Health Insurance Simplified

29
January 2019
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Shopping for health insurance sounds about as exciting as getting your taxes done. At best, it can feel confusing. At worst, getting health coverage can feel overwhelming, expensive, or even impossible. But like many complicated things, health insurance can be broken down simple concepts and easy-to-understand language.

So here’s your simplified guide to health coverage.

What Health Insurance Does

Health insurance is actually one of the most hard-working insurance policies you can own.

Health insurance helps you pay for health care expenses: preventative care, visits to the doctor or hospital services if you’re sick or injured, and specialty medical professionals and treatments.

Health care doesn’t come cheap.

National health spending in the U.S. reached $3.5 trillion in 2017 and is projected to reach $5.7 trillion by 2026. We spend a lot of money on health care in our country. On average, other wealthy countries spend about half as much per person on health care than the U.S. spends.

The average cost of one in-patient day at a hospital is approximately $2,000 in the U.S. for the year 2018. Which means a week-long stay could run you $10,000 or more.

Could you afford a week in the hospital if a sudden illness or injury happened?

How Health Insurance Works

Health insurance is a contract between you and an insurance company. You pay the insurance company a premium and they agree to pay a portion of your health care costs.

The terms of this contract are spelled out in your insurance policy. Your policy dictates how much your insurance company will pay for different types of health care expenses and how much you are required to pay.

Health Insurance Terms

Some of the terms you’ll find in a health insurance policy include:

  • Premiums: the amount of money you pay each month/ year for coverage.
  • Deductible: the amount of money you pay before your insurance coverage kicks in.
  • Co-payments: the amount of money you pay for each doctor’s office/ urgent care/ hospital visit
  • Co-insurance: the percentage of costs of a covered service you pay (20%, for example) after you've paid your deductible.
  • Policy limits: the maximum amount your insurer will pay out.
  • Out of pocket maximums: the most you have to pay for covered services in a plan year (deductibles, coinsurance, and copayments) before your insurance pays 100% for services.

Types of Health Insurance

Health insurance typically comes in 2 forms: group or individual.

Group Health Insurance is typically provided through an employer. When employers or organizations have a large group of people to cover, they typically can get better rates and lower premiums for their employees.

With group insurance, every member of the group pays premiums into a collective “pot.” Everyone’s combined payments cover everyone’s combined cost of care. You as an individual may need less or more health services than the rest of the group, but either way, you’re covered.

Employer-provided group rates are renegotiated each year based on the previous years’ health costs. That’s why employers often offer wellness programs and incentives for employees.

Healthier employees = lower group insurance rates.

Want to see lower premiums for your employer-provided healthcare? Encourage your co-workers to participate in wellness initiatives! Start a weight loss challenge or step-challenge to get people moving. It could pay off for all of you!

Not all employers provide health care for their employees. And some people who are unemployed, part-time, or independent contractors may not qualify for employer-provided plans.

That’s where the next type of health insurance comes into play.

Individual Health Insurance is the option for people who don’t have access to employer-provided group health care. Individual health coverage is purchased on your own for yourself and/or family.

Individual health insurance tends to be more expensive than group coverage.

Prior to the Affordable Care Act (ACA), individual plans were often medically underwritten and a pre-existing condition could become an obstacle to obtaining coverage. After the ACA act, individual plans began to include more coverage features and became a guaranteed issue, even though enrollment is typically limited to open enrollment and specialty enrollment periods.

When Can You Get Health Insurance?

Health insurance enrollment dates are typically limited to open enrollment periods unless you have a qualifying life event (more on this in a moment).

Open enrollment is the time period when you can enroll in an individual health coverage plan. In 2018, the 45-day long open enrollment period was November 1, 2018 to December 15, 2018.

Employer-provided group plans may have their own open enrollment periods, so be sure to check with your employer to find out when yours is.

You can apply for Medicaid or the Children’s Health Insurance Program (CHIP) any time of year.

If you have a qualifying life event, such as getting married, having a baby, moving to a different zip code, or losing health coverage, you may qualify for a specialty enrollment period.

Is Health Insurance Required?

The ACA included an individual mandate penalty to encourage healthy people to enroll in health care coverage, rather than waiting until they were sick to sign up. In 2019, Congress reduced the individual mandate penalty to $0 as part of a tax reform legislation - essentially removing the requirement that you carry health care.

Mandated penalty or not, having health insurance is simply a good idea.

There’s a very good chance you will incur health costs in any given year:

  • 84% of adults saw a doctor in the past year
  • 92.7% of children saw a doctor in the past year
  • 41 out of 100 people went to the hospital last year (outpatient)

For most health insurance plans, preventative care visits are 100% covered.

Each year, potentially preventable chronic diseases are responsible for millions of deaths among Americans from heart disease, cancer, respiratory disease, stroke, and unintentional injuries.

Early prevention through covered preventative care visits could save millions of lives.

Health insurance may feel complicated, expensive, or overwhelming. But it’s essential insurance coverage that could afford the high costs of health care services in America - and could even help save your life. And that’s easy-to-understand.

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