Unexpected accidents, routine doctor visits, surgery, and prescriptions can be costly. Affordable health insurance helps minimize the risk of medical costs. Health insurance covers some of the cost of medical care you receive for illnesses, health conditions and injuries. Medical insurance is when a health insurance company protects you financially against medical losses. In this post we review what is health insurance, why health insurance is important, how to get health insurance, what it covers, types of health insurance plans and more.
A health insurance plan helps cover medical care and services, like emergency care, preventive care, medical treatments, behavioral health, and sometimes hearing and vision.
What is Health Insurance?
Health insurance is when you buy a medical insurance policy. An insurance policy is a contract that requires the health insurance company (called the insurer) to pay some or all your health care costs in exchange for the monthly policy premium you pay them. The medical insurance company (the insurance plan) helps you (the policyholder) pay for covered medical care and services. For example, provider fees for visits, fees for surgery, anesthesia, hospitalizations, and also medications costs.
Why is Health Insurance Important?
Health insurance minimizes the financial risk of health care payments. Medical insurance provides financial protection because health care is expensive.
- Because you are paying monthly premiums, medical insurance should lower your out-of-pocket costs. Most plans cover preventive care at 100%, meaning there are few or no out-of-pocket costs for preventive care like annual checkups, flu shots, vaccinations, and routine health screenings such as colonoscopy, mammograms, and cholesterol screening.
- You may need medical care unexpectedly because of an emergency, a hospitalization, or a serious diagnosis like cancer. Medical care can be costly. Affordable health insurance helps pay for those costs, and once you pay your annual out-of-pocket maximum, your plan will usually pay for all of your care for the rest of the plan year.
Who Needs Health Insurance?
Affordable health insurance can benefit everyone because it helps pay for medical expenses, such as getting sick, getting into an accident, or needing prescription medications. Health insurance coverage is not mandatory on a federal level as of January 2019; however, some states may require you have insurance to avoid a tax penalty.
What Does Health Insurance Cover?
Health insurance coverage may vary significantly, depending on what plan you purchase. It is important to understand what is covered and out-of-pocket expenses as you compare plans.
Because of the Affordable Care Act, most health plans must cover essential care benefits. Essential care benefits are 10 categories of health services.
These essential care benefits include:
- emergency services
- laboratory services
- prescription drugs
- ambulatory services (outpatient care without being admitted to the hospital)
- substance use disorder and mental health services
- pediatric services (including dental and vision care for pediatrics)
- preventive and wellness services
- rehabilitative and habilitative services and devices (meaning services and devices to help people with disabilities, chronic conditions, or injuries recover or gain mental and physical skills)
- maternity, pregnancy, and newborn care (both before and after birth)
It is important to look over the policy to confirm what it does and does not cover.
How Can I Get Health Insurance?
- Many people in the U.S. get affordable health insurance through their employers. If you lose your job, COBRA may allow you to purchase health insurance through your employer but is usually more expensive because most employers do not pay any of the premium.
- Once you reach 65 years old, you are eligible for Medicare, but most people purchase a Medigap policy to reduce their out-of-pocket expenses.
- You can compare affordable health insurance plans and apply for health insurance marketplace coverage through Healthcare.gov. This site will bring you to your state’s health insurance marketplace if your state has one. This website, the health insurance marketplace, can also tell you if you are eligible for subsidies, Medicaid, or CHIP.
- There is free help available to help you find and apply for the best plan for you, usually by using a broker or assistant.
- You can buy a health insurance policy directly through one of the many health insurance companies.
- Membership organizations can be a way to buy health insurance at group rates. Be sure you are buying health insurance, not just a specific discount plan. A discount plan does not usually include things like hospitalizations, office visits, and treatments, you may have significant out-of-pocket expenses.
Types of Health Insurance – Marketplace Categories
If you buy insurance from the Marketplace, the plans have 4 ‘metal’ categories, Bronze, Silver, Gold, and Platinum. These categories show what percentage of the cost you pay and what percentage cost the insurance company pays.
For example, a Bronze plan may be a good choice for those who want a low-cost monthly premium to protect from worst-case medical scenarios but will have more cost-share if you use medical services. Below is a summary chart of the 4 metal categories.
Summary of Marketplace Categories (When Buying Insurance on the Marketplace)
|Metal Category Marketplace Plans||Cost of Monthly Premium||Cost When You Need Care||Deductibles||Good Choice if:|
|Bronze||Lowest||Highest when you need care||The amount you pay out of pocket as a deductible for medical costs before the insurance plan starts to pay can be thousands of dollars a year||You want something with low-cost monthly premiums to protect against worst-case medical scenarios. You have to pay out of pocket for most of your routine care.|
|Silver||Moderate||There are moderate costs when you need care||The out of pocket cost you pay before the insurance plan starts to pay (the deductible) is typically lower than those of Bronze plans||If you financially qualify for cost-sharing reductions, you must pick a Silver plan to get extra cost savings. Whether you qualify for extra savings or not, the silver plans are a higher monthly premium than a Bronze plan.|
|Gold||High||Lower out of pocket costs when you need care||The out-of-pocket cost that you pay before your plan starts to pay (the deductible), is typically low.||For those who prefer to pay higher monthly premium payments each month to have more costs covered by the plan when you get medical care. If you use a lot of health care services, a Gold plan may be a good value.|
|Platinum||Highest||Lowest cost when you get care||The out-of-pocket cost you pay before your plan starts to pay (the deductible) is usually very low. This means the health plan starts paying its share sooner than the other categories of plans.||You typically use a lot of care and are willing to pay a high monthly premium, knowing nearly all your other costs will be covered|
HEALTH INSURANCE PLANS
Health insurance companies usually have a network of providers and facilities that they contracted with to provide negotiated rates to insurers. These companies negotiate rates and contracts with providers and facilities to help keep costs down to offer lower rates.
There are four basic plans, HMO, EPO, PPO, or POS
The type you choose will impact how much you pay out of pocket. It will also determine which providers and facilities you can use.
Each plan contracts with providers and hospitals to keep costs down. These contracted providers are called in-network providers. Can you use these in-network providers? Or, on the other hand, do you want the flexibility of using out-of-network providers?
Some plans are more restrictive and you can only use in-network providers. On the contrary, other plans may allow you to use out-of-network providers. However, plans with the flexibility of covering for out-of-network providers and facilities will cost you more.
Below is a comparison of the different types of health insurance plans.
Summary of Plan Types
|Plan Type||Do you have to use the in-network providers and facilities to get coverage?||Is a referral needed for procedures and specialists?||Summary|
|Health Maintenance Organization (HMO)||Yes, unless it is for an emergency||Yes, usually||You choose a primary care provider who must coordinate your care by writing referrals, you must select providers and facilities from the in-network list, but you have lower out of pocket costs|
|Exclusive Provider Organization (EPO)||Yes, unless it is for an emergency||No||Referrals are not required, you must choose providers and facilities from the plan’s in-network list, but you have lower out-of-pocket costs.|
|Preferred Provider Organization (PPO)||No, but using in-network providers and in-network facilities is less expensive||No||Referrals are not required, you have the freedom to choose any provider or facility (you do not have to use the plan’s in-network list) but out of pocket costs are higher|
|Point of Service Plan (POS)||No, but using in-network providers and in-network facilities is less expensive||Yes, usually||You usually need referrals to see a specialist, and you have the freedom to choose any provider or facility|
Shop around and price the various health insurance plans, so that you can find a plan that meets your needs.
Questions to Ask When Getting Medical Insurance
Choosing a good health plan can be challenging. However, it is worth the time comparing policies to ensure you are purchasing the right policy for you and your family.
Here are some health insurance questions to ask before choosing a health plan.
What Type of Plan is it?
Whether it is an HMO, EPO, PPO, or POS will indicate whether you
- need to stay with the plan’s network of providers, and also
- whether you will need referrals to see a specialist.
How Much will I have to Out of Pocket for Medical Care?
You want affordable health insurance.
- Find out how much the premium will cost. Premiums are usually charged monthly.
- Is there a health insurance deductible, and if so, what is it? This is the amount you pay out of pocket before the insurance plan kicks in and starts paying their share of costs.
- Ask whether you will be charged a copayment, which is a fixed fee like $30 for office visits.
- You will also want to know whether you will have to pay coinsurance in addition to other costs.
- What is the annual out-of-pocket maximum, the maximum amount you will have to pay annually.
What Benefits are Covered Under your Policy?
- Does the plan cover medical care, prescriptions drugs, dental and vision?
- Are the prescriptions you take now covered by the insurance plan, and if so, how much will you have to pay toward each prescription?
- What type of alternative therapies are covered? If you’re interested in alternative medicine, you may want to see what is covered, for example, a chiropractor or acupuncture.
- Some insurance plans provide extra perks like discounts for gym membership or grocery store discounts.
Do I have to Stay within a Network of Providers and Facilities?
- Are my current doctors in-network?
- Is the laboratory I go to in-network?
- Is my pharmacy in-network?
- Each plan has a list of providers and facilities in the network. It is a good idea to review the lists to see if your current doctors will be considered in-network for this plan.
- Does the plan have out-of-network benefits? Meaning, can I use out-of-network providers if I pay more?
Questions to Ask Health Insurance Agent or Broker
When using a health insurance agent, or a broker, you want to make sure you understand their role in helping you.
To learn about the most options, you may want to work with a broker that sells plans that can be purchased on the health insurance Marketplace in addition to non-marketplace plans.
Some questions to ask include:
- Who does the agent or broker work for?
- Does the agent or broker charge you fees if you purchase affordable health insurance from them?
- Will they discuss plans from only one insurance company? Or, do they help you with plans sold by multiple insurance companies?
- Does the broker or agent help to see if you qualify for government plans? Meaning, will see if you are eligible for subsidies or other income-eligible health insurance programs like Medicaid or CHIP?
Frequently Asked Questions About Medical Insurance
How Much is Health Insurance?
The cost of health insurance can vary tremendously. For example, depending on
- whether you are purchasing an individual plan for yourself only or purchasing a family plan
- where you live, and
- what is covered under the plan
In addition, the types of health insurance plans vary. For example, in some policies, you must use in-network providers. On the other hand, some policies allow you to use out-of-network providers but these cost you more.
Furthermore, some policies may have smaller monthly premiums. However, when you receive services there may be higher out-of-pocket costs.
Going to the healthcare.gov site is a good starting point to compare plans. You can also compare the monthly premiums, benefits each policy offers, and your cost share.
In addition, when using healthcare.gov, you can determine if you are eligible for any subsidies or other help to pay for affordable health insurance.
Which Health Insurance is the Best?
What affordable health insurance plan is best for you depends on several variables. This makes it a very personal decision.
- If you purchase an HMO plan, you usually must use the plan’s network of providers and facilities.
- However, a PPO plan generally allows the use of out-of-network providers but usually will cost you more.
Starting with healthcare.gov is a good idea because you can compare prices and policies and confirm whether you qualify for subsidies to help pay for the monthly premium. You can work with a broker or an agent to help you find affordable health insurance.
The federal government provides help through the Find Local Help tool. This tool enables you to locate a marketplace-trained private insurance broker. There is usually no fee for using a broker. In addition, using a broker does not mean you are paying higher premiums.
When Does Health Insurance Expire After Leaving Your Job?
The time period for when your benefits remain active after leaving your job varies by company. Employers explain the handling of benefits in their employee handbooks or employment contracts. For example, some companies might end benefits immediately. On the other hand, another company may allow coverage to continue until the end of the month.
Health Insurance Dependent Age
Per the HHS, if your health insurance covers children, you can have your children on your insurance policy until they turn 26 years old. This is possible even if they 1) are not living with their parents, 2) are not financially dependent on their parents, 3) they are married, or 4) they are eligible to enroll in their employer’s plan.
This coverage ends on the child’s 26th birthday. When this coverage is lost on their 26th birthday, they qualify for a Special Enrollment Period. This period allows them to enroll in a new health plan outside open enrollment.
Can Health Insurance be Canceled?
You can cancel your medical insurance policy. However, consider arranging for a new policy before canceling. This will ensure you don’t have a coverage gap.
To find out what to do to cancel your policy, you can 1) review your account online, 2) call the insurance company, or 3) talk to your HR representative if it is an employer-sponsored plan.
Insurance companies may stop offering different policies. Therefore it is possible you may receive a letter stating your current health plan is no longer being offered. This usually is considered a cancellation letter.
A health insurance company can’t drop you because you used too much coverage. However, if your policy is canceled for legitimate reasons, you will have to join a new plan timely if you do not want to have a gap in coverage.
Can Health Insurance be Backdated?
Usually, medical insurance can’t be backdated, but it depends on the rules of the medical insurance company. You can ask the effective date of your policy and whether they could backdate it to an earlier date. The effective date is when the medical insurance policy begins. The effective date is determined by the insurance company and is usually at some point after your first premium payment.
However, there are some exceptions. Medicaid, for example, may have retroactive eligibility that covers expenses for a certain period before the application date. However, this is usually only if the beneficiary would have been eligible for benefits during that time.
Can you Have Health Insurance in Two Different States?
You can buy medical insurance in two different states. However, you should think about why you want to do that and what other options you may have.
Every time you buy and use a new policy, you have to pay the deductible first and have additional out-of-pocket expenses (like copays and possibly coinsurance). If you are planning on going back and forth between two states, some plans offer the option to use out-of-network providers, so you could use that policy while in different states.
Is Health Insurance a Business Expense?
A company that provides employees group health insurance can write off that cost as a business expense. Individuals who purchase their medical insurance can usually take federal income tax deductions for those premiums. Individuals don’t pay business taxes, so they take personal deductions instead of writing off business expenses.
Does Health Insurance Cover the Surgery? Does Health Insurance Cover Dermatologist?
Every health insurance policy is different, so it is best to do some research, know what is considered a covered benefit and how much out-of-pocket cost you will incur.
Your insurance policy is an agreement, a contract between the insurance company and you. The insurance policy will explain what medical services are a covered benefit, for example, office visits and prescriptions drugs.
If you don’t know whether something is a covered benefit or want information regarding your out-of-pocket expenses, you should do some research and ask your insurance company for additional details.
Does Health Insurance Cover Therapy? Does Health Insurance cover Lasik?
What services are covered vary with each policy. Review your policy to understand whether things like therapy or lasik is covered, and if so, how much out-of-pocket cost you will incur. Don’t hesitate to call the insurance company to find out.
What is a Deductible in Health Insurance?
A deductible is a cost you pay for medical services each plan year before your health insurance starts to pay its portion of the cost of covered health insurance benefits. The amount you pay in a deductible may vary considerably, depending on which health insurance policy you choose.
- After you pay your annual health insurance deductible, your insurance plan kicks in, and you start paying any cost shares.
In addition to the deductible, copayments and coinsurance are out-of-pocket costs, also called cost shares, you have to pay each time you get a medical service after paying your annual deductible.
Is Health Insurance Tax-Deductible?
Health insurance premiums may be deductible on federal taxes because monthly premium payments are classified as a medical expense. Generally, if you pay for medical insurance with out-of-pocket money, you can deduct the amount from your taxes if you meet certain criteria. When submitting tax deductions, the IRS allows you to select either a standard deduction or you can itemize your medical expenses. It is best to discuss tax questions with a professional
How Does Health Insurance Work Through the Employer?
Employer-sponsored health insurance, or a group plan, is medical insurance the employer offers to eligible employees. The employer usually will share some of the cost of the monthly premium with you.
Is it Cheaper to get Medical Insurance Through an Employer?
Employer-sponsored health insurance, or a group plan, is usually cheaper than an individual health plan because the employer usually helps pay for some of the monthly insurance premium.
What to Do When Health Insurance Won’t Pay?
If your health insurer does not pay a claim or end your coverage, you can appeal that decision. Insurers have to tell you why they denied your claim and what your rights are if you disagree with their decisions. Usually, in your denial letter, the insurer provides this information.
Can Medical Insurance be Retroactive?
Usually, health insurance can’t be backdated, but it depends on the rules of the insurance company. You can ask the insurance company what the effective date of your policy is and whether they could backdate it to an earlier date. The effective date is when the health insurance policy begins, which the insurance company determines and is usually at some point after your first premium payment.
However, there are some exceptions. For example, Medicaid may have retroactive eligibility that covers care expenses for a specific period before the application date if the beneficiary was eligible for benefits during that time.
When Does health Insurance End?
When you enroll in a medical insurance plan, there is usually an end date to the policy. You should research health insurance renewal before your policy ends, and either renew or apply for a new plan during open enrollment.
An insurance policy can end for many reasons, and the date it ends depends on the policy rules and why the policy ended. For example, if your medical insurance is through your employer and you leave your job, whether your medical insurance stops immediately, on a specific date, or at the end of the month depends on the policy rules.
Purchasing an affordable health insurance policy can be overwhelming. There are numerous different health insurance policies to choose from, and you can enroll in a health insurance plan in many ways. If you do not have an employer-sponsored medical insurance option, it is a good idea to start by reviewing health insurance marketplace coverage options at healthcare.gov to compare plans and see if you qualify for a subsidy.