Understanding health insurance is essential for any individual or family to have. Regardless of whether or not you or a family member have existing medical conditions, health insurance is vital for preventing illness and injury and offers financial protection in the event of medical emergencies. Health insurance protects your assets from the rising costs of healthcare and makes it possible to receive quality medical care when necessary.
What Are Some Health Insurance Terms I Should Know?
Finding the right health insurance plan requires plenty of research. When choosing the right healthcare plan, it’s essential to understand what benefits will be covered and what costs you will be responsible for. Understanding the various aspects of a plan can be overwhelming, but learning the basic terms will help get you started.
What is a Co-Payment?
A copayment is a fixed amount that a policyholder must pay for a medical service before the insurer pays the remainder of the cost. With an insurance plan, co-payment costs can vary for different services. Services that typically require copayments are routine doctor’s visits, specialist visits, and emergency room visits.
What is an Insurance Premium?
An insurance premium is a monthly payment made on behalf of an individual or family in order to keep their health insurance plan active. The cost of a premium depends on the type of plan (public vs. private) members choose and which tier it falls under. Premiums can either be paid monthly directly to an insurer or through payroll deductions if received through an employer. In addition to the premium, members may be required to pay extra out-of-pocket costs for services — such as deductibles, copayments, and co-insurance.
What is a Deductible?
A health insurance deductible is the amount of money members pay out of pocket before their insurance plan begins to cover benefits. Once the deductible is paid, the insurance plan will then begin to cover eligible expenses. For example, a healthcare plan may have a deductible of $3,000. The member will be responsible for paying for all medical services until they reach that $3,000 limit. Only then will their insurance begin to cover medical service costs. Deductibles depend on different types of insurance and coverage benefits. Typically, the higher a premium, the lower the deductible is likely to be. In turn, a higher deductible means lower monthly premiums.
What is Co-Insurance?
Co-insurance is the shared cost between a policyholder and their insurance company for specified health care services. Co-insurance is typically presented as a split cost, with policyholders taking responsibility for a fixed percentage of the service cost. The insurer is responsible for paying the rest. Co-insurance splits depend on the different types of plans but the most common split is 80/20, with the insurer paying 80% of a service costs and members paying 20%.
What is an Out-of-Pocket Maximum?
An out-of-pocket maximum is the maximum amount an insurance policyholder will pay out-of-pocket for healthcare expenses. This limits the amount that members under an insurance plan will have to pay each year for medical expenses. Once the maximum is reached, the insurer is responsible for paying all eligible healthcare expenses for the rest of that year. For 2020 plans, the maximum is $8,150 for individuals and $16,300 for families. Deductibles, copayments, and coinsurance all contribute to the out-of-pocket maximum. However, monthly premiums and services that are not under a plan’s coverage benefits do not count towards the maximum.
What Are the Types of Health Insurance Plans?
There are various types of health insurance plans that offer different benefits to policyholders. Choosing the right type of plan requires you to consider your health, your family’s health, your preferred level of flexibility and freedom in choosing healthcare providers, and how you want to manage costs between monthly premiums and out-of-pocket expenses. The following plan types offer various options.
A Health Maintenance Organization (HMO) plan is a managed health insurance plan which offers quality care for lower costs. Members pay a monthly premium for access to medical care from a specific provider network. Members of this plan are limited to in-network providers and will not be provided coverage for medical visits outside of the network. HMO plans require individuals to choose a primary care physician, through whom they must coordinate all medical care and receive referrals to see specialists.
A Point of Service (POS) plan is a type of health insurance plan that provides different benefits depending on whether members use in-network or out-of-network healthcare providers. Similar to HMO plans, POS health plans require members to choose a designated primary care physician and get referrals before visiting specialists. The difference, however, is that members have the choice to use doctors, hospitals, and service providers outside of their provider network. POS plans will partially cover out-of-network visits but members will have to make higher copayments for services.
An Exclusive Provider Organization (EPO) plan is a managed health care plan that limits members to a specific provider network. Insurers will not cover costs accrued from out-of-network service visits, with the exception of emergency care. While this is similar to an HMO plan, a notable difference between the two is that an EPO plan does not require members to get referrals from their primary care physicians to visit healthcare specialists.
A Preferred Provider Organization (PPO) plan refers to a health insurance plan that provides maximum benefits for in-network services, but still provides coverage for out-of-network visits. It allows individuals to visit various health providers and specialists without committing to a primary care physician. PPO plans give members the cost-saving benefits of a typical HMO plan, while providing more flexibility and freedom. They are typically more expensive than an HMO plan, as members will usually have to pay higher premiums.
How Do I Get Health Insurance?
If you are looking to purchase health insurance, there are several ways to shop for, compare, and acquire plans. Obtaining the right health insurance plan requires consideration of your lifestyle and financial situation. Though everyone’s situation is different, there are various outlets for anyone to obtain health insurance in a way that works for them.
Health Insurance Marketplace
The Health Insurance Marketplace is a service that helps individuals and families search for and enroll in affordable health care plans. The federal government, by way of the Affordable Care Act (ACA), developed the Marketplace to expand access to affordable healthcare. The Marketplace is accessible through HealthCare.gov, where individuals can shop for various healthcare plans. Small business owners are offered the Small Business Health Options Program Marketplace to provide adequate health insurance for their employees.
Affordable healthcare plans are available outside of the Marketplace. These are provided by private, for-profit insurance companies who offer cost-sharing plans that meet the essential benefits required by the ACA. They can be found by visiting private insurer websites or with the help of brokers and agents who have experience comparing health insurance plans.
Employer-Sponsored Health Insurance
Employer-sponsored health plans, also known as group plans, are healthcare policies selected and received through an employer. These healthcare plans are offered to eligible employees and their dependents and are required to cover essential health benefits. Premium payments typically come in the form of payroll deductions. These are accessible to members of a private company, an organization, or a union.
With indemnity plans, insurance companies pay a fixed portion of medical expenses on a per-incident basis, regardless of the final total cost. These fixed amounts are determined by Usual, Customary, and Reasonable (UCR) rates – the average rates that medical providers charge for a service. Indemnity plans require several out-of-pocket costs, including an annual deductible. Individuals who opt for indemnity plans experience more freedom and flexibility when choosing doctors, healthcare professionals, hospitals, and specialists.
Short-Term Health Plans
Often provided at a low cost, short-term health insurance plans are available for up to a year and can be renewable. Short-term health plans are a temporary option for those who miss the Marketplace enrollment period or are waiting for healthcare coverage to activate sometime in the near future. These plans provide health coverage, but impose limitations. Short-term plans do not cover the essential benefits required under the ACA and are not considered adequate insurance.
Health Care Sharing Ministries
Health Care Sharing Ministries (HCSM) allow individuals or families with similar beliefs and religious values to share medical expenses. Unlike traditional plans, HCSM health plans do not require members to pay a monthly premium for their individual medical needs. Instead, members pay a monthly fee that contributes to a larger collective sum. Members then submit their medical bills to the ministry, and the costs are covered by the collected monthly share payments of other members. HSCM plans do not cover the essential benefits required under the ACA and are not considered adequate insurance.