Health Insurance 101: The Basics
Health insurance is the most important insurance you will ever buy. Without health insurance, an illness or accident can destroy you financially and catapult you and your loved ones into debts so deep you may never recover.
Health insurance pays for medical expenses when you or your family members need medical attention. For a monthly or annual premium payment, the insurance company will provide payment to healthcare providers and hospitals to care for you and your family. Services provided for, include medical exams, drugs and treatments referred to as “covered services” in your insurance policy. Read your health policy carefully to know what your “covered services” include.
With all insurances, there are exclusions and limitations. Health insurance protection and limitations vary widely. It is important to compare health care providers and the services that they provide.
You may purchase healthcare insurance from the insurance company directly or through an agent or independent broker. Or you may choose as most people do to buy healthcare insurance through employer-sponsored programs at your work place.
Be aware of you deductibles and how much they comprise.
The higher the deductible, the lower your premiums. Insurance companies use deductibles to discourage unnecessary medical treatment and to keep premium costs down for policy holders.
Co-insurance means the percentage split per calendar year between you and the insurance company. If the co-insurance arrangement is 80/20, then it means you pay 20 percent of all medical plus the deductible amount.
A co-pay arrangement plan is the specified amount that you agree to pay every time you.For a visit to your doctor, you may pay $20 as a co-payment. Co-payment and the co-insurance are not to be confused as they are two different things.
Stop loss limit is the total amount ofexpenses in excess of the deductible after which your coinsurance payment ceases and the insurance carrier pays 100% of covered expenses. The stop-loss limit is the total out-of-pocket costs for the insured individual.
It is important to note that co-payments are applied after you pay the deductible amount. For example you pay the deductible amount first from the total bill, then your co-payment of 20 percent is applied to the remainder of the bill. The insurance carrier pays the remaining 80 percent.
An indemnity or fee-for-service plan, is an insurance that reimburses you according to a schedule for medical expenses. These plans pay for hospital stays, surgical expenses and other general medical coverage as set out in the policy.
Benefit amount paid can be as a percentage (80/20) of costs or a scheduled amount of the actual expenses.
Health Maintenance Organizations (HMO)
The HMO is the type of insurance policy most people buy and frequently provided for by employers. HMOs provide a broad range of comprehensive healthcare services to an insured group for a fixed payment. With this type of insurance you must select a primary physician who screens all of your medical care providers that you may require during the year. Insurance companies attempt to control the cost and quality of care by coordinating health services with providers. Your physician is responsible for determining what care is required before making any referrals to specialists.
HMOs tend to be the most cost effective health insurance plans available. The downside is you may only select doctors and hospital approved in the insurance carrier’s network. If you use a non-network provider, your HMO plan does not have to cover the costs unless it’s for an emergency and or has been previously authorized.
Preferred Provider Organization (PPO)
PPOs are healthcare providers under contract with an insurance carrier, third-party administrators, or others (like employers) to provide medical care services at a reduced fee.
PPO healthcare providers are compensated on a fee-for-service based schedule, very much like a traditional doctor’s visit.
You may choose not to use the PPO’s healthcare providers or facilities. However you may be required to pay a higher co-payment and deductible.
Point of Service (POS)
Then there is thepoint of service plan. This is a more flexible alternative plan that allows for a combination a HMO, PPO and indemnity plan. It allows you to decide for yourself what services to use. You may end up payinga higher portion of the cost for the added flexibility.
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