Insurance Basics
Understanding health insurance can be complicated. This is a guide of the most frequently asked questions to help navigated this complex industry.
What is health insurance?
Health insurance can cover medical expenses for illness and injury as well as prevention. This can include doctors appointments, emergency room visits, and medication. It works by sharing the risk of medical expenses among a larger group (you buy insurance with a fixed amount every month whether you need medical care at the time or not.) Individuals are protected from high health costs because it is spread out over the whole group.
Why do I need health insurance?
Health insurance exists to protect you from catastrophic medical bills in the event of an emergency or serious illness. While the risk of having a high medical bill is low in the transition-age population, thousands of healthy individuals find themselves in need of expensive medical care because of an accident, sudden illness, or surgery. Furthermore, health insurance is now required for everyone in the United States, and there are fees for those who choose not to have it.
How do I find out what plan is right for me?
Figuring out which health insurance plan you need can be tricky. You can start at a health insurance exchange–a website designed to help you figure out what kind of plan best fits your needs. You’ll have to choose between managed care plans, indemnity plans, and consumer-driven health plans.
- Managed Care Plans: These are the most common type of plans available. In these plans, insurance companies negotiate with hospitals, pharmacies, and health care providers to negotiate a cost. There are several kinds of managed care plans.
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- Health Maintenance Organization (HMO): Care through an HMO starts with a Primary Care Physician (PCP). He or she will coordinate your medical care between preventative visits, hospitalizations, and care from specialists. Being part of an HMO means that you can see providers only within your network, and you have to get referrals for specialists from your PCP.
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- Preferred Provider Organization (PPO): A PPO offers more flexibility than an HMO, but is often more expensive. Instead of having to start your medical care through your PCP, you can see any provider you’d like; however, if the doctor you choose is part of your plan, you’ll pay less.
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- Point of Service (POS): With POS plans, you stay within your network for most of your care, but you can pay more to see a specialist outside of your network.
- Indemnity Plans: These plans are sometimes called fee-for-service plans. In these plans, you can see whichever provider you’d like and you pay for the services out of pocket. You then submit a claim to your insurance company who may reimburse you for a part of the cost. The premiums with these types of plans are often higher than other plans, and indemnity plans generally do not pay for things like preventative care.
- Consumer-Driven Health Plans: These are newer plans where you set aside some of your money in a special type of health insurance savings account. You have the flexibility to use this money in whatever health-related capacity you choose. The deductible you need to reach in these plans can be higher than other types.