Health Insurance: How to choose better?

Health Insurance: How to choose better?

Medical care, in the United States, is expensive. US Healthcare is ranked the most expensive among all industrially developed countries. Therefore, what to do in situations where you are in need of it. Luckily, there are Healthcare coverage options that help you in that time of need. Health Insurance system is not only complex and challenging to navigate, but also imperfect. Individuals must be in a position to understand this topic better and make better decision for themselves and their dependents. We have summarized key points and discussions on this topic to help you choose better healthcare coverage options.

To Learn how the US Healthcare System works and to know about the Government funded Healthcare plans, visit our article, Understanding the US Healthcare System.

Health Insurance is a contract between an individual and an insurance company, where the insurance company covers the cost of medical care for that individual and/or his dependents in a time of need, in return for a fixed amount per month known as a premium. This means that the individual will have to make a monthly payment to the company regardless of the fact that he or she will have used the company’s services to pay for medical care during the time that the contract is valid. When the individual and/or his or her dependents need medical care, all or part of the costs of that medical care will be paid by the company. This ensures that people get medical care in a time of need without worrying about the expenses.

There are two models of payment that insurance companies use for the payment of medical services rendered. One of these two models is where an insurance company pays directly to the healthcare provider without the need of individual paying up all costs upfront. In the other model, the individual has to pay for the medical services upfront and can later apply for a reimbursement to the company for those medical bills. Some companies may use a hybrid of these two models depending upon the type of medical services needed.

To know the details about how medical billing works, read our article about Medical Billing and Coding.

Why buy a health insurance plan?

With medical care costs increasing excessively, it is not affordable to pay for medical services in time of need. It is easier to pay for a small monthly premium than to come up with a huge medical bill at an unexpected time. Moreover, health insurance protects one against increasing medical costs due to inflation. When it comes to deciding for the future of your healthcare and that of your family, it is smarter to opt in for a health insurance plan that saves you from the worry of medical bills. So, you can focus on getting better and not worrying about payments. A plus point of buying some health insurance plans is that the premium on those plans is tax-deductible.

When to buy a health insurance plan?

When it comes to the right time for buying health insurance plan, it’s better sooner than later. Younger adults have a much better chance of getting a good insurance plan with lower premiums. As, the age progresses and the risk of medical disorders increase, premiums on health insurance go up. Moreover, if a person suffers from any pre-existing medical condition such as Diabetes, Hypertension or ischemic heart disease, premiums on insurance go up. Some companies may also avoid offering health insurance plans to people with preexisting conditions. As insurance companies make money by paying for the medical expenses of a few people from a larger pool of people paying premiums, it makes sense for those companies to cut back on their risk of paying for medical expenses for those few people. The only way for them is to do so by handing out health insurance plans to people in least need of medical care in the near future. Therefore, it is beneficial to buy health insurance plans when you are healthy and are less likely to be in need of it.

Individual vs Family Plans

Individuals can either get a health insurance plan for themselves or can get a comprehensive health insurance plan for their whole family (dependents). Family Plans are the plans that cover for the medical expenses of all of the dependents of an individual in exchange for a premium charged to that individual. It makes sense to buy a family plan in certain circumstances because the premium in case of one family plan is going to be lower than the sum of the premiums on multiple individual plans for the whole family. Yet, in certain conditions (like having old parents on the list of dependents) it is better to stick to individual plans as they are going to be more affordable.

Services Covered in an Insurance Plan

An insurance company to be up in the ACA Marketplace, it must cover ten basic healthcare services called Essential Health Benefits.

  • Outpatient Care
  • Emergency Services
  • Laboratory Tests
  • Prescription Medicines
  • Indoor Care (Hospitalization)
  • Dental and vision care for children
  • Disability care
  • Mental Health and substance abuse
  • Prenatal and postnatal care
  • Preventive Services

Following services are not usually provided by the health insurance companies:

  • Aesthetic Treatments (Elective or cosmetic)
  • Non-prescription drugs including off-label drugs
  • Innovative treatments

Technical Definitions

Before discussing the workings of the Healthcare insurance plans, we need to have a grasp of certain technical terms that are used commonly to describe the attributes of a health care plan.

Covered Benefits:

The insurance company will agree to pay for certain types of medical services, in partial or full. These services are called covered benefits. We have mentioned the essential covered benefits above, and each plan varies on the type of covered benefits that it offers.

Premium:

A fixed cost of buying a healthcare plan that is paid monthly whether the signer (buyer) of the policy needs medical care or not. It is a fixed amount that depends upon certain factors such as the medical condition of the individual buying the policy, medical condition of dependents in case of a family plan, and the terms of the contract.

Deductible:

Deductible is a set amount of payment that one has to make before the insurance company can start paying for the medical payments in case of a health coverage. For example, if an insurance plan comes with an annual deductible of $1000, the signer of the policy has to pay $1000 for the medical services he or she receives. After this limit is up, the insurance company starts paying for further medical services that he or she needs. Deductible has a payment cycle (usually of one year) after which it is reset, and the individual has to pay this deductible every year before insurance company has to pay.

Copay:

Whenever an individual with a health insurance plan avails certain medical service, he or she has to pay flat fee for the service which is called Copay. For example, in case of a $50 copay for a visit to physician, a client must pay $50 regardless of the total cost of the visit.

Coinsurance:

Coinsurance is a percentage of the total medical bill that has to be paid to the healthcare provider as a result of the medical services rendered. This percentage comes out of the pocket of the signer of the policy and the rest is covered by the health insurance company. This amount depends upon the total bill of the medical services rendered as it is a set percentage of that bill.

Maximum Out-of-Pocket:

A person is only liable to pay a maximum limit of medical bills out of his or her own pocket per year as set in the health plan. This limit is called maximum out of pocket. Copays, coinsurance and deductibles are all included in it. For example, in the case of maximum out-of-pocket of $10000, insurance company has to pay any and all medical expense of the buyer of the policy when the buyer has done paying $10000 for that year. In other words, it is the maximum amount that an individual is liable to pay in a year for medical expenses regardless of the medical bills incurred.

How it Works?

About half of all healthcare insurance plans in the United States are employer-provided. The rest of the US citizens are bound to purchase private health insurance. ACA has made it easier for US residents to compare and purchase health insurance plans through the ACA marketplace. People can now make an account at the US healthcare website and start looking for Health insurance plans by clicking here.

Once you make an account and enter your details, you are also offered subsidies from the US government applicable to you while purchasing your private health insurance plan. Those subsidies are automatically applied to you while making a purchase. People entitled to specific US Healthcare aid programs such as Medicare, Medicaid, etc., can also opt in for those schemes by following the above-mentioned link.

Once you pay for the first month’s premium, you become a policy holder and you receive a health insurance card via mail. A health insurance card has all your details related to the health insurance plan along with the contact information of the health insurance company. In certain instances, you are assigned a Primary Care Physician (PCP) who handles most of your medical care needs. A Primary Care Physician refers you to a specialist or a hospital if in need of further medical services. In some instances, the insurance company may deny claim for certain medical services availed without pre-authorization. Therefore, it is necessary to learn about the terms and conditions of the policy you are considering purchasing.

Types of Private Health Insurance Plans:

There are a few different types of healthcare plans depending upon their workings. They are divided into two categories: Traditional fee-for-service plans and Managed Healthcare plans.

  • Traditional fee-for-service plans: These are insurance plans where you pay a premium (usually higher than managed plans) and you have flexibility of choosing a healthcare provider for yourself. You can visit any healthcare facility to avail medical care and the plan covers for it according to the terms and conditions of the plan.
  • Health Maintenance Organization: This is a type of plan where the insurance company has its own network of healthcare facilities and healthcare providers and an individual having a healthcare plan can only visit those facilities and providers to be eligible for compensation by the health insurance plan. There are some exceptions though; an individual currently outside their locality and in need of emergency care is one example. In such plans, policy holders are assigned a Primary Care Physician (PCP) and patients need a referral from their assigned PCP to visit a hospital or specialist.
  • Point of Service Plan: A type of plan where patients will be charged less if they visit the insurance providers’ network of healthcare facilities and healthcare providers. Patients can visit other facilities or other providers, but they need a referral from a PCP in all cases.
  • Preferred Provider Organization: A plan where you will be charged less if you visit the insurance provider’s network of healthcare providers and you do not need a referral from PCP.

Federal Health Insurance Plans

There are various Federal Health Insurance Plans funded by the United States Government to certain categories of population to improve the efficiency of healthcare system for those in need. These plans include Medicare, Medicaid, CHIP, VHA, Tricare and Indian Health Service Program. To know more about these plans and their eligibility criteria, visit our article Understanding the US Healthcare System.

How to choose a Health Insurance Plan

While choosing a health insurance plan, there are three things to consider.

  • Where can I receive medical care?
  • What will be covered?
  • What will it cost me?

To choose the best healthcare plan that fulfills your needs, you need to make some informed decisions. Firstly, you need to define your budget for the monthly premium that you inevitably have to pay. Once you decide on your budget, you can browse through different insurance plans falling under your budget on the ACA Marketplace. Start by making an account. Then you can go through the terms of each plan to learn more about the covered benefits, copays, deductibles, coinsurance, and maximum out-of-pocket associated with the plan. Also, keep track of the network of providers mentioned, in case of a managed healthcare plan. These factors will help you decide what health insurance plan is right for you.

Please comment below if you have any questions and feel free to suggest additional remarks about the topic.

Dr. Muhammad Hussain
Dr. Muhammad Hussain

MD, Entrepeneur & Administrator. Six years of experience, working in the field of clinical care, medical administration, and healthcare business.

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