance promotes preventive care by offering services such as routine check-ups, immunizations, cancer screenings, and counseling to keep you healthy.
Types of Health Insurance
The definition of health insurance encompasses various aspects, falling into two main categories: private and public. Which one suits you best, and how can you obtain health insurance?
Private health insurance covers the majority of Americans, whether provided through employers, purchased directly from insurers, or acquired via the HealthCare Marketplace, which has played a significant role in reducing the uninsured rate.
Public health insurance includes government programs like Medicare, Medicaid, Veterans Administration benefits, and the Children’s Health Insurance Program (CHIP).
What Is a Health Insurance Plan?
A health insurance plan specifies what services are covered, the insurer’s payment amounts, and the duration of coverage.
There are over one million doctors in the U.S., but your plan may restrict you to a specific “network” of doctors, pharmacies, and healthcare facilities to receive full coverage. Your health plan outlines the in-network and out-of-network providers available to you.
Here’s the distinction between the two:
- In-Network: Providers who have a contract with the insurer to offer services at negotiated rates.
- Out-of-Network: Providers who do not have such contracts and may charge higher rates.
Using an in-network provider can save you money. While out-of-network services may be covered, they often come with higher costs, and some may not be covered at all, leaving you responsible for the full expense.
Types of Health Plans
Navigating health insurance can be complicated, and choosing the right health plan can be daunting. Here are the four primary health plans you may encounter, all of which offer in-network services:
- Health Maintenance Organization (HMO): HMOs provide a range of healthcare services through a network of providers. You must select a primary care physician (PCP) within the network who will coordinate your healthcare, including referrals.
- Preferred Provider Organization (PPO): PPOs offer greater flexibility in choosing healthcare providers. You aren’t required to select a PCP, and you can see specialists without a referral, though costs may be higher.
- Exclusive Provider Organization (EPO): EPOs feature a limited network of providers similar to HMOs, except for emergency care. You don’t have to select a PCP or get referrals to see specialists.
- Point of Service (POS): POS plans blend aspects of HMO and PPO plans. You must choose a PCP from within the network and obtain a referral to see specialists, though you can seek care outside the network at a higher cost.
What Does Health Insurance Cover?
Coverage can vary based on your insurance provider and selected health plan. However, common items and services that may be included are:
- Preventive services
- Maternity care
- Hospitalization
- Emergency services
- Urgent care
- Diagnostic tests and screenings
- Laboratory work
- Prescription medications
Keep in mind that you may still incur costs for covered services.
What Does Health Insurance Not Cover?
What is excluded from coverage will depend on the specific plan you choose, but common exclusions often include:
- Cosmetic surgery
- Elective surgeries
- Beauty treatments
- Off-label prescriptions
- Experimental treatments
Additionally, health insurance is typically separate from dental and vision insurance. When shopping for a health plan, it’s wise to inquire about specific healthcare needs and prescriptions.
What Are the Costs of Health Insurance?
After understanding what health insurance entails, you might be curious about its costs. Here are the primary expenses you’ll encounter:
- Premium: The amount you pay for health insurance.
- Deductible: The expenses you must cover before your insurance starts paying.
- Copayment: A fixed fee you pay for healthcare services at the time they are provided.
- Coinsurance: The percentage of costs you are responsible for after reaching your deductible.
“Cost sharing” refers to the portion of covered service costs (deductibles, copayments, coinsurance, and other fees) that you pay out-of-pocket, excluding premiums, except for those using Medicaid and CHIP.
The average annual premium for single coverage is approximately $8,435.
The Difference Between Health Insurance and Medical Insurance
You might wonder about the distinction between health insurance and medical insurance. While these terms are often used interchangeably, they refer to different types of coverage.
Medical insurance typically refers to a more basic plan that costs less than comprehensive health insurance and primarily covers hospitalization for specific accidents and illnesses. In contrast, health insurance provides broader coverage for various health needs beyond just hospitalization.
