If you’ve ever wondered whether you should invest in health care insurance, but felt confused about how exactly it works – you’re not alone. Health insurance in the United States can be expensive, so it’s important to know the ins and outs of how it works, and how you can get the best coverage to keep your health and finances safe. In this post, we’ll go over everything you need to know about how healthcare insurance works so that you can make the best decision for your health.
What is Health Care Insurance & How Does it Work?
Health care insurance helps you to pay for your doctor’s visits, hospital trips, surgeries, prescribed medications, and much more. Essentially, it protects you from unexpected, high medical costs and keeps you from paying the full costs of medical services when you’re sick, injured, or have an accident. Health insurance also helps you pay for preventative care like yearly check-ups, vaccinations, and wellness programs that can help you stay healthy and avoid illness.
Health insurance works the same way your home or car insurance works – you or your employer choose a plan and settle on a certain rate or premium to pay each month. In return, your health insurer agrees to pay a percentage of your covered medical expenses. Your health insurance company and you essentially become partners who work together to cover the costs of your health care, which is also known as cost sharing.
Each month, you make a payment to be covered by your health plan. Your payment is called a premium. If your job offers health insurance, your employer will pay part of the monthly premium, and you will pay the rest. So, you may pay 30% out of your paycheck each month while your company pays the other 70%. It’s important to keep in mind that what you pay will depend heavily on the type of health insurance plan you choose.
Types of Health Insurance Plans
You may be familiar with health insurance that you can get from your employer or a family member’s employer. This is the most popular type of health insurance, but there are many other types of health care coverage that you can also look into. Here are the 4 types of health insurance plans:
Employer-Based Insurance
This is the most well-known type of health insurance. Employer-based insurance is health insurance that is provided by an employer, as a benefit to the company’s employees. An employer will purchase insurance on behalf of the employees, and will cover all or some of the cost of the plan premium. Depending on the plan, employees may have to contribute toward the cost of the monthly premium through copays, co-insurance, or deductibles.
Medicare
Medicare is a federal health insurance program that’s available in the United States for those who qualify. People who qualify must be 65 years or older or younger with disabilities. It’s administered by the federal government who determines the eligibility of those who apply.
Medicaid
Medicaid is a joint state and federal program that provides health care coverage for the nation’s most vulnerable individuals who meet certain income and other eligibility requirements.
Individual Health Insurance
If you’re looking to purchase health insurance on your own, individual health insurance may be the perfect option for you. Individual health insurance is not provided by an employer or the government. You can purchase individual health coverage for yourself or your family members through brokers, navigators, or directly from insurance companies.
The Affordable Care Act
The Affordable Care Act is the health care reform that was signed into law by President Barack Obama in 2010. Commonly referred to as “Obamacare”, the ACA was created to extend health coverage to millions of uninsured Americans. The ACA expanded Medicaid eligibility, established a Health Insurance Marketplace, and prevented insurance companies from denying coverage due to pre-existing conditions. It requires most insurance plans to cover a list of preventive services at no cost to policyholders, making health insurance more affordable to the public.
How Health Insurance Payments Work
Generally, there are two ways you and your health insurance company can share the cost of your visits to the doctor or healthcare provider. A health plan with a copay, deductible, and coinsurance, and a health plan with a deductible and coinsurance, but no copay.
Health Plans With a Copay, Deductible, and Coinsurance
Health plans with a copay are a good choice if you know you’ll need to visit the doctor a lot. Although they’re often the more expensive choice, you’ll have a better idea of the cost of each visit before you go. Here are the most important things to know about health plans with a copay, deductible, and coinsurance:
- You may be required to pay a small fee known as a copayment when you check out of your appointment. Copays are often charged at the doctor’s office, urgent care, emergency visits, and prescription drugs.
- You’ll pay your deductible yearly, and will pay for any services and supplies not covered by the copay until you’ve met your deductible for the plan year.
- You’ll pay your coinsurance yearly. Once you meet your deductible, you’ll only have to pay part of the bill, and your insurance will pay the rest of the bill until you’ve paid your coinsurance for the year.
- Your out-of-pocket maximum (the most you will pay during the plan year until your insurance starts covering all costs) is your copay plus your deductible plus your coinsurance.
- Finally, your insurance starts paying 100% of your health bills until the plan year ends or you change insurance plans.
Health Plans With a Deductible and Coinsurance Without Copay
If you’re looking for a less expensive plan, a health plan without a copay may be the best option for you. This plan is great for people who are relatively healthy and don’t have to visit the doctor too often. Here are some important facts to know about health plans with a deductible and coinsurance without copay:
- You’ll pay your deductible each year including services and supplies until you’ve met your deductible for the year.
- Each year, you’ll pay your coinsurance until you meet your deductible. Then, you’ll pay part of the bill and your insurance will pay the rest of the bill until you’ve paid your coinsurance for the year.
- Your out-of-pocket maximum (the most you will pay during the plan year until your insurance starts covering all costs) is your deductible plus your coinsurance.
- Finally, your insurance starts paying 100% of your health bills until the plan year ends or you change insurance plans.
Final Thoughts
Although it can be expensive, healthcare insurance is a great way to protect yourself from the high and oftentimes unexpected costs of medical care. Now that you have more information on how health care insurance works, you can make an informed decision regarding your health insurance, finances, and well-being.