Understanding Health Insurance
What is health insurance?
Health insurance helps you pay for your health care costs. Having insurance can help protect you from high medical costs, and it may help cover expenses if you need unexpected care. It also can make it easier to have routine doctor visits and preventive care. Insurance sometimes helps pay for prescription medicine costs.
Health insurance pays some, but not all, of your medical costs. Some plans pay more of your costs than others.
How can you get health insurance?
Many people get a health insurance plan through their work. The employer often helps pay for the plan. Some people buy health insurance on their own, directly from an insurance company, rather than getting a plan through an employer.
The Affordable Care Act provides a marketplace for people to look for and compare health insurance plans.
The United States government provides health insurance for people who qualify, such as seniors, people with certain disabilities and health problems, and some people with low incomes. Medicare and Medicaid are government insurance programs that help pay certain medical expenses for people who are eligible.
There are different kinds of health insurance plans to choose from. To get the best care, it's important to read your insurance plan closely. Be sure you understand the plan's rules and costs, how it works, and which medical services are covered.
Types of Health Insurance
Private health insurance is often offered through employers or other organizations. Some employers offer only one type of health insurance plan. Others may allow you to choose from more than one plan.
Buying health insurance on your own, instead of getting a plan through an employer, usually costs more. You pay for the plan yourself, rather than sharing the cost with an employer.
Some insurance plans work with certain health care providers and facilities, which are part of the plan's network, to provide care at lower costs. This is called managed care. There are different kinds of managed care plans:
- Health maintenance organizations (HMOs). These plans usually pay only for medical care within their network of health care providers. HMOs generally cost less than plans that offer a greater choice of providers.
- Preferred provider organizations (PPOs). These plans cover more of your medical costs if you get care within the network of care providers. But they still pay some costs for care outside of the network.
- Point of service. You can choose between an HMO or a PPO each time you get medical care. These plans offer more flexibility in choosing doctors and hospitals.
Indemnity (fee-for-service) plans are different from managed care plans. The choice of doctors or hospitals you can use for your care is not restricted. Your health care provider is paid a fee each time you get medical care covered by the plan. The costs you have to pay on your own (out-of-pocket) could be higher than they are with some managed care plans.
Public (government) insurance
Medicaid is a state-run, government insurance program that helps some people with lower incomes pay for medical care. Medicaid pays your health care provider. You may have to pay a small amount for certain medical care.
Medicaid is available only to certain low-income people and families who are eligible. Rules about who is eligible and what services are covered vary from state to state. To learn more about Medicaid, go to www.cms.gov.
Medicare is health insurance provided by the government for people age 65 or older. People who have certain disabilities or health problems, such as long-term (chronic) kidney failure treated with dialysis or a transplant, also may get insurance through Medicare. It covers some, but not all, medical costs for people who qualify.
Medicare has four parts:
- Part A (hospital insurance) helps cover care in certain medical facilities, such as hospitals or nursing facilities.
- Part B (medical insurance) helps pay for doctors and certain outpatient care. It covers some services not covered by part A, like some home health care and some physical therapy.
- Part C (Medicare Advantage Plan) allows you to get health care coverage for parts A and B (and usually part D) through a private health plan, like an HMO or a PPO.
- Part D helps to cover some prescription medicine costs. People with limited incomes may qualify for extra help with prescription drug costs.
To learn more about Medicare, go to www.medicare.gov or call 1-800-MEDICARE.
Choosing a Plan
When you are choosing a health insurance plan, carefully consider the plan's rules and policies. Find out the cost of the plan (premium), what medical services are covered, how the payments work, and how much choice you will have when choosing providers and hospitals. Ask for a summary of the plan's benefits.
Read the plan's brochure closely before you sign up. Ask questions about parts you don't understand. It may be helpful to know these terms:
- Coinsurance: The amount you have to pay for a medical expense after you meet your deductible
- Co-pay: A set fee you pay each time you receive certain types of medical care
- Deductible: A set amount that you will pay for your health care each year before your insurer helps you pay the costs. Some insurers, though, may help you pay for certain services—such as a wellness checkup—whether you've reached your deductible or not.
- Denial of claim: When an insurance plan refuses to pay for a certain health care service
- Exclusions, limitations, or noncovered: Medical services that aren't covered by the insurance plan
- Flexible spending account: An account where you can use pre-tax dollars to pay for specific services not covered by your insurance plan, such as co-pays and dependent care
- Formulary: A list of medicines that your insurance plan will cover or help you pay for
- Health savings account: An account a person or employer sets up to save money for health care costs
- Out-of-network: Health care services received outside of an insurance plan's network of providers. Services received out-of-network often cost more than services received in-network.
- Pre-existing condition: A health problem you already have when you apply for health insurance
- Premium: The amount you pay to have a health insurance plan
It's a good idea to contact your doctor's office to find out which health plans are accepted and how the payments work.
Coverage for medicines
Find out how your insurance covers medicine costs. In general, you'll pay less for generic medicines than for brand-name medicines. Some insurance companies require prior authorization from your doctor before they'll help you pay for a medicine. For instance, this may be the case if you'd prefer to take a brand-name medicine over a generic one in the same class of drugs. With some plans, you may have to pay more for medicines that aren't on the plan's list of preferred medicines (formulary). Some insurers cover medicines that are bought only at certain pharmacies.
A formulary may put drugs into three groups, or "tiers," based on how much your health plan will pay and how much you will have to pay.
- Group 1: Generic drugs. These are usually drugs that have been in use for a long time, have proven benefits, and cost less to make and sell. You pay the least for drugs in this group.
- Group 2: Brand-name drugs that are on the formulary. Your health plan may have agreements with some drug companies to offer their brand-name drugs at a lower cost. You still pay more for the "formulary" brand-name drug than for the generic, but it costs less than brand-name drugs that aren't on the formulary.
- Group 3: Brand-name drugs that are not on the formulary. These drugs cost more because your health plan doesn't have an agreement with the drug company to reduce the price. When the health plan pays more, so do you.
If you have a choice between plans, check what your co-pay for prescription drugs will be, the maximum amount the plan will pay in a year, and other details.
You can learn about the Affordable Care Act and how to get health insurance at www.healthcare.gov or at www.hhs.gov/healthcare.
Some organizations, such as the National Committee on Quality Assurance (NCQA), give reports on insurance companies. This may help you choose which plan is best for you. Find out more at www.ncqa.org.
Questions to ask
When you are choosing a health insurance plan, think about questions you want to ask. For example:
- What benefits and services are covered?
- What plan does your doctor accept?
- Which doctors are available in the plan?
- Does the plan offer coverage for foreign travel?
After you have a plan
After you get a health insurance plan, keep your insurance card with you. Save your insurance company's phone number in your phone's memory so that you have it available.
Many plans require you to contact your insurance company before having an elective procedure, such as a surgery or certain medical tests, or for a hospital stay. If you have a medical emergency, get help for the problem first. After the emergency is taken care of, contact your insurance company as soon as you can.
Help for the Uninsured
Affordable Care Act
The Affordable Care Act (ACA) provides options for those seeking health insurance. It provides a health insurance marketplace that allows people to compare health plans, look for a plan that fits their needs, and find out if they may qualify for lower costs. It also sets guidelines for insurance companies, including rules about cost increases, coverage for preexisting conditions, and requirements for certain kinds of coverage, such as preventive care.
The ACA works in partnership with individual states. Parts of it may vary from state to state. Be sure to find out the options for health coverage in your state. You can learn more about the Affordable Care Act at www.healthcare.gov or at www.hhs.gov/healthcare.
Health centers and state programs
Federally funded health centers provide medical and dental care for people who don't have health insurance. Health centers may offer services such as checkups, pregnancy care, immunizations for children, and other medical treatment. The amount you pay for care depends on your income.
Many states offer programs that help people get health insurance. Medicaid provides health coverage for certain families or individuals who are eligible. The Children's Health Insurance Program (CHIP) provides low-cost insurance for children whose families don't qualify for Medicaid coverage but cannot afford private insurance.
There are also ways to get help with medicine costs. Find out whether the drug company that makes your medicine has a patient-assistance program. Some companies offer free or discounted drugs for people who cannot afford them.
Find more resources and information for the uninsured at:
- http://findahealthcenter.hrsa.gov/search_hcc.aspx. Find out what no-cost or low-cost health services are near you.
- www.insurekidsnow.gov. Learn about programs for children, such as the Children's Health Insurance Program (CHIP).
- www.rwjf.org/coverage. Find resources and information for the uninsured.
- www.coverageforall.org. Learn more about getting health insurance.
Other Works Consulted
- Roizen MF, Oz MC (2006). Take control of your health insurance. In You, The Smart Patient, and Insider's Handbook for Getting the Best Treatment, 1st ed., pp. 317–342. New York: Free Press.