At some point in your life, you might have asked yourself what is the importance of health insurance. Why should health insurance matter to you? It’s an understandably complicated subject at times, but that doesn’t mean it has to be that way! As we continue to dive into the subject, you’ll be able to truly understand the importance – and the surprising simplicity – of obtaining health insurance.
What is Health Insurance
Essentially, health insurance is what helps cover any health or medical-related costs. It also provides coverage for services such as prescription drugs and even dental treatment.
Health insurance is offered in many ways. Whether it be a public or private form of insurance, the services provided vary widely. As an example, sometimes the policyholder can either be reimbursed or paid directly by the insurance company during their stay at the hospital as a result of illness or injuries sustained.
The role of health insurance is to aid the policyholder as best as it can through the many types of plans offered by the provider networks.
Understanding How Health Insurance Works
How does a health insurance plan work exactly? The answer itself is a bit complicated. Health insurance works upon the premise of a managed insurance system. What this means is that a policyholder is required to receive care and services from a designated network of providers. As a result, if a policyholder ever wanted to seek services outside of their network plan, then it is highly likely that they would be paying more on average than usual.
All health insurance company network plans are influenced by crucial variables that help fund their provider networks. Health insurance providers make use of factors like co-payments, deductibles, and coinsurance to craft the policies and services being offered for the policyholder. It is important to note that the services, coverage, and out-of-pocket expenses will differ according to the type of insurance plan.
Importance of Health Insurance
Acquiring a health insurance plan is one of the most important things you can do. Having health insurance will protect you from the financial burden caused by either a serious disease or an accident. For instance, in the event that you ever suffer injuries from a car accident, your health insurance plan will be there to mitigate the costs of that unexpected incident.
Furthermore, through health insurance acquisition, you can gain access to preventive services such as vaccinations and screening procedures that ensure good health over the long-term.
Now the costs of your insurance will be dependent upon the type of plan you come across in the Marketplace. With thorough research and plan-comparison, you can find the right insurance for your needs.
Public Vs Private Insurance
When discussing which type of health insurance policy to buy, we must first consider the two main types of health insurance available to the consumer. Both public and private health insurance have their own distinctions that benefit particular demographics. Understanding how each of them works is critical towards broadening your knowledge of health insurance.
Public health insurance is a state and federal program in which the people have partial or complete coverage of their healthcare costs paid for by the government. In the United States, the two main sources of public health insurance offered to the population are Medicare and Medicaid.
Both of these public health insurance programs offer their own unique benefits and coverage perks to differing demographics.
Medicare is a federally subsidized public health insurance program that provides health coverage to adults over the age of 65 and in some instances younger individuals that meet specific eligibility criteria. The Medicare health program is divided into many distinct parts that provide coverage for many healthcare situations.
This program is divided into four unique parts: Medicare Part A, Part B, Part C, and Part D. Each of these parts tackles a specific service for the general population.
All of these Medicare services are managed by the Centers For Medicare and Medicaid Services (CMS). The main purpose of this agency is to guarantee the coverage of Medicare’s services to the older population and individuals with disabilities such as ALS, Lou Gehrig’s, and even those with end-stage renal disease.
Similar to Medicare, Medicaid is a state and federally subsidized public health insurance program that focuses on providing health coverage to individuals and families from a low-income background. Not only does Medicaid offer coverage for hospital stays and visits, but it also extends coverage for long-term treatment and custodial care.
Now, in contrast to Medicare, Medicaid is organized on a state level. This means that depending on state funding, Medicaid applicants can be subject to different eligibility requirements alongside varying coverage options. Nevertheless, Medicaid does have a universal requirement in order to obtain access to its services. To be eligible for this program, you must be either a U.S citizen, permanent resident, or a legal immigrant.
A private health insurance plan is basically any health insurance plan that is not offered by both the state and the federal government. This type of insurance is solely offered through a private entity whether it be an insurance company, broker, or private company (insurance through job-based coverage).
In order to obtain a private health insurance plan, you can do so through:
- Employer-based health coverage
- Insurance plans provided by a licensed agent or broker
- State/Federal Marketplace
It is worth noting that because of the creation of the Affordable Care Act, private health insurance plans are mandated by this federal policy to provide basic minimum coverage to policyholders.
Terms to Help You Understand The World of Health Insurance
Before gaining complete mastery of the healthcare world, it is of the utmost importance to become familiar with a certain amount of terms. Through these terms, you will be able to understand how health insurance works more easily.
A premium is a monthly payment made upfront to a health insurance company in order to maintain an active insurance plan. The costs of a premium are subject to other factors like deductibles, copayments, and coinsurance. These factors determine whether an insurance plan will have a high or low premium.
A deductible is a specific amount that the policyholder pays annually to cover a portion of their medical costs before the insurance plan covers the remaining amount. For example, if your plan includes a $250 deductible, then it won’t be able to provide any coverage until those $250 are fully paid. Nonetheless, despite having to pay a mandatory deductible, there will be instances where insurance companies may pay for preventative services before the deductible is fully paid.
Health Savings Account
A Health Savings Account (HSA) is a type of account that behaves like a personal savings account. With an HSA, an individual is able to allocate up to $3,350 in order to cover medical expenses. Any contribution made to this sort of account will for the most part not be subject to federal income taxes and may allow users to grow their earnings tax-free.
Coinsurance is the designated percentage of the medical bill that you have to pay, even if the plan deductible has been paid. For instance, if your coinsurance percentage is 20% and you make a trip to the doctor that costs $100, then you would only be paying 20$ while the insurance plan covers the remaining portion.
A copayment is a fixed amount of money that an individual will pay for certain services such as a doctor’s visit or for prescription drug accessibility. The amount of copayment may differ depending on the medical service the policyholder is seeking. In the end, the insurance provider may cover some, if not all of the remaining amount for the service required.