No matter how big or small a medical procedure is, the last thing you want is to be facing unexpected charges for something your insurance doesn’t cover. We’ll show you how understanding insurance coverage can simplify your medical decision-making.
Health insurance in America is complex. Sadly, most of us don’t understand our own policies. In fact, a 2017 survey showed 96% of respondents couldn’t define basic terms like co-pay and deductible.
Our lack of knowledge has profound financial consequences. When looking at who applies for bankruptcy because of medical bills, we see more people with insurance than without. That seems backward.
But it makes sense, because, as it turns out, people with insurance don’t know what their deductibles or co-pays are. They also don’t know what services or medical providers their insurance covers. A medical crisis, then, catches them off guard.
As you can see, understanding insurance coverage is important. You want to decode your policy before an illness or accident strikes. Below we have the complete guide to insurance coverage so you can do just that! Let’s go!
General Overview: What is Health Insurance?
Health insurance is one kind of insurance. It is used to pay for medical expenses, some of which may include:
- doctor’s visits
- prescriptions
- blood tests
- other medical procedures, including surgery
Your health insurance policy is an agreement between you and the insurance company. As the owner of the policy, you are known as the “insured.” Any clinic, hospital, doctor, laboratory, or other healthcare practitioner is referred to as the “provider.”
Your policy will specify how much you pay the insurance company each month. In return, they allow you to access their network of providers. If your medical insurance is part of your employee benefits package, your employer will pay some of this monthly fee.
In addition, your policy will list which medical benefits are covered and which are not. Consider this information carefully when choosing a health-care plan. Not all plans cover the same things.
Finally, remember your insurance policy is a legally-binding contract. Failure to abide by its terms can have a catastrophic impact on your health or finances.
Americans get their health insurance from many different sources. In the next section, let’s see what those are.
Where Does My Health Insurance Come From?
People get their health insurance through three sources. It’s important for you to know where your’s comes from. That way, you know where to direct your questions.
It’s also useful to know because there are different appeals processes. If you end up disagreeing with a decision your insurance company makes, you will need to know where and how to appeal it.
Your Employer Provides Your Insurance
Any company that has at least 50 full-time employees must offer them health insurance.
Generally, the employer will purchase the insurance policy. They will then offer it to their employees as part of their benefits package.
Employees who receive their health insurance at work are part of a group plan. As mentioned above, employers generally help pay the monthly installment (called the premium). This is a helpful benefit, and it means group plans are usually the cheapest option for individuals.
You Purchased it Yourself
People who are self-employed cannot participate in employer-sponsored health plans. They must purchase health insurance for themselves.
There are two ways to go about this. First, you can buy health insurance from the Health Insurance Marketplace. These are the health-care exchanges set up by the Affordable Care Act (ACA). You apply at www.healthcare.gov either through the federal or your local state government.
That is the more popular option. In 2016, 64% of individuals in non-group plans got their health insurance through the Marketplace.
It is also possible to purchase health insurance directly from the company or a broker. Not as many people do this. In 2016, only 31% of individuals bought their health insurance directly.
You Get Your Insurance Through Government Programs
There are some government-run programs designed to help individuals in need. People 65 and over no longer work and cannot take part in employer-sponsored health-care plans. Their primary source of insurance is Medicare.
Low-income individuals can qualify for Medicaid. Sometimes individuals make too much money to receive Medicaid. Yet, their children can still get health insurance through the Children’s Health Insurance Program (CHIP).
Now that we have gone over possible sources of health insurance, let’s see what kinds of plans are available. Knowing what your plan type is essential when trying to figure out what is covered and what is not.
What Kind of Health Insurance Plan Do I Have?
Besides Medicare and Medicaid, there are several types of plans consumers can choose from.
What insurance covers will depend on the kind of plan you have.
This knowledge helps you determine things like which providers you can see or whether you need a referral. It will prevent any surprising bills from appearing in your mailbox.
Health Maintenance Organization (HMO)
With this kind of plan, you must pick a primary-care physician. If needed, they will refer you to a specialist. You can’t make the appointment on your own without a referral.
You are also limited to seeing in-network doctors only. The health insurance company decides who they are. The only time the HMO will cover services provided by an out-of-network provider is during an emergency.
HMO’s are designed to save money, potentially for both the insurance company and you.
Preferred Provider Organization (PPO)
This plan is more flexible than an HMO. You are allowed to see providers both in and out of network, although you will pay more money to see anyone out-of-network. But, you don’t need a referral to see a specialist.
In general, you will pay more money for a PPO policy but are not as limited in your choice of doctors and hospitals.
Exclusive Provider Organization (EPO)
EPO’s are similar to HMO’s in that you have a list of in-network providers you can choose from.
It is a little more flexible, though, because you may not need a referral to see a specialist.
An EPO plan will likely be less expensive than a PPO. Yet, you may not be able to see your provider and be forced to switch.
High Deductible Health Plan (HDHP)
These plans have a low monthly cost. But the insurance company asks you to pay more upfront before they start covering expenses. This is known as a high deductible (we’ll go over the term deductible in more detail below).
There is little flexibility with these plans and a limited choice of providers. They are ideal for a young person who doesn’t need to see the doctor very often.
Important Terms to Know
Remember at the beginning of this article we saw only 4% of Americans understand basic health insurance terms? In the remainder of this article, let’s go over the most-used ones so you are among that 4%.
Premium
This is the amount of money either you or your employer pays each month to the insurance company. If you are enrolled in a group plan, this amount will be taken out of your paycheck.
Deductible
This is the amount of money the insurance company expects you to pay before they start chipping in. If your deductible is $500, you will have to pay that by yourself for any covered services.
Note that many insurance companies (though not all) will pay for things like check-ups before you’ve met your deductible. If you need to see your doctor for a routine physical, you’ll pay your regular co-pay (see below).
On the other hand, if you have an accident like breaking your leg, you might have to pay the first $500 of treatment before the insurance company will cover the rest.
Co-payment (Co-pay)
This is the fixed amount you pay for any covered service. For example, if your co-pay is $20, you pay $20 each time you visit your provider.
Co-pays may be different for different services. For example, it might cost you $20 to see your primary care physician, but for a specialist, you’ll need to pay $30. Emergency room visits and urgent care centers might also have different amounts.
Co-insurance
Some plans do not have co-pays but instead require you to pay a percentage of medical costs after you have met your deductible. For example, if your co-insurance is 80/20, then your insurance company will pay 80% of your medical bills after you have met your deductible. You are responsible for the remaining 20%.
Maximum Out-of-Pocket Costs
This is the most money you will have to spend on covered medical services during a year. It includes your deductible, co-payments, and any coinsurance.
After you have paid the maximum amount, the insurance company will pay for 100% of your covered medical expenses. Take note, though, this figure does not include monthly premiums, which you must pay regardless.
Preauthorization
This term is also known as prior authorization or prior approval. It means the insurance company believes your medical treatment is necessary, and they will pay for it.
Some insurance companies require preauthorization for certain services. Of course, you don’t have to obtain prior authorization in an emergency situation.
Wrapping Up: Understanding Insurance Coverage
Understanding insurance coverage is tough, no doubt about it. Our health insurance system is quite complex and can seem overwhelming. We hope this article helped you understand your own coverage better!
If you feel inspired to research different insurance plans, why not try Insurdinary? You might find a plan that works better for you!
Also, if you enjoyed this article, check out some of our other ones. We have a large number of interesting topics, including health and beauty care. After all, staying healthy is the best way to avoid seeing the doctor, so maybe you’ll learn some new ways to do that on our site.
