It helps to have a good understanding of the basics of health insurance so you can avoid confusing (and sometimes misleading) lingo and save money while ensuring you have sufficient coverage. This guide will help you understand individual and family health insurance essentials and assist you in making important decisions so you don’t end up compromising your health and finances.
- The Fundamentals of Health Insurance
Right now, there are two categories of health insurance: individual and group coverage. Individual plans, also known as single-payer plans, are offered by an insurer directly to individuals while group plans are offered by an employer, union or government agency. In general, group plans are less expensive because the employer pays a huge portion of the premium. Since you’re reading this post, I’m going to assume that you’re interested in purchasing an individual plan so that is what this guide will focus on.
Individual plans are purchased from the open market or exchange, and they are usually more expensive than group plans, unless you qualify for a subsidy.
- Cost Terminology
All kinds of health insurance have the same cost-sharing approaches. You pay a premium every month to keep your policy active and you need to consider 3 cost-sharing mechanisms:
- Co-payments: These are fees that you need to pay every time you receive medical care/treatment. The fees are pre-determined and are fixed amounts.
- Deductibles: These refer to your out-of-pocket expense limits that have to be met before your insurance kicks in. For example, your policy may require you to pay the first $400 toward any hospital visit before the insurer will begin to pay.
- Co-insurance: You will pay a certain portion of the total cost for health services, and it often begins after your deductibles are met. In some policies there’s an 80/20 split, which means your insurance plan pays for 80% of the cost while you pay for the remaining 20%.
- Health Insurance Needs of Families
Starting a family is an exciting phase in a person’s life. And it’s also a time to investigate your options for health coverage so that your family’s well being and health are not compromised.
When choosing health plans, you can pick from any of the following options:
- PPOs: Choosing Preferred Provider Organization plans means you and your family are covered when you go to a hospital or physician that belongs to your insurer’s network. You will be charged for out-of-network costs.
- EPOs: Choosing an Exclusive Provider Organization plan means that you are covered when you go to in-network providers however out-of-network charges are completely excluded.
- HMOs: Health Maintenance Organization Plans have stringent arrangements with in-network providers and as long as you stick to these providers, you get full coverage. HMO premiums are also oftentimes lower.
- POS: These plans are a hybrid between HMOs and PPOs in that you get reduced coverage if you choose an out-of-network service and you can opt for any of the 3-tiers that it offers.
- HDHPs: High Deductible Health plans give you substantial tax savings and may be associated with either PPOs or HMOs.
When buying a family health plan, always consider what your family’s health care needs are, in addition to how much you can afford to pay each month for your insurance premiums.