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Basics of Health Insurance
Are you confused about what a deductible means to your budget? Or what the difference is between an employer-sponsored plan and short-term medical insurance? You need to learn the basics of health insurance to be better able to evaluate the pros and cons of healthcare plans.
If you’re new to the realities of finding healthcare coverage for you and/or your family, you may find the landscape difficult to navigate. With so much jargon, dozens of competing companies and seemingly complicated benefits, most newcomers want to throw up their hands.
Knowledge Could Save You a Ton of Money
It seems that the rising cost of healthcare is placing a strain on our pocketbooks. More Americans than ever are looking for ways to save money and stay healthy.
According to the Millman Medical Index, a family of four typically paid more than $7,000 in health insurance premiums in 2017. Worse, that figure doesn’t include the cost of office visits, treatments, or prescriptions.
Unfortunately, going without health insurance is a risky option. Nearly half of all bankruptcies in the U.S. are due to medical debt.
For young and healthy individuals tempted to go without health insurance, there are some alternatives to consider that don’t carry the looming prospect of financial disaster.
Premiums, Copays, and Deductibles — Oh, My!
When it comes to health insurance, there are a lot of different terms you’re going to see. It’s important to understand the differences and what these costs cover.
A premium is the cost of your coverage, typically what you pay monthly, or what’s deducted from your earnings each pay period. You’ll be responsible for this cost whether or not you received any health-related services in that month.
If you fail to pay your premiums, you risk having your policy cancelled and losing your healthcare coverage. If this happens, you’ll be financially obligated for any healthcare services you receive.
Most insurance plans require a copayment. This is typically what you pay out-of-pocket for a specific service.
For instance, when you go to your primary care doctor for a nagging cold, and your plan has a $30 copay for office visits, you’ll have to pay$30 over and above your premiums. You can also be responsible for a copay for any prescriptions, clinic visits, or other medical care you receive.
Copayments are almost always due at the time of the medical visit. Rather than sending you a bill, many doctors’ offices collect payment when you arrive, even before the doctor sees you. This is what they mean when they remind you to bring your insurance card and “any copays that are due.”
Deductibles are a bit tricky to understand. They represent a threshold amount of expenses that you must meet before your insurance kicks in and starts covering the medical service.
For instance, you may have an annual $500 prescription deductible. That means that you’d have to pay the full cost of all your prescriptions until your expenses reach $500 — regardless of whether you reach that in January or October of that year.
After reaching that threshold, your plan would cover a portion of your covered medications. As a result, your portion of the cost of your plan’s covered prescriptions would be reduced, generally to what’s listed as your prescription copay.
Under most health insurance plans, you’ll pay a monthly premium for the policy plus a copayment each time you receive medical-related services such as a doctor’s office visit or a prescription drug. The amount paid depends on whether or not you’ve reached your deductible. Whew!.
Individual, Employer, and Other Plans
Most large companies offer their employees coverage on their “group” plan. Typically, you don’t have a lot of choice in benefits or options as your employer negotiates coverage with the insurer.
There are a few advantages of getting covered through your employer, and how much you’ll have to pay will be the largest consideration. Because risks are spread out across a larger pool of insured individuals, your premiums are usually lower than an individual policy with the same coverage.
Additionally, many employers subsidize health insurance, paying a portion of the monthly premium as a benefit for their employees. You can expect lower premiums as a result.
If you don’t have insurance through your employer, you can search for an individual plan. You’ll be able to choose among a number of choices such as the healthcare marketplace.
Finally, there’s short-term health insurance. This consists of short-term health plans that can be customized to meet your needs.
Typically, short-term plans are used to bridge coverage gaps that occur when life circumstances change such as a divorce or job loss. Premiums for temporary plans can be significantly less expensive than individual major medical coverage.
As we all know, healthcare is one of the larger household budget items for most Americans. As a result, taking a few moments to understand the basics of health insurance could save you a lot of money in the long run.
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