Why Get Health Insurance?
Every individual, at one point or another, will require some type of medical service, product, or treatment – no matter how great our health is; thus, health insurance is a product we must all purchase. Unforeseen and unexpected illnesses or injuries can occur, sometimes at the fault of others; however, regardless of the cause, we will seek medical assistance at some point. Without an adequate health insurance policy in place, many of these expenses will have to be paid for out of pocket. Health insurance can be one of the most confusing types of health insurance to understand and can seem very confusing and overwhelming. However, by breaking down the components and reviewing all parts of the health insurance policy, you will gain a better understanding of exclusions, loopholes, cancellation clauses, coverage clauses, and everything in between.
Let’s take this one step at a time. A health insurance policy must be purchased through a licensed agency. In the USA, health insurance is largely regulated at the state level. Each state implements and regulates its own set of rules for the industry. Health insurance can be purchased online or in person at an insurance agency. Health insurance companies base their premiums on the amount of risk an individual or group poses to the company. A younger person in excellent health will likely pay a much lower premium than one who is of advanced age and has certain health issues like cancer, diabetes, or asthma. The latter group will more likely seek medical services and treatments more often that a healthy person.
Group and Individual Health Insurance
There are two basic types of health insurance that can be purchased; individual health insurance and group health insurance. An individual health insurance policy is a contract between an individual or family and an insurance agency. A group insurance policy is one that is purchased through an employer. You will find a significant difference in the amount of premium charged by each plan. Normally, a group health insurance plan will offer lower premiums. This is because the rate is based on a larger group of people. Think of it as purchasing your groceries in bulk; the larger quantity you buy, the lower the price is for each individual item. Individual health insurance premiums are based on buying only one insurance policy; akin to buying one item at a store – there is no discount. Group health insurance policies also tend to provide a wider expanse of coverages, whereas individual policies can be somewhat limited in their benefits.
Health insurance policies can be broken down even further from just individual and group coverage. In the USA, there are different services that can be purchased through these health insurance plans. The plan you choose will also impact your health insurance rates. One of the most common plans is a Health Maintenance Organization, or HMO. With an HMO, patients are required to select a primary care physician from a pre-authorized list. This physician will be responsible for all care and service the patient requires. He or she can refer the patient to a specialist inside the network of approved medical providers. Usually, an HMO offers the lowest premiums for health insurance. If a patient chooses to seek medical treatment outside of the approved network, any services received may be charged a higher rate and the health insurance policy may not cover these services.
Types of Health Insurance
A common health insurance plan is a Preferred Provider Organization, or PPO. This health insurance plan offers more flexibility than an HMO and these benefits are reflected in the higher premium. Patients are not required to choose a physician for their primary care. They are also given a list of network approved medical providers but they have the choice to use providers outside of the network as well. With a PPO, any medical care received is paid for as it is used, unlike an HMO where the patient pays a monthly premium for the year.
What is an HSA, or health savings account? It’s another type of health insurance plan that is relatively new to Americans. With a HSA, patients can deposit and withdraw funds into a special account that is to be used to pay for medical procedures, treatments, and services. This type of health insurance is considered to be a high deductible plan, meaning that the insured must pay a large portion of the medical bill up front before the health insurance benefits will begin. The upside to this type of health insurance is that the money held in the account is tax-exempt. The premiums for an HSA are significantly lower than other health insurance plans. This also gives the insured person a larger incentive to become more active in their personal health care.
A Health Reimbursement Account, or HRA, is a fourth type of health insurance policy that a person can purchase to ensure against large medical expenses. An HRA permits an individual’s employer to reimburse an employee for any medical costs that they have paid. This benefits both employer and employee as they receive many tax advantages.
Health insurance policies are meant to offset the high cost of medical services that a person would otherwise have to pay out of pocket. Plans can range from basic, routine services to comprehensive plans that cover major surgeries. The choice of coverages is really up to the individual. They should assess what their needs are in regards to health care, especially if there are dependents and children involved. In this case, a more comprehensive policy may be required. Some services covered may include prescription drugs, physician office visits, x-rays and other laboratory tests, hospital stays, preventative care or surgeries. Individuals can also opt to purchase additional coverages such as dental insurance to supplement their existing health insurance policy.
An important issue to review is pre-existing conditions. Basically, a pre-existing condition is one that is present before a health insurance policy has been purchased. A pre-existing condition can include such health concerns as diabetes, high blood pressure, cancer, or asthma. In many cases, an insurance company can increase a person’s health insurance premiums if there is a pre-existing condition present. They may exclude the pre-existing condition from coverage, or depending on the severity of the condition, they may decline the applicant for coverage altogether. This is because a pre-existing condition is likely to need medical treatment on an ongoing basis, which will cost the insurance company a substantial amount of money in claims. Some health insurance policies actually consider maternity and fertility issues to be a pre-existing condition. As mentioned before, insurance companies prefer to insure those who are less likely to need expensive medical care.
Some additional, important factors in health insurance that need to be discussed include deductibles, co-pays, and co-insurance. Many health insurance plans require the insured to pay a deductible. This helps to reduce the amount of small claims a person may make. A deductible is the amount that a patient must pay before health insurance benefits will start to pay for medical procedures. A co-pay is when the insurance company will pay a certain portion of a claim and then the remainder is left for the insured to pay. This is common with prescription drugs. Co-insurance is another stipulation on some health insurance policies. Co-insurance will split the risk between two or more health insurance companies so that one company doesn’t have to absorb the entire amount of the expenses.
When shopping for health insurance, it is recommended that you compare several quotes with well known and reputable companies. Always look for a health insurance company that is well established and has a strong financial stability. Some of the largest health insurance companies in the USA include United Healthcare, Humana, Blue Cross Blue Shield, Cigna, Kaiser Permanente, Health Net, Aetna, and Coventry.
When you contact one of these companies for a health insurance quote, they will ask you several questions regarding your current health status as well as your family medical history. This medial questionnaire is meant to help the insurance company determine how big of a risk you pose to them. Different insurance companies often use different criteria to screen applicants, so always obtain several quotes before making your final decision. As well, be honest in all of your answers, as the insurance companies will thoroughly review all of the information and if any of it is inaccurate, they may adjust your premium or even deny you coverage.
Health insurance is one of the most important investments a person will ever make in their life. We all insure everything we own; automobiles, homes, boats, travel trailers, and businesses, but sometimes, we forget about the most important thing – our lives. Health care in the USA is very expensive and without a health insurance policy to protect us against possible catastrophic illnesses or injuries, we could add these financial burdens on to an already devastating life event. Health insurance will help offset these expenses and help you to concentrate on what matters most – staying healthy.