The Importance of Health Insurance
Access to medical coverage is an important part of staying healthy. Health insurance helps cover these medical expenses, from routine visits and prescriptions to specialists and nuclear imaging.
Without insurance, even a minor accident or illness can drain thousands of dollars from your bank account and destroy your financial health. Paying the whole cost for doctors visits, exams and medication can quickly take its toll. In fact, medical bills are the number one cause of bankruptcy filings in the United States.
Thanks to the Affordable Care Act, health insurance is required. If you choose not to have coverage, you’ll pay a financial penalty. The penalty for not having coverage adjusts every year, with the 2015 penalty being the higher of 2% of your household income or $325 per a person ($162.50 per child under 10).
Helps Maintain Good Health
People without health insurance are less likely to see a doctor when something is wrong. And not going in right away can lead to bigger problems down the line. Many illnesses are treatable when they are treated early enough.
Most insurance plans cover routine and preventative care visits at no cost to you. These include annual physicals, check-ups and vaccinations.
Affordable Care Act Basics
The Patient Protection and Affordable Care Act (ACA), sometimes referred to as Obamacare, went into effect March 23, 2010. The purpose of the ACA is to make health care more affordable and accessible for the general public, therefore lowering the number of uninsured citizens.
Here are some of the basics:
ACA Individual Mandate
This requires anyone not covered by an employer plan, Medicaid, Medicare or other public insurance program to obtain a private insurance policy or pay a penalty. Some people may be excused due to financial hardship or religious conflict.
Any business employing 50 or more people that does not offer health insurance to full-time employees must pay a tax penalty if the government has subsidized a full-time employee’s healthcare through tax deductions.
Minimum Standard For Health Insurance
The ACA defined a set of guidelines establishing a minimum standard for acceptable health insurance.
Health Insurance Exchange
Exchanges are state-based marketplaces where individuals and small businesses can find and purchase health insurance. These marketplaces are regulated and partially subsidized by the government.
Individuals and families that fall between 100 to 400% of the federal poverty level can receive federal subsidies for their health care coverage. The subsidies are on a sliding scale and health care must be purchased through an exchange.
This requires health plans to cover a person regardless of age, gender or health status (including pre-existing conditions). Rules vary by state, but the insurance provider is not limited on how much to charge.
A Word About Mental Health
The ACA requires most individual and small employer health insurance plans, including all plans offered through the Health Insurance Marketplace to cover substance use and mental health services.
Private, or individual coverage is purchased through a private insurer. The quotes you’ll find here are for individual policies.
This coverage can be purchased with a variety of options, and unlike most group plans, these allow the insured to select specific features needed.
For the majority of people, having insurance through an employer is the easiest way to be insured. Many employers offer coverage at a rate that is less expensive than private insurance and much more convenient.
The key drawback? Not all employers offer coverage, and employees who are part-time or contracted often have fewer or no choices.
Individuals and families facing financial hardship can receive insurance at a reduced rate through special government programs such as Medicaid and the Children’s Health Insurance Program (CHIP).
To qualify for Medicaid or CHIP you must fall under a certain income level. The qualification requirements vary from state to state.
Veteran’s Administration or Tricare
Medicare is a benefit provided to U.S. citizens over the age of 65 (younger in some cases). This program was designed to help older citizens maintain their health during retirement years.
Medicare includes several options to choose from, including:
- Original Medicare: This includes Hospital Insurance and Medical Insurance and is the basic plan.
- Medicare Advantage Plan: These are issued by private insurers. They cover everything that Original Medicare covers and often come with a variety of additional benefits such as meal plans, free gym memberships and other incentives. Many include Prescription Drug coverage as well.
- Prescription Drug Coverage (Part D): Additional coverage for prescription drugs.
- Medicare Supplement: These are additional plans offered by private insurance.
Types of Individual Plans
There are several types of health insurance plans. The differences affect who the insurer will pay, how much they will pay and how the insurer pays.
The four basic plan types are:
Health Maintenance Organization (HMO)
HMOs focus on preventative care and wellness, but work closely with a specific list of health care providers. Patients select a Primary Care Provider and use the providers that are in the HMO’s network.
Preferred Provider Organization (PPO)
A PPO contracts with selected hospitals and doctors to create a network of preferred medical service providers. Patients are encouraged to only use Providers in the network and pay less for using them. Patients may use other providers, however the cost can be substantially higher.
Point of Service Plan (POS)
A POS plan is similar to both an HMO and a PPO. The patient selects his or her Primary Care Provider and pays less for using doctors, hospitals, and other health care providers that belong to the plan’s network. However, providers outside of the network may be used at an increased cost.
High Deductible Health Plan (HDHP)
This type of plan features a higher deductible than other plans. HDHP plans are frequently paired with a Health Spending Account or reimbursement plan that allows the patient to pay for medical costs on a pre-tax basis.
Source: healthcare.gov, cms.gov
Catastrophic coverage plans are made to be a low-cost option to protect against the types of injuries and illnesses that can create very large medical bills such as bad car accidents, cancer or Crohn’s disease.
A catastrophic plan covers only 3 basic visits per year up to the deductible. While the premiums for these plans are low, the deductibles are usually quite high. They are designed for the person who can cover the majority of their own medical costs.
What Individual Plans Cover
All health insurance plans are required to cover certain basic treatments and services, although they can do so at various levels and costs.
Basic coverage benefits include the following:
- Outpatient Care: Treatment received during a doctor’s office visit without hospitalization.
- Emergency Service: Treatment received in the emergency room.
- Hospitalization: Treatment received in a hospital.
- Maternity and Newborn Care: Treatments for mother and child, including prenatal and labor and delivery.
- Mental Health and Substance Use Services: Treatment for mental health issues, behavioral health and substance abuse.
- Prescription Drugs: Medications prescribed to you by your doctor.
- Rehabilitative Services: Services such as speech therapy, physical therapy and occupational therapy.
- Lab Tests: Laboratory analysis including blood work or urinalyses. X-rays may also fall under this category.
- Preventative Treatment: Medical screenings, physicals and other treatments that serve the purpose of retaining good health before issues arise.
- Chronic Disease Management: Service and treatment for long-term chronic conditions, such as COPD, diabetes and certain heart conditions.
- Pediatric Services (including oral and vision care): Treatment for children under the age of 18.
Source: Zamosky, L. (2013). Healthcare, insurance, and you the savvy consumer’s guide. New York: Apress
How Much Will I Pay?
Determining how much a plan will cost depends on several factors, including the type of plan you have, who provides the treatment and where that treatment is provided. When reviewing a quote, look at the following factors to determine what plan is best for you.
This is the upfront cost for the insurance plan. It is usually paid annually, quarterly or monthly.
This is a specific fee that is due for a particular service or treatment. For example, a regular office visit might require a $25 copay.
This is a percentage that is paid for a given medical service. For example, a hospital stay may have a 20% co-insurance, meaning that the insurance pays for 80% while the patient owes 20% of the total bill.
This is the amount that the patient is responsible for paying before the health insurance benefits are applied.
Maximum Out-of-Pocket Expense
This is the most that you will pay in deductibles, copays and co-insurance. Once this amount is met, the insurance plan pays 100% of the costs.
Decide what kind of coverage you need. If you visit the doctor a lot or have chronic health issues, look for a plan that includes lower copays. Don’t forget to check the copays for specialists.
If you are healthy, rarely visit the doctor and you have disposable income, you may consider a higher-deductible plan.
Are you taking any long-term medications? If so, be sure to review the plan’s prescription drug costs. These may vary considerably by plan and insurer.
Not Satisfied? Switch!
What if you’re unhappy with your plan? Switch! If you are covered by your employer, you’ll probably have to wait for open enrollment (the time when you can change plans). And if you have coverage through one of the insurance exchanges or Medicare, you have to wait for the open enrollment period as well.
What’s the difference between an HMO, PPO, POS, and HDHP plan?
Health Maintenance Organization (HMO) – HMOs focus on preventative care and wellness, but work closely with a specific list of health care providers. To get benefits from an HMO the patient needs to work with one of the plan’s preferred providers unless it is an emergency.
Preferred Provider Organization (PPO) – A plan that contracts with certain hospitals and doctors to create a network of preferred medical service providers. Patients pay less for using those providers. Patients may use other providers at an increased cost.
Point of Service Plan (POS) – A plan in which the patient pays less for using doctors, hospitals, and other health care providers that belong to the plan’s network.
High Deductible Health Plan (HDHP) – This type of plan features a higher deductible than other plans. HDHP plans are frequently paired with a Health Spending Account or reimbursement plan that allows the patient to pay for medical costs on a pre-tax basis.
Can I be refused coverage based on a pre-existing condition?
No. The Affordable Care Act’s “Guaranteed Issue” clause states that health plans may not refuse to cover a person due to age, gender, health status, or other factors that would affect the future use of health benefits. A pre-existing condition may increase the cost.
What is Catastrophic Coverage?
Catastrophic coverage is a very basic form of health insurance. The purchaser pays low premiums to have coverage that only pays out after a high deductible has been met. This type of insurance does little to cover basic health care but acts as a safety net against bills from a major illness or accident.
Are dental and vision included in my Health Insurance Plan?
No. Qualified Health Plans are required to carry basic pediatric vision coverage, but not adult. They may include it if they want. In most cases, dental and vision are separate plans that can be added on to the health insurance.
What is a Health Savings Account?
A health savings account is an account used primarily with a high-deductible plan. This allows the insured to save money tax-free to use for medical expenses.