Health insurance can often seem like a labyrinth of policies, terms, and conditions. However, it is a vital tool in managing and predicting healthcare costs. It’s no secret that medical costs in the U.S. have risen to record highs. Health insurance can help lower the out-of-pocket costs associated with medical care.
Without health insurance, you may be responsible to cover the full cost of your medical care. Plus, some states penalize you for not having health insurance. To get covered by a health insurance plan, you must first decide which kind of insurance suits your needs. You can get it privately, through an employer, or through a federal health insurance program. Then, you’ll need to wait to enroll until the plan’s enrollment period opens.
What is health insurance?
Health insurance is a contract between an individual (or their employer) and an insurance company, where the individual pays a monthly premium, and in return, the insurance company covers certain medical expenses. It’s a method of spreading the financial risk of medical costs over a larger group of people, ensuring that unforeseen health issues don’t result in financial catastrophe.
Types of Health Insurance
There are several types of health insurance plans, each with its benefits and constraints. Health Maintenance Organizations (HMOs), for example, require members to choose a primary care physician (PCP). If you want to see a specialist, you usually need a referral from your PCP. This referral essentially gives you “permission” to seek out a specialist.
With Preferred Provider Organizations (PPOs), members can use any doctor they wish, but they often get a higher coverage if they use doctors within the PPO’s network. Going out of the network is allowed, but often results in higher costs for the member.
Exclusive Provider Organizations (EPOs) act as a mix between HMO and PPO. You don’t typically need referrals to see specialists, but you must stick to the plan’s network. If you see a doctor outside of the plan’s network, you could be responsible for all of the costs associated with your care.
A Point-of-Service (POS) Plan combines some features of HMO & PPOs. You need a referral to see a specialist but can see any primary doctor you wish, even if they aren’t in your insurance’s network.
How can you get health insurance?
The most common way to get health insurance is through an employer. This is known as employer-sponsored insurance (ESI). The Affordable Care Act (ACA) is legislation that controls health insurance in the United States.
The ACA requires U.S. employers that have at least 50 or more full-time employees to provide affordable medical insurance coverage to at least 95% of their full-time employees and their dependents. For insurance purposes, employees who work an average of 30 hours or more are usually considered full-time workers.
Employers pay a portion of the cost of the health insurance plan, and employees pay the remaining amount, which is generally through an automatic payroll deduction. This means that most employees see the cost of their health plan deducted from their paychecks.
Federal Health Insurance Plans
Employer-sponsored health insurance is not the only method of obtaining coverage. There are several insurance programs operated by the U.S. government that aim to provide coverage for certain populations. Each serves a distinct group based on factors like age, income, or military status.
Medicaid is a joint federal and state program that provides health insurance to people with limited income, including some low-income adults, children, pregnant women, elderly adults, and people with disabilities. To qualify, you must generally meet income requirements. Other ways to qualify include household size, disability status, and family status.
Medicare is a federal program providing health coverage for people 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (permanent kidney failure). To qualify, you must generally be 65 or older or have a qualifying condition. Also, you must have worked and paid into Medicare through payroll taxes for a certain period of time.
There are 4 parts of Medicare:
- Part A (Hospital Insurance): Covers inpatient hospital stays, hospice care, and some home health care.
- Part B (Medical Insurance): Covers outpatient care, doctors’ services, and preventive services.
- Part C (Medicare Advantage Plans): Includes all benefits and services covered under Parts A and B, usually includes Medicare prescription drug coverage.
- Part D (Prescription Drug Coverage): Covers prescription drugs.
TRICARE is a health insurance program for active-duty and retired military members and their families. There is a wide variety of TRICARE plans that vary based on eligibility for the program. Generally, to enroll in any TRICARE plan, you must be one of the following:
- Active-duty service members and their families.
- Retired service members and their families.
- Members of the National Guard and Reserve and their families when activated.
- Some retired reservists and family members.
- Medal of Honor recipients, their families, and others in specific categories.
Understanding Common Health Insurance Terminology
Understanding health insurance jargon can help you make informed decisions. Here are some essential terms:
- Premium: The amount you pay for your health insurance every month.
- Deductible: The amount you pay for care before the insurance starts to pay its share. For example, if you have a $1,000 deductible, you’ll pay the first $1,000 of your medical bills before insurance kicks in.
- Copayment: A fixed amount you pay for a service after you’ve paid your deductible.
- Coinsurance: The percentage of costs you pay after you’ve met your deductible.
- Out-of-Pocket Maximum/Limit: The most you have to pay for covered services in a plan year.
When can you apply for health insurance?
Choosing and applying for health insurance isn’t an open-ended process. There are usually specific periods during which you can enroll in or make changes to a health insurance plan. Understanding these periods ensures you don’t miss out on essential coverage.
If you choose to get covered by a health insurance plan offered through an employer, you must usually enroll at the beginning of your employment. Most companies have an annual enrollment window, which means you have a set period of time (usually a couple of weeks) to evaluate the employer’s insurance plan for the coming year and re-enroll.
If you choose a plan through the Health Insurance Marketplace, you can enroll or make changes to an existing plan during Open Enrollment. It’s one of the most well-known enrollment periods, especially for those looking to get coverage through federal or state exchanges.
Life events can lead to changes in health insurance needs. If you undergo specific significant life events, you may qualify for a Special Enrollment Period (SEP), allowing you to enroll in or make changes outside of the regular Open Enrollment.
Enrollment in Medicare doesn’t strictly follow the same timelines as marketplace insurance. For instance, the Initial Enrollment Period starts three months before you turn 65 and ends three months after the month of your 65th birthday. If you missed your initial enrollment, you could sign up between January 1 and March 31 each year, but coverage won’t start until July 1 of that year.
Medicaid and the Children’s Health Insurance Program (CHIP) don’t have restricted enrollment periods. You can apply at any time throughout the year, and if you qualify, your coverage can start immediately.
What are the benefits of enrolling in health insurance?
Health insurance offers financial protection. High medical bills can lead to debt or bankruptcy. Health insurance protects against this by offsetting the costs of certain services. Also, many plans cover preventive services without additional costs, like vaccinations and check-ups.
What are the disadvantages of health insurance?
Although health insurance can lower the out-of-pocket expenses of medical care, it does not usually eliminate all costs. For example, there’s usually a cost just to have and maintain a health insurance plan, also known as premiums. Premiums can be high, and even with insurance, out-of-pocket costs can accumulate.
Also, some plans restrict which healthcare providers you can see or require referrals. This can be frustrating for some people who have a preferred provider or have been seeing the same medical professionals for several years.