In case you are unaware, health insurance is a sort of assurance that is provided according to predetermined terms in the event that the insured person becomes ill or requires medical attention. The covered life can have a long-term medical condition that necessitates care. Learn more about it now.
You undoubtedly constantly hear individuals discussing health insurance. However, you can feel that you don't really comprehend it. That's okay because the issue can actually be somewhat perplexing.
But just like other things, you can quickly understand the fundamentals of health insurance. And Health Insurance 101 will assist you in achieving that.
Therefore, let's examine a few issues together. How does health insurance operate and what is it? Do you need health insurance, too?
Who will pay for the medical expenses?
One of the most typical inquiries is this one. You may rest easy knowing that your health is in good hands if you have health insurance. Actually, it is some sort of arrangement or contract between you (the policyholder) and the insurer. The agreement or contract's objective is to offer protection from expenses. In certain cases, the expenses are so exorbitant that the sick individual is unable to cover the debts. The person is unable to receive the care he needs to recuperate as a result.
Although you will pay a monthly or annual premium, you should anticipate that it will be much less than what you would pay in the event of an illness.
Remember that health insurance is a sort of benefit offered by a government entity, a private company, or a non-profit. The business obtains an estimate of the total state population's medical expenditures in order to determine the cost. The risk is then distributed among the policyholders.
In terms of the principle, the insurer is aware that one individual may experience significant unforeseen medical costs while the other person may not. Therefore, in an effort to make health insurance far more inexpensive for all of the insured lives, the cost is dispersed among a big group of people.
Public plans are additionally sponsored by the government. As a result, they extend additional health insurance to vulnerable populations including seniors and persons with impairments.
To further grasp the idea, let's use an example. Cerebral palsy sufferers require specialised care throughout their lifetime. It is well known that chronic illnesses require far more expensive care than usual. Physical impairment brought on by cerebral palsy may endure the entirety of the sufferer's life.
This illness may need frequent doctor visits, a number of therapies, and protracted hospital stays. Your requirement for specialised health insurance may depend on the severity of your impairment. There will be a large number of medical specialists involved, including occupational therapists, physical therapists, orthopaedic surgeons, radiologists, paediatricians, neurologists, and others.
Some patients might require the assistance of multiple providers. A speech therapist, qualified dietitian, cosmetic dentist, or urologist, to mention a few, may even be necessary for some people.
Therefore, the coverage provided can help you feel a little less financial pressure. If you don't enrol, you can experience severe financial difficulty and might require assistance from other sources, such as charitable organisations and community groups. So it makes sense to take advantage of health insurance.
What Is Health Insurance?
In essence, health insurance serves as a means of covering your medical expenses. Most people cannot afford to pay for all of their medical expenses out of pocket; instead, they must use a debit or credit card.
Health insurance can help you get the care you require and make it easier for you to pay for your medical expenses.
Different Kinds of Health Insurance: Private and Government-run
There are many different kinds of health insurance plans. Some plans are run by the government. For example, you’ve probably heard of Medicare and Medicaid, which are government-run:
- Medicare – health insurance for people age 65 and over, as well as some people under age 65 with a disability. Learn more about Medicare >
- Medicaid – health insurance for people with a low income. Learn more about Medicaid >
There are also private health insurance plans. Many people get private health insurance from their employer, and self-employed individuals often purchase private health insurance, too. With private health insurance plans, you typically pay the health insurer a monthly premium; with government-run health insurance, there often is no monthly premium.
How Health Insurance Works?
When you have health insurance, your health insurance plan is the first place your medical bills are paid. Then, in accordance with the specifics of the plan, they pay all or part of that bill.
Health insurance resembles auto insurance in certain ways. Automobile insurance covers a portion or all of the cost if your car is in a serious accident and requires extensive repairs or perhaps needs to be completely replaced with a new vehicle. The cost of repairing or replacing your car could easily exceed the amount you have in your bank account, so that's a good thing.
However, health insurance, unlike auto insurance, pays for much more than just the costs of an unfortunate accident. Annual physicals, immunisations, preventative care, and other types of "regular maintenance" for your body and mind are frequently covered by health insurance. It would be similar to auto insurance paying for tyre rotations and oil changes.
Why Should I Get Health Insurance?
There are primarily two benefits of having health insurance:
- Having health insurance helps you if you become ill.
- Having health insurance helps you stay healthy in the first place.
Let's examine each of these explanations in greater detail:
Health Insurance as a Safety Net
As a safety net, health insurance is crucial. Health insurance is available to help cover expenditures that you probably can't afford to pay on your own if you become ill or injured unexpectedly.
The cost of medical care can be very high. It could be a huge financial strain. Costs for procedures including surgery, urgent care, prescription medications, lab work, scans, and exams can quickly pile up. They may even be excessive enough to force people into bankruptcy or to refuse necessary care that they cannot pay for out of pocket.
But with health insurance, you don't have to deal with such expenses on your own because you have a plan that will help you pay for them and sort through the confusing world of medical billing.
Let’s face it, medical bills aren’t the sort of thing you want to be dealing with while ill, injured, in a hospital bed or the emergency room. It’s smart to make difficult financial decisions ahead of time, by getting health insurance before you get sick.
Preventing Illness
The other reason it’s important to have health insurance is that it makes it easier for you to keep from getting sick in the first place.
Having health insurance makes it easier for you to access – that is, find and pay for – routine and preventive health care. This includes:
- Annual checkups
- Vaccinations (flu shots, MMR, etc.)
- Blood tests and lab work
- Scans and screenings
These all play a role in keeping you healthy, and diagnosing any illness you might have as soon as possible.
Additionally, health insurance assists in defraying the costs of treating any ongoing illnesses you might have, like diabetes, heart disease, and depression. For these kinds of illnesses, health insurers often offer disease management plans. They can also direct you to experts and other helpful resources. That makes it simpler for you to be organised and in good health.
When it comes to kids, routine and preventive treatment is extremely crucial. To be healthy and thrive, children, babies, and expectant moms all need regular medical attention. Early intervention can possibly save lives by preventing future issues.
Health insurance often covers mental and behavioural health care as well, so it's not only about physical health.
Can I Afford Health Insurance?
Most private health insurance plans need you to pay a monthly fee in order to enrol. It is much more likely that you can afford health insurance than it is that you can afford to pay out of cash for a procedure, an illness, or a trip to the emergency room.
In order to cater to a wide range of income levels, private health insurers typically provide a number of plans at various premium amounts.
You might qualify for a government health insurance programme like Medicaid or Medicare if you cannot afford a private health insurance plan. Or you may qualify for financial assistance through the healthcare.gov Health Insurance Marketplace.
Cost-sharing
However, not everything is covered by health insurance. The majority of insurance policies also include various forms of cost-sharing in addition to paying your monthly premium. Below, we'll go through each one and describe how it operates.
The first is the deductible, which is the sum of medical expenses you are responsible for paying before your insurance plan begins to cover some of those expenses. You must therefore pay the first $1,000 in medical expenses if your plan's deductible is $1,000 in order for your health insurance to start paying its half of the bill.
When you visit a doctor, insurance plans frequently require that you pay a copay. Another option is a coinsurance arrangement, in which the insurance company pays 80% of some medical expenditures and you pay 20%. Copays and coinsurance normally kick in once your deductible has been met, though occasionally they do so even before then.
The out-of-pocket maximum comes last (or maximum out-of-pocket). Once you've used that much toward medical expenses in any given year, your health insurance plan will cover all of your subsequent medical expenses in full. You only have to pay your monthly fee.
Here is an illustration of how it functions with actual numbers. We'll refer to it as the "Ten Plan," and keep the number simple.
Ten Plan (example)
- $10 Copay (after deductible met)
- 10% Coinsurance (after deductible met)
- $1,000 Deductible
- $10,000 Out-of-pocket maximum
In the Ten Plan, you must pay the first $1,000 of your medical expenses out of pocket in addition to your monthly premium (i.e., your deductible). That covers everything, including doctor appointments, lab work, x-rays, surgery, and physical therapy. However, after that, you'll only be responsible for 10% of any additional medical expenses and $10 per doctor visit.
And if you end up shelling out a total of $10,000 in a given year, the balance of the year's expenses are covered by your health insurance plan. You only have to pay your monthly fee.
What If I Don’t Get Sick? Don’t I Lose Money?
You might be thinking, "Won't I lose money if I sign up for health insurance, pay my monthly premium, but don't get sick and need any medical care?"
But that's not exactly correct.
First, many health insurance advantages, such as immunisations and checks that help you stay healthy in the long run, can be utilized even if you don't get sick.
Second, you receive the piece of mind in knowing that, if you became sick, you wouldn't have to pay all those medical expenses on your own, even if you don't get into an accident, have high medical expenses, or need to use your health insurance benefits.
Last but not least, even if you don't utilise your personal health insurance benefits, your premiums help to cover the costs of other people on your plan's benefits and medical care. And one day, when you do fall ill and want assistance with paying your medical bills, the other members of your plan will do the same for you.
