Healthcare is a crucial aspect of human existence. Health insurance is one of the ways of ensuring that most people within a population have access to healthcare as required. In America, having access to healthcare is quite expensive, especially without any form of insurance coverage.
Here’s what we are going to cover:
- How Health Insurance Works
- Health Insurance Coverage
- Health Insurance Cost
- Terms Associated with Health Insurance
A routine consultation to a local doctor can cost up to $300 without any medications nor lab tests. With medications, x-rays, CT-scans, or MRIs, this cost can surge into thousands of US dollars. Also, for individuals requiring extended admissions, treatments, dental care, or procedures, they may have to spend thousands of US dollars to pay for such services.
Since illness in most cases occurs without any prior warning, an individual must have a comprehensive financial plan that can protect themselves and their families in cases of a health event or emergency. Therefore, health insurance is crucial in providing healthcare to individuals in a way that ensures continuity and affordability.
How Health Insurance Works
Typical health insurance provides healthcare coverage to an individual purchasing an insurance policy by sharing risk with several other people. For the policy to be valid, an individual must continuously pay an up-front agreed payment called a premium.
The premium collected by the insurance company provides funding for healthcare services provided to clients. Therefore, the premium collected by an insurance company from each assurer (insurance policy buyer) must be cumulatively enough to cover the healthcare of all their clients. In America, there are different kinds of healthcare insurance policies that are available to the general public. Each policy has different requirements and structures in terms of the rate of premium, coverage, and more.
Insurance companies always try to determine and regulate the healthcare providers an assurer can access. These healthcare providers include doctors, labs, pharmacies, hospitals or clinics, and more. Therefore, insurers make arrangements with specific sets of healthcare providers, which offer health services to assurers at discounted prices.
Individuals may have to settle the cost of the complete healthcare services that they receive from healthcare providers, which are not approved by their insurers. If an insurer pays its share, it would be far less than the amount it would typically pay to approved providers. As such, assurers that get medical services from the unapproved providers would usually pay more for healthcare. This knowledge is critical for those that may need to access healthcare outside their city or state.
Health Insurance Coverage
Before the regulation of the American healthcare system, different people received different kinds of healthcare insurance coverage from their insurers. Regulation ensured that each insurance holder gets a basic set of health services from healthcare providers.
These basic services include lab testing, hospitalization, emergency needs, childcare and maternity, mental health management, prescription medication, outpatient care, rehab, and more.
Health Insurance Cost
The exact cost of healthcare insurance policy is sometimes difficult to understand. As such, apart from premium, an assurer may have to deal with some other additional costs. This cost is the coinsurance, which signifies the amount of money an assurer must contribute at the point of care. The percentage an assurer pays depends on the cost of services received, coverage, and the rate of premium.
In most cases, the higher the premium paid by an assurer, the less they contribute at the point of care for consultation, medication, or hospitalization. People that pay less premium would naturally pay more at the point of care.
Assures are encouraged to pay more when they can when paying their premiums. This approach helps to reduce the amount of money they pay when getting services. Plus, assurers do not get discouraged by the cost while getting this care. Also, in the event of an emergency, an assurer would pay less, especially in times of excessive hardship.
Terms Associated with Health Insurance
Like any sector, the health insurance industry has a couple of terminologies that are typically used to describe different processes. These terms are stated and explained below.
Premium
It is the monthly agreed money that an individual pays an insurance company to keep their health insurance policy active.
Deductible
Is the agreed amount an assurer pays the insurance company at the beginning of each year. It also guarantees that the insurer pays its portion of the cost as agreed.
Failure to pay deductibles as when due without any genuine reason would mean that an individual would have to settle the entire medical service they receive. In some cases, it can lead to the outright cancellation of an insurance policy.
The deductible is usually paid annually. For example, an individual with a yearly deductible of $1,000 must pay the amount in total before the insurer starts to pay its share.
Cost Sharing
It describes the percentage of medical costs an individual pays after receiving health services. This amount is entirely different from the premium that is paid monthly.
Copay
It is the amount paid before an individual receives care on certain medical services. Thus, a medical service such as consultation or lab tests that cost $100 may require an upfront copay payment of $20. The remaining $80 is paid for by the insurer. Additionally, individuals that pay lower premiums tend to pay higher copays, and the reverse is the case. Services that are not covered through copay may be paid through other forms of sharing of cost.
Coinsurance
It is described as a portion of the cost an individual pays for their care. For example, a person that gets a CT-scan that costs $2,000 may be required to pay 30% at $600. This situation means that he or she would have to pay $450, while the insurance company pays the remaining $1,400. Just like copay, higher rates of premium leads to lower coinsurance and vice versa.
Out Of Pocket Maximum
It is the maximum amount of cost-sharing an individual is responsible for within a given year. This amount is determined by totaling coinsurance, copay, and deductibles while excluding premium. Once an agreed maximum amount is reached in a given year, the individual is going to stop paying for any additional medical cost except premium.
The insurer pays up the entire medical bills of an individual for the rest of that year. Assurers that utilize a lot of expensive healthcare services can take advantage of such an agreement. Furthermore, assurers that pay higher rates of premiums would generally have a lower limit.
