What is Health Insurance?

Health insurance is a system that helps cover the cost of medical care. Instead of paying the full price for healthcare services out of pocket, you pay a monthly fee called a premium to an insurance company. In return, the insurance company helps pay for your medical expenses when you need care.

Why is Health Insurance Important?

Health care in the U.S. can be very expensive. Without insurance, a single visit to the doctor or a trip to the emergency room can cost hundreds or even thousands of dollars. Health insurance helps reduce these costs, making it more affordable to get the care you need.

How Does Health Insurance Work?

1. Premium: This is the amount you pay every month to have health insurance, regardless of whether you use any medical services.
2. Deductible: This is the amount you must pay out of pocket for healthcare services before your insurance starts to cover costs. For example, if your deductible is $1,000, you will need to pay the first $1,000 of your medical bills each year before the insurance company begins to pay.
3. Copayment (Copay): This is a fixed amount you pay for a specific service, like $20 for a doctor’s visit. You pay this each time you receive that service.
4. Coinsurance: This is a percentage of the cost you pay for a service after you’ve paid your deductible. For example, if your coinsurance is 20%, you pay 20% of the cost of the service, and the insurance company pays the remaining 80%.
5. Out-of-Pocket Maximum: This is the most you will have to pay for covered services in a year. Once you reach this amount, the insurance company pays 100% of covered services for the rest of the year.

How Do These Costs Translate to What You Pay?

Let’s break down how these different costs work together using an example:

1. You Have a Monthly Premium:
   • You pay a set amount every month to keep your insurance active. Let’s say this is $300.
2. You Need Medical Care:
   • You visit the doctor and the total bill is $1,200.
3. Deductible:
   • Your deductible is $1,000. This means you need to pay $1,000 out of pocket before your insurance starts to pay.
   • You pay $1,000 directly to the healthcare provider.
4. Coinsurance:
   • After paying the deductible, you still owe $200 of the total bill ($1,200 – $1,000 = $200).
   • If your coinsurance is 20%, you pay 20% of the remaining $200.
   • This means you pay $40 (20% of $200) and the insurance company pays the remaining $160 (80% of $200).
5. Copay:
   • For specific services, like visiting a specialist, you might have a copay. Let’s say your copay is $30 for each visit.
   • This means you pay $30 at the time of each visit, regardless of other costs like the deductible or coinsurance.
6. Out-of-Pocket Maximum:
   • Throughout the year, all your costs (deductible, copays, coinsurance) accumulate. If these add up to your out-of-pocket maximum, say $6,000, the insurance will cover 100% of your covered (In-Network) medical expenses for the rest of the year.

Contradicted Rates and Balance Billing Rules

• Contacted Rates: In-network providers agree to provide services at specific rates, and are contractually prohibited from charging covered members more than the contracted rate for covered services.  For example, if your provider charges $200 for a visit, but is in-network with your insurance who pays $140 for the session, you would only pay/be charged based on the $140 rate.
• Balance Billing Rules: In some cases, you may receive a bill for the difference between what your insurance company pays and what the healthcare provider charges. This is called balance billing, this is only an option if accessing your Out-of-Network (OON) insurance coverage.   In the same scenario as above, the OON provider can bill you the balance (balance bill) of the charged vs covered rate.

Types of Health Insurance Plans

There are 2 types of insurance coverage Commercial and Government plans.

1. Commercial Plans Include:
   • Employer-Sponsored Insurance: Many people get insurance through their jobs. Employers often pay a part of the premium, making this option more affordable.
   • Individual and Family Plans: These are plans you purchase on your own, not through an employer. You can buy these plans through the Health Insurance Marketplace (Healthcare.gov) or directly from insurance companies.  These include health insurance plans and coverage that are a result of the Affordable Care Act (or ObamaCare).
2. Government Programs:  These plans are beneficial to millions of Americans of all ages – however they come with different provider access.  Even those that are provided through private insurance companies.
   • Medicare: For people 65 and older or with certain disabilities.
   • Medicaid: For low-income individuals and families. Eligibility varies by state.
   • CHIP: The Children’s Health Insurance Program covers children in low-income families who don’t qualify for Medicaid.

Choosing a Health Insurance Plan

When selecting a plan, consider the following:

• Monthly Premiums: How much you can afford to pay each month.  Premiums give you access the care through the plan. These payments are not paying for healthcare services.
• Deductibles and Out-of-Pocket Costs (OOP): Higher deductibles usually mean lower premiums, but you’ll pay more upfront for care.  Out-of-Pocket (OOP) costs are the most you will have to spend via deductibles, co-insurance, or copay charges.  Once the OOP is satisfied are no additional charges for covered services for the calendar/policy year.
• Network of Providers: Ensure your preferred doctors and hospitals are in the plan’s network to avoid higher costs.
• Covered Services: Check what services are covered, including Out-of-Network coverage, prescription drugs, mental health care, and specialist visits.

Key Takeaways

• Health insurance helps manage the high costs of medical care.
• You pay a monthly premium and share costs through deductibles, copays, and coinsurance.
• Provider participation, contracted rates, and balance billing rules impact what you ultimately pay for healthcare services.
• There are various types of plans.  The health care provider determines the coverage and the fees.
• Understanding your needs and comparing plans based on costs and coverage can help you choose the right insurance.

Health insurance can seem complex, but breaking it down into these basic components makes it easier to understand. With the right plan, you can protect yourself from high medical costs and ensure you have access to the care you need.