How Does Health Insurance Work?
Many of you either have some form of health insurance or have heard of it frequently as a heated topic in the news. But how does health insurance work? In fact, what is health insurance, really? No matter what your stance is regarding medical insurance and healthcare, there are many people that need help understanding health insurance. Here are some answers to the more broad questions about health insurance in the general sense.
What’s the Point of Health Insurance?
When you break it down on the surface level, health insurance coverage is just like any other insurance policy. It is there to help offset costs after a loss. Only instead of the loss or damage done to a vehicle or home, this insurance helps pay for the loss and damage of your health. It’s there to ensure that you won’t spend away your life savings to pay for the treatment of a major injury or illness.
How Does Health Insurance Help Me?
If you get injured, sick, or need prescription medication for a chronic illness, health insurance will help pay for it. It helps you heal and get healthier quicker and at a lower cost than without coverage.
What sets health insurance apart from other forms of insurance is that it can prevent covered incidents from getting worse. Your auto insurance company won’t help pay for oil changes or brake pad replacement to improve your car’s performance before a damaging accident has occurred. However, health insurance can pay for check-ups and other preventative measures that will either keep you healthy or spot a problem before it becomes worse. Whether you purchase private health insurance or buy a policy through the Marketplace via the Affordable Care Act, it is necessary to have medical coverage in the United States.
Should I Get an Individual Plan or Participate In a Group Plan? An HMO or a PPO? What Does All of This Mean?
One of the things that makes the whole ordeal so complex is the wide range of choices for health insurance. California residents can get an affordable plan through Covered California and other U.S. residents can take advantage of other ACA plans as well. You can become a part of a employer’s group health insurance plan or purchase individual health insurance on your own. You can get an HMO plan that provides additional protection against higher costs or a PPO that allows you more freedom to choose who provides your medical services. To find the best plan within your budget, you will have to do some research while also talking to a health insurance provider in order to determine which type of health plan, benefits, and price work best for your needs. That is the surefire way to get all of your questions answered and get coverage without confusion.
Common Health Insurance Terms
Here are some definitions for the most common terms and phrases revolved around health insurance plans.
Premium: The amount you pay for healthcare coverage, usually divided into monthly payments, quarterly payments, or a yearly lump sum. Your premium may vary depending on a number of factors such as age and income. Typically, the higher the premium, the less out-of-pocket costs you’ll pay for medical expenses.
Copay: The established, fixed amount you will pay for covered medical services.
Coinsurance: The percentage of costs you pay for a covered medical service after you had paid your deductible. For example, if your health plan’s allowed amount for a service is $100 and your coinsurance is 20%, you will have to pay 20% of the $100 bill ($20) after you have paid the deductible.
Deductible: The amount of covered out-of-pocket costs that you’re responsible to pay for each year before your coinsurance goes into effect. It’s important to note that most medical insurance plans don’t pay 100% after you reach your deductible. You should also know that premium payments also don’t count towards your deductible.
Out-of-Pocket Maximum: This the amount of maximum amount of money you will be expected to pay for covered services during your health insurance’s policy period.
Dollar Limits: The maximum amount that your insurance company will pay for your care. Under the Affordable Care Act (ACA), there are no dollar limits applied to the ten essential health benefits.
Ten Essential Benefits: The required minimum benefits provided by any plan sold through the ACA’s marketplace. These benefits include insurance coverage for: prescription drugs, maternity care, pediatric services, preventative services, laboratory services, mental health treatment, rehabilitation services, emergency services, outpatient care, and hospitalization.
Networks: The physicians and services that are covered in your health plan. “In-network” doctors and services means that your plan covers the full-sharing cost. “Out-of-network” services means that the doctor, service, or procedure is only partially covered or not covered at all by your health insurance plan.
Actuarial Value (AV): The average total cost for covered benefits covered by a health insurance plan. It is the projected percentage of how much your insurance plan pays for everyone who uses the plan versus what everyone will pay out-of-pocket.
Drug Formulary: The network of prescription drugs your plan covers and the copayment amounts for those drugs.
MAGI: Short for “Modified Adjusted Gross Income.” This is calculated for you/your family to help determine if you qualify for cost assistance for health insurance coverage or exemptions from the health insurance requirement.
Cost Assistance: The amount of financial help you can get through the ACA to pay for health insurance.
Federal Poverty Level (FPL): The guideline used to determine eligibility for cost assistance for health insurance and other assistance programs.
Health Maintenance Organization (HMO): A health insurance plan that only allows coverage and access to certain doctors and hospitals within its network. While the insured cannot receive coverage for medical services outside the network, most providers under an HMO have agreed to lower their rates for plan members.
Preferred Provider Organization (PPO): A health insurance plan that features a network of providers, but allows more flexibility. You can pick a doctor or hospital outside of the preferred network, however you may be subject to only partial coverage.
Get more information and get help obtaining a health insurance plan by contacting Freeway Insurance. Freeway can help guide you to a quality, affordable healthcare plan through our partners at Covered California. Give us a call at (800) 777-5620 or get a free health insurance quote online today.