Health Insurance Basics: The 101 Guide To Health Insurance

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health insurance 101

Choosing the best health insurance plan for your needs is a daunting task. It becomes even more elusive with the complex terms and conditions that may sound like gibberish. However, this should not deter you from getting the right health insurance plan for you and your family as this determines your quality of life.

To help you make an informed decision, this article covers all the basics of health insurance and the nitty-gritty details that you should be aware of. It further covers different health insurance plans, how to make sense of different terminologies, and where to get the most suitable package according to your requirements and budget.

Understanding health insurance

Health insurance is an agreement that you sign with an insurance company to prevent paying the high costs of healthcare facilities. You pay premiums over time, enabling the insurance company to cover some part of your medical expenses, prescription medications, and other preventive care. Health insurance also increases your access to healthcare as it assures providers that they will be paid for their services.

The purpose of health insurance is also to reduce individual financial risk. This means that medical costs are spread over many people; everyone pools in to pay for each other’s insurance. If the group is sufficiently large, most people are healthy and, as a consequence, there are fewer medical costs to cover. Most of the spending is accounted for by a minority group, i.e., elderly or chronically ill patients. Everyone will inevitably require medical services at some point. Hence, sharing this risk is a crucial aspect of health insurance.

Types of health insurance plans

There is a wide array of insurance plans that provide a range of coverage. Here, we discuss a few of them for your benefit.

Group health insurance

One way to get health insurance is through your employer. It is one of the cheaper options since the financial risk is spread over many people with good health. Group plans also allow you to split the monthly premium with your employer.

Individual health insurance

Individual plans are not associated with a job and need to be purchased personally. The most common example of this is Obamacare or Affordable Care Act (ACA), which is largely accessible to most demographics. You can buy them through different health insurance companies.

Short-term

These are temporary health insurance plans which may help make up for any gaps in the coverage over a few months up to 3 years at a time.

Medicare

This is a federal plan for senior citizens above 65 years. You can obtain coverage through the government or private insurance companies.

Others

Most health insurance plans do not cover dental or vision care. For dental check-ups and root canals, you will need separate dental insurance. The same goes for vision; there are different plans to get insurance for glasses, eye exams, and contacts.

HMO

Health Maintenance Organizations (HMO) limit coverage to a primary care doctor for you and your family. If you require special attention, then your doctor will refer you ahead to a specialist. HMOs require monthly premiums and small copayments for each visit. They also won’t cover out-of-network care apart from emergencies. You must also reside in their area of coverage to be eligible.

PPO

Preferred Provider Organization (PPO) does not limit you to a primary care physician; you can choose providers from within or outside the network. However, sticking to a single provider may increase costs. Copays and deductibles are lower for providers in the PPO network, but the pay ratio may be higher.

Key terms to remember

No health insurance 101 guide is complete without defining specific terminologies. Understanding what each of them means helps make more sense out of health insurance plans and costs.

Participants

Participants of a health insurance plan include the provider, insurer/carrier, policyholder, and the insured. Hospitals, doctors, clinics, pharmacies are providers. The insurance company is the insurer, while the organization or individual under contract with the insurance company is the policyholder. Lastly, the person receiving the coverage is the insured. 

Premium

The amount you pay to the insurance company to stay enrolled in the program is called the premium. It varies according to age, dependents, and geographic location. Premiums can be paid annually or in installments over the year.

Deductible

Before your health insurance company starts paying for health services, you must spend some out-of-pocket amount known as the deductible.

Out-of-pocket maximum

This is the maximum amount you should pay for your medical expenses in the year, apart from the premium. After reaching this amount, your insurer will pay 100% of your coverage for the rest of the year.

Co-payment

Copayments are fixed out-of-pocket amounts you must pay for services after you avail yourself of them—for example, $15 for every doctor’s visit.

Co-insurance

Co-insurance is your shared cost of a covered medical expense, typically in percentage form. If you have a 10% coinsurance for a prescription medication that costs $100, you will have to pay $10.

How much does it cost?

The most crucial factor that you should take into account when considering the best health insurance plan for yourself is the cost. This is highly variable and depends on the type of plan and the coverage level it provides. Despite having the same plan, costs may change every year. Prices are also determined by factors such as gender, zip code, age, and tobacco consumption.

Think about the bigger picture while choosing a plan. Lower premiums may sound attractive, but you might still end up with high deductibles leading to expensive medical bills before your insurance is effective.

Along with the budget, it is also essential to be mindful of your past, present, and future health requirements. If you need frequent check-ups and regular doctor’s visits, a plan with a high premium but low deductibles will save you more money.

When and where to get health insurance?

Most people get insured during the Open Enrollment Period, which is the annual period for enrolling in ACA insurance plans. But you may also buy insurance at any other point of the year, dependent on relevant circumstances.

However, if you go through a qualifying life event such as a divorce, relocation, or termination of employer-sponsored insurance, then you can also sign up for a Special Enrollment Period that lets you get an ACA plan outside of the annual cycle. If you are interested in Medicare, know that it has its Annual Election Period. Other plans like short-term are also available throughout the year.

See Also: Using Big Data To Improve The Healthcare Revenue Cycle

You can buy health insurance through an insurer or your state / federal marketplace. Many online marketplaces also let you browse through hundreds of plans from various companies. Choosing a suitable insurance plan requires research and knowledge. We hope this article served as the health insurance 101 guide you needed to make the best decisio

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