A Survival Guide to Understanding Health Insurance
Health insurance coverage is a way to help you manage your healthcare costs. With health insurance, you pay a health care company’s premiums and then you get benefits to pay for healthcare expenses. These eligible expenses can be injuries or regular doctor checks.
Understanding health insurance can help you narrow down your options for your plan.
Why You Should Have Health Insurance
When understanding health insurance, it's also important to understand why you should have it. Health insurance can be expensive so many people go without it. However, while health insurance can be expensive, medical emergencies can also be expensive. If you undergo a medical emergency without having insurance, you can find yourself with a lot of medical debt and the only recourse is bankruptcy.
Protect Your Finances And Yourself
If you take good preventive care of your health, it can be hard to see why insurance is so important but sometimes having a medical accident has nothing to do with your health. You can break an arm or slip on the last stair at your house and dislocate an ankle. Any costs can climb much higher if you need surgery or rehabilitation. You may not be able to work while you are recovering from a medical emergency and this means you can lose out on pay. Even with insurance, it can be hard to pay for your healthcare costs but insurance does help.
There are no longer any penalties on a federal tax return if you aren’t insured. However, there are some states that still impose a penalty. Even without a penalty, you are still protecting your financial future and health status by having a health insurance policy.
Health insurance is good for your health. When you don’t have insurance, you might avoid being treated for any minor problems that can then turn into a bigger issue fast. Access to quick treatment and preventive medicine can be the best ways to avoid any expensive hospital stays. If you have insurance then you won’t have to worry about this so much. If you put off going in for treatment and do have a serious medical condition then you may have a harder time finding health insurance in the future.
If you are worried that you can’t afford insurance, you could be wrong. There are a lot of talks about the cost of health care but there are health plans at different price points.
What Health Insurance Will Typically Cover
Understanding health insurance helps you know what is covered. Whether you are chronically ill or healthy, health insurance gives you financial protection for both unexpected healthcare needs and routine expenses. Health insurance will usually cover preventative health services that keep you healthy and screen for potential health issues that can cause problems later on.
It can also cover some other benefits, such as prescription drugs, maternity care, or emergency services. When you have health insurance, it can protect you from high medical costs, whether you expect these costs or not. If you skip health insurance then you have to face these costs without any financial help.
Various Health Insurance Plans
The coverage you get will depend on the different type of health insurance plan you have and the insurance company you choose. For example, some plans cover dental care and vision, while others don’t. A health insurance plan may not cover any care that the insurer says is not medically necessary. Some procedures that are not considered medically necessary include weight loss surgery, cosmetic surgery, infertility treatment, and long-term care.
Understanding Health Insurance Terms
When understanding health insurance, you need to know about some terms so that the plans will make more sense.
Premium
This is what you will pay the insurance company for your coverage every year or month.
Deductible
This is money you will need to pay out of pocket before your health coverage kicks in. Deductibles will be rounded amounts, such as $1,000. The lower the premium, the higher the deductible.
Co-Insurance
This is what you owe to the provider once the deductible has been paid. This will be a percentage of the total bills.
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Co-Pay
This is similar to co-insurance. Instead of waiting until the deductible is paid, you make the copayment at the time of service. Co-payments are standardized by the plan so you will pay the same amount every time you go to the doctor or see a specialist.
Out-of-Pocket Maximum
This is the amount of money you will pay for deductibles and charges each year before the insurance company starts covering expenses.
Waiting Period
Many health insurance plans, especially employer ones, have a period of 90 days before you can enroll in the plan and receive benefits.
Open Enrollment
This is the window of time in which you can apply for health insurance and change your plan to include children or your spouse. Policyholders aren’t usually able to adjust until the next open enrollment period happens and unless there is a qualifying life event. These events can include changes to income, interstate residence, divorce, or the birth of a child.
Dual Coverage
This is maintaining a health plan with more than one insurer. Some people may get coverage from their spouse’s employer and their own employer.
Where You Can Get Coverage?
There are two general categories where you can get coverage as part of understanding health insurance. You are able to get coverage for yourself or your family by reaching out to an insurer directly or you can get group coverage as an eligible student or employee.
Historically, the availability and cost of individual coverage were variable before the Affordable Care Act (ACA) was passed. Now you can choose from three different coverage options if you are looking for individual health coverage. You can choose providers within the ACA exchange, outside the ACA exchange, or ones that provide short-term coverage.
If you choose the health insurance marketplace, there will be four main categories of plans.
Bronze
This plan is typically the cheapest but the deductible can be pretty high.
Silver
With a silver plan, the healthcare costs and premiums are moderate. Deductibles may not be as high but still can be high. This is usually the most popular type of plan.
Gold
With a gold plan, your costs are lower but there are higher premiums.
Platinum
These types of plans have the highest monthly premiums but the deductibles are much lower than the other plans.
Choosing a Health Insurance Plan
When understanding health insurance, you need to know how to choose a health insurance plan.
Choose Your Health Plan Marketplace
Many people will get health insurance through an employer. If you are one of these people then your company is the marketplace. Plans in the marketplace may cost you more since many employers pay a portion of the premiums and these plans will usually have lower total premiums. If your job won’t provide health insurance then shop on the public marketplace for your state or the federal marketplace if available. You are able to purchase insurance directly from an insurer or through a private exchange. If you choose these options then you may not be eligible for premium tax credits.
Compare Different Types of Plans
There are a lot of acronyms when you are shopping for plans. Understanding health insurance means knowing what these acronyms mean. You will usually find HMOs, PPOs, EPOs, and POS plans. The type of plan you choose will determine your out-of-pocket costs and which doctors you are able to see. When you compare plans, check out the summary of benefits. Online marketplaces will give you a link to the summary and show you the cost near the title.
A provider directory will list the clinics and doctors that are in the network. If you are going through an employer then you can ask the workplace benefits administrator for this information.
HMO
With a Health Maintenance Organization, you have to stay in-network in order to get coverage unless it’s an emergency. You typically need a referral to see a specialist. However, there are lower out-of-pocket costs.
PPO
With a Preferred Provider Organization, you don’t have to stay in-network but out-of-network care can be more expensive. There are more provider options and you don’t need to get a referral to see a specialist.
EPO
An Exclusive Provider Organization gives you lower out-of-pocket costs and no required referrals but there may be less freedom to choose providers.
POS
With a Point of Service plan, there are more provider options and there will be a primary care doctor who coordinates care for you with referrals. You don’t need to stay in-network to get coverage but care can be less expensive if you do stay in-network.
Understanding health insurance means comparing different plans. When you are doing this, closely look at your family’s medical needs. Take a look at the type of treatment and how much you have received. It can be hard to predict every medical expense but it helps to be aware of trends to help you make a better decision.
If you choose a POS or HMO plan that will require referrals then you will need to see a primary care physician before a specialist. Due to this, many people like other plans. These plans can be a good choice if you don’t mind having your primary care doctor choose specialists for you. There will be less work on your end since the staff handles your medical records and will coordinate your visits.
Compare Health Plan Networks
When you go to an in-network doctor, costs will be less expensive because insurance companies have contracted lower rates with the in-network providers. When you go out of the network, these doctors don’t have the same agreed-upon rates. If you have a preferred doctor you are already used to seeing then make sure they are included in the provider directories.
You can also ask your doctor if they take any plan you are considering. If you don’t already have a preferred doctor then you want to find a plan with a large network so that there are more choices. A large network is even more important if you live in a smaller, rural community since you will more likely need to find a local doctor who takes your plan.
Compare Your Out-of-Pocket Costs
Your out-of-pocket costs are going to be as important as the network. The plan’s summary of benefits should spell out how much you are paying for out-of-pocket services. Your portion of costs includes the deductible, co-payments, and co-insurance. The total you spend out of pocket will be limited and the out-of-pocket maximum is listed in the plan information. Usually, the lower your premium is, the higher your out-of-pocket costs will be.
During this step, you want to narrow down choices based on the various out-of-pocket costs. A plan that pays for your medical costs with a higher premium can be helpful if you need to see a doctor more regularly, take expensive medications, are expecting a baby or plan to have a baby, have planned surgery, or have been diagnosed with a chronic condition, such as cancer or diabetes. A plan with higher out-of-pocket costs may mean that you aren’t able to afford the higher monthly premiums and don’t see a doctor very often.
Compare Benefits
Now you should have your options narrowed down to just a few. In order to further narrow down your options, look at the summary of benefits and see if any of the plans cover a wider variety of services. Some plans may have better coverage for things such as mental health care, physical therapy, or fertility treatments, while others may give you better emergency coverage. If you skip this step then it’s possible that you will miss out on a plan that may be suited the best for your family.
Once you have just a few options it’s time to address any lingering questions you may have. In some cases, you need to speak with a person so you may want to call the customer service line for the insurance company. Write down your questions so you are prepared. Here are some questions you may have. Are the drugs you need covered under the plan? What happens if you are sick while traveling abroad?
Understanding Health Insurance and Health Savings Accounts
A health savings account, or HAS, can be helpful for many different plans. If you are insured under a plan that has a high deductible then an HSA may be useful. This is an account that is used solely to save money that you will use for any future medical expenses. Money distributed from an HSA and used for medical expenses is non-taxable. Any disbursed money that is not used for medical expenses is then included as part of the gross income on your tax return and can be taxed.
FSA vs. HSA
A flexible spending account, or FSA, is created by your employer and is similar to an HSA in that it has tax-advantaged savings. However, with this account, you technically own the account and will make regular contributions with your paycheck deductions. Contributions are not taxable but annual contributions can’t exceed a certain amount. These funds can be used to cover different medial expenses and medications. With an FSA, usually, you use it or lose it. This means you have to use the funds while the account is active.
How Much Does Health Insurance Cost
Your health insurance costs can change significantly by age and location. There are different companies that will offer coverage in different areas with different rates. Each person that you add to the policy, such as a child or spouse, will also add to the calculations. Your costs also depend on if you use tobacco and the type of plan you pick.
Ways Insurance Coverage Protects You from High Costs
There are two different ways that health insurance can protect you from high medical costs.
Out-of-Pocket Maximum
This is the amount you will pay if you get sick. It will reset each year on your policy renewal date, which is January 1st. This means if the plan you choose has $3,000 for the out-of-pocket maximum then once you pay $3,000 in co-insurance, co-payments, and deductibles, the insurance company pays for the rest of the covered care above the amount for the remainder of the year.
Unlimited Checkbook
The insurance plan has unlimited benefits on how much the company spends each year or over the lifetime to cover essential health benefits. Once you have reached your out-of-pocket maximum the insurance company is then required to pay for all your covered medical care with no limits.
Finally,
Health insurance covers a wide variety of things and has a number of benefits. When choosing a plan, you will need to think of your current medical needs, as well as your future needs. Some plans will allow you to have access to more doctors, while others are more limited but will save you money on out-of-pocket costs. Understanding health insurance will help you pick the best plan for your needs.