One of the most important investments we make is in Health Insurance. All the expenses of the hospital in case of illness, injuries and other needs can be extremely expensive if regular visits or other serious measures are required. Having a health insurance is the sole way to make sure that we are not out of resources when we are stuck in a medical situation.
Even though we are aware of this fact, but still a significant percentage of the population is living without a health insurance. According to Kaiser Family Foundation, more than 47 million adult Americans, which is 15% of total country’s population were not insured back in 2012. Such individuals have to pay approximately one-third of the medical expenses from their pocket, therefore medical expenses are more troublesome to them than the people who are insured. CNBC had an article published in 2013, due to medical bills that year, more than 2 million U.S residents were facing insolvency. A report from Becker Hospital CFO told that the hospital generated an income of $387.3 billion in 2011, which is $10,000 on an average per visit.
You should have a complete understanding of how health insurance works if you want to take advantage of it to the fullest. In this article, most basic concepts of health insurance are discussed, also the most common sources of insurance are also mentioned. The objective is to simplify the policies and increase the knowledge about the same along with presenting all the options you can discover.
Let’s discuss a few basic definitions because having knowledge about important terminology related to health insurance is the first step to develop understanding and get the best suitable plan that serves all purpose to you and your family.
- Premium: The amount which is paid by you every month or every year to a health insurance company for the health coverage.
- Deductible: The amount of money you pay from your own pocket before the coverage plays its role. Most of the time the deductibles are round off amounts, such as $500 or $1000. Usually, the lower the premium, the higher the deductible is.
- Coinsurance: Once the deductibles have been settled, the amount that has to be paid by you to the medical provider. It is usually a predetermined percentage of the prepared bill. If the policy’s co-insurance is fixed at 25% and the bill is calculated to be $100, the policyholder owes $25 in co-insurance.
- Co-pay: this plan is similar to co-insurance, but with one key difference: your co-payment is fixed in the policy, so even before the payment of deductible you may pay your co-payment. For example, your co-payment is fixed at $30, so you will have to pay $25 each time you see a physician.
- Out-of-pocket maximum: The money that is paid by you for the deductibles and coinsurance in a given year before the insurance company starts paying for all covered expenses.
- In-network: The medical services providers and the services covered by the insurance plan. It is generally the most reasonable option for policyholders. Insurance companies have their business tie-ups with these medical service providers and they have negotiated lower rates with in-network providers.
- Out-of-network: The medical services providers and the services not covered by the insurance plan. The difference between in-network and out-of-network providers is that the latter one is more expensive than the former one. This is because they do not have cost negotiated at lower rates.
- Pre-existing condition: any disease, disability or any other chronic condition that exists at the time of getting insured. Also, the symptoms and ongoing treatment for previously existing condition make premium to be higher than that of the usual plans.
- Waiting period: When you get employed, the employer-sponsored insurance plans have a waiting period which enables you to get ensured only after a specific period of time.
- Enrolment period/ Open enrolment: The period of time during which you can apply for health insurance or change your plan or include your spouse/children in the insurance plan. It is difficult to alter your policies until the next open enrolment, although there is an exception if there is a life event. These life events include marriage, divorce, the birth of the child, change in household income, or relocation.
- Dual Coverage: The policy plan of more than one insurer. For example, a married couple receives coverage from both their employers.
- Coordination of benefits: When policyholders of two or more policies make sure that the beneficiaries do not receive more than the combined payout for the policies.
- Continuation of benefits: It is nothing but an extension of a policy which no longer covers an individual under a particular plan. It is mainly used to cover the former or retired employees of a particular company that offers insurance coverage.
- Referral: A notice from a veteran physician to the insurer that recommends specialist treatment for the policyholder.
WHERE CAN YOU GET COVERAGE
Health coverage plans are usually divided into two categories in the United States. You can obtain individual coverage for yourself or your families by contacting an insurer directly, the other option is to get group coverage as an eligible student or employee. Due to the arrival of the Affordable Care Act, the rules and regulations have been altered significantly.
Individual Coverage: initially the cost of policies varied depending on your initial condition. It is all because of the ACA that individual health insurance plans cover you irrespective of your previous health condition under this coverage plans you can choose your own physician, regardless of network. There are three coverage pathways:
- Providers in ACA healthcare exchange
- Providers not in ACA healthcare exchange
- Short-term coverage policies
Insurers INSIDE the ACA Healthcare Exchange:
The ACA Healthcare Exchange was introduced by The Obama Administration to provide an online marketplace for health coverage buyers. There are five categories of the coverage plans:
- Bronze: Policyholders have to pay 40%, co-insurance, plans will pay 60%
- Silver: Policyholders have to pay 30%, co-insurance plans will pay 70%
- Gold: Policyholders have to pay 20% co-insurance, plans will pay 80%
- Platinum: Policyholders have to pay 10% co-insurance, plans will pay 90%
- Catastrophic: Policy-holders have to pay 40% or more co-insurance, plans will pay 60% or less. This option is available for men and women under the age of 30 or the people who qualify for a hardship exemption. An exemption is granted to those people who receive insurance for more than 9 months but less than a year, U.S citizens living outside the country, and others who fulfill the criteria.
Most cost-effective plans are gold and platinum plans for those who want to visit regularly and need a regular prescription. Silver, bronze and Catastrophic plans are suitable for people who are at lower risk and do not visit a doctor regularly or frequently.
Insurers NOT in the ACA Healthcare Exchange: People who do not receive group coverage should apply to the individual plan, otherwise they might be fined each of being uninsured. You can always opt to get insured from insurance companies and not ACA Health Insurance Exchange. ACA Health Insurance Exchange has been introduced to simplify the process and options to choose from.
Your annual income matters the most while opting for an insurance plan, whether it is from an online portal or insurance companies. Individual who earn 400% of federal property level which is approximately $46,000 per year for individual pan and $ 94,000 per year for four-membered household or less are entitled to subsidies that will help them eventually to pay for insurance. But this subsidy plan is only available only on the exchange, in the offline market there is no such benefit. On the contrary, people who earn more than $46,000 per year may find an affordable health plan outside the marketplace. If you want to look for a suitable plan outside the exchange, it is advisable to approach an insurance broker. They will help you locate the best suitable plan for you that meets your requirement and suits your financial conditions. Also, just FYI their services are free of charge as they get their commissions directly from insurance companies, once the plan is sold.
This plan is suitable for those who are uninsured and are waiting for their coverage plan to kick in. It is a cost-effective route for individuals. This is also known as gap policy. Short-term coverage rates start at 85 cents per day. But most of the times, short-term coverage does not fulfill the requirements of ACA.
It is different from the individual coverage plan. In the individual plan, you are supposed to pay for entire premium but in group coverage plan premium is divided between the beneficiary and the institute that provides insurance i.e., a company or educational institute). Group network coverage plan holders are bounded in a physician network but they cannot be denied the preexisting condition’s coverage.
More than 50% of the monthly premium is paid by the employer. Like the subsidy is available for individuals who get insured from the exchange, similarly, businessmen are entitled to tax benefits for providing group coverage to his employees.
Group coverage plans are cheaper than individual coverage plans because in the case of group coverage plans employer bears most of the premium. It is the choice of the employee if he wants to shop for policy in the ACA Exchange or get insurance through his employer. In most of the cases group, coverage plans are more cost-effective. There is a difference for the individuals who want a specialist/physician out of the network or who needs the prescription which is not covered under the plan.
COBRA, known as The Consolidated Omnibus Budget Reconciliation Act provides continuation of coverage plan for a certain period of time to those who have lost their group coverage plans under certain circumstances. These plans are more expensive than short-term or individual plans as the subscriber has to pay the full premium. Circumstances under which a person can get insured under COBRA are;
- Individuals who are fired or who have quit their job
- Individuals whose working hours are changed which has eventually changed the availability of the insurance plan
- Individuals switching their jobs
- Death, divorce, marriage, the birth of a child or any other life event.
FINAL CONSIDERATIONS BEFORE CHOOSING A PLAN
The final decision you take depends on various aspects, it should suit you and your family’s needs. The factors you should consider are:
It is important to know if there are restrictions in the plan you are opting for. The actual idea of a policy is to enable you to receive medical services whenever needed, but some insurers limit your doctor visits whereas some are lenient enough to allow doctor visits whenever required. Before enrolling in a plan make sure there are no as such restrictions.
Are you one of those healthy individuals who make sure they get one yearly health checkup? If you answer is yes, you must get a high-deductible plan with a low premium will be the best option for you.
Do you have a condition that needs treatment and a large amount of money for the same? If so, you will need a low deductible plan, you will have to pay high premiums but you will save more on out of pocket expenses.
PHYSICIANS AND SPECIALISTS
If you are currently visiting a physician and you want to continue your treatment with the same physician then you need to check the network of doctors of your policy. The cost may differ if your doctor is out of that network, it may make your policy expensive.