In the simplest terms, health insurance protects you against high medical bills. An insurance cover can pay for all or a fraction of your bill, depending on the agreed terms. Whatever the case, these covers significantly reduce the burden of medical bills making it easier for people to access health services.
Health insurance also gives financial protection. By footing some or the entire bill, the cover effectively safeguards you from sliding into debt since a single medical bill is more than enough to wipe out your savings and leave you in a deficit.
How Does Health Insurance Work?
Health insurance works pretty much like car insurance except for a few differences. With a medical cover, you will cost-share your medical expenses in various ways depending on your agreement. Some companies will charge you higher premiums and provide a more comprehensive cover. Others are slightly more affordable, allowing the insured to pay a reasonable premium each month, but the coverage will also be limited. It’s up to you to choose one that fits your needs and budget.
An insurance cover can include different kinds of services. They can help pay the cost of consultation, medication, and even the more costly expenses of treating chronic conditions.
Preventive services are also covered under certain insurances. These give you access to annual vaccinations and shots plus routine checkups.
In addition to covering you, medical insurance can also pay for the expenses of your nuclear family. This may include your spouse and children. It’s important to scrutinize the details on who is included in the coverage before buying any plan.
Key Medical Insurance Terms
When shopping for medical insurance, you will come across several terms that can be a bit confusing. Let’s break them down:
A premium is a monthly payment you make to keep your insurance plan active. It is one of the several out-of-pocket expenses that you should expect.
Are low monthly premiums cost-effective? Well, it depends. If you and your beneficiaries require little healthcare services in general, then a plan with low monthly premiums and relatively higher deductibles can be cheaper in the long run. However, if you have higher medical needs, a plan with higher premiums and lower deductibles will save more money.
A deductible is the amount of money you pay out-of-pocket for a certain covered healthcare service before your insurance provider starts to pay for that service.
So, if your insurance plan has a $2,500 deductible, you’ll be responsible for paying the first $2,500 when receiving that service before the benefits of your plan kick in.
The amount of money in your deductibles usually varies depending on the terms in the cover. However, you should expect them to be much lower if you’re paying higher premiums. On the other hand, lower premiums can result in higher deductibles.
Co-payments or co-pays for short are fixed payments that you may be required to make whenever you seek certain services or medications. The rest of the payment is covered by the provider.
Coinsurance is a cost-sharing arrangement where you will pay a set percentage out-of-pocket to receive covered medical services or drugs. For instance, if the cover has a 20% coinsurance agreement for doctor’s visits and the visit costs $100, you will pay $20 out of pocket, and the provider clears the rest.
This payment is made after the deductible is satisfied.
e. Out-of-pocket Maximum
As you can tell, a plan can have a lot of out-of-pocket payments. To control these payments and protect the patients, the Affordable Care Act set up an out-of-pocket maximum. This is the maximum amount of cost-sharing money you can pay every year. Therefore, if your plan has a maximum out-of-pocket payment of $30,000, once you reach this ceiling with deductibles, co-pays, and coinsurance, the provider will be responsible for the rest of the payments in that year.
Note that premiums are not included in the out-of-pocket maximum.
Types Of Health Insurance
There are different types of medical insurance out there. Here are some of the major ones:
a. Individual & Family Plans
These are also known as Obamacare or Affordable Care Act (ACA) plans. They are available to everyone. The plans are also subsidized to make healthcare affordable to most people, including households that meet the federal poverty level to a certain degree.
These are also called group coverage. Under the plan, you will share the monthly premiums with your employer. However, you’ll be responsible for some cost-sharing payments.
This is a federal health insurance program for seniors aged 65 years and above. The plans can be bought through the government or a private insurance company. There are quite a number of private companies offering medicare. They are also well spread out to make the services readily available. So, for instance, if you live in San Diego, a quick medicare insurance San Diego search should give you a list of the companies you can get the cover through. They also offer different plans depending on your budget and needs.
Short-term plans are ideal for bridging coverage gaps. You can get a short-term or temporary plan that is only a few months long to some that can go for up to 3 years.
Other special medical covers pay for certain services usually exempted from most of the plans discussed above. These include dental and vision care insurance plans.
Preferred Provider Organization (PPO) Vs. Health Maintenance Organization (HMO)
PPO and HMO are the most common types of health insurance plans.
In a PPO plan, providers work with an extensive network of hospitals and doctors to offer healthcare services at a discounted price. These plans are usually more expensive since they provide a larger pool of physicians and facilities to choose from.
With an HMO plan, the insurance with designate a primary doctor to you and your family, so you won’t have too many options. Most HMO plans have lower out-of-pocket expenses. They’re, therefore, ideal if you have a tight budget, but they will limit your flexibility.
Where To Buy Health Insurance
You can get medical covers from the federal or state marketplace. You can also go through an insurer.
Hopefully, that answers all your questions on how health insurance works, why you need one, and where you can buy it from. There are many providers out there, so make sure you go through the fine print carefully to get the best deal.