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Health Insurance
Overview
Just like other forms of insurance, for your car and your home, health insurance helps relieve the
burden of unexpected events: you put away a little in case you need a lot later. You and your
family's health should be of the highest priority.
Every year, the cost of healthcare increases dramatically. Simple same-day surgeries, required
tests and emergency attention can add up to thousands of dollars or more.
The overall benefits of health insurance are obvious. You won't be avoiding the doctor because it
costs too much. The hospital bills won't be piling upon your desk waiting for attention. Your health
insurance will provide the help and care you demand. Also, if you drive a car, health insurance will
work cooperatively with your auto insurance in case of an accident.
What is health insurance?
Simply put, health insurance is protection against medical costs. A health insurance policy is a
contract between an insurer and an individual or group, in which the insurer agrees to provide
specified health insurance at an agreed-upon price (the premium). Depending on your policy, your
premium may be payable either in a lump sum or in installments. Health insurance usually
provides either direct payment or reimbursement for expenses associated with illnesses and
injuries. If your employer does not offer a health insurance plan, you may wish to purchase health
insurance on your own.
Why do you need it?
Let's face it--health insurance is a necessity in today's world. The costs of medical care and
treatment have soared to new heights in recent years and are expected to rise even further in the
years to come. Think for a moment about the enormous medical costs you would incur if you
suffered a major injury tomorrow or were suddenly stricken with a life-threatening illness.
Uninsured people live with such risk every day of their lives; health insurance can shield you from
that risk. Even if you're healthy today and have never had any major problems in the past, you
simply can't predict the future.
In addition to medical emergencies, routine conditions requiring visits to a physician happen all
the time. This is especially true if you have children. Ear infections, rashes, and high fevers are
commonplace with infants and children; numerous trips to the doctor can be pretty expensive
without health insurance.
What do you need to know?
You should know where to get health insurance, and understand the various types of private health
insurance that are available. There are some important differences between indemnity plans,
HMOs, PPOs, and POS plans worthy of understanding.
You should also make every effort to understand your own health insurance policy, and become
familiar with common health insurance provisions, including limitations, exclusions, and riders. It's
important to know what your policy covers, and what you'll have to pay for in out-of-pocket expenses.
When comparing health insurance policies, you should strive to balance coverage against cost.
While price is an important consideration, there are also other factors that may influence your
decision when it come to choosing a health insurance plan.
Understanding the taxation of health insurance benefits and premiums is also an important issue,
especially if you're self-employed.
Being aware of your COBRA rights, in the event that you lose your health insurance coverage due
to a change in employment or other factors is also worth investigating.
When to get it
If you don't have health insurance right now, you should seriously consider purchasing it as soon
as possible. No one can predict the future--you don't know when you might suffer an accident or
become seriously ill. Health insurance can help to protect you against financial ruin.
Overview
Just like other forms of insurance, for your car and your home, health insurance helps relieve the
burden of unexpected events: you put away a little in case you need a lot later. You and your
family's health should be of the highest priority.
Every year, the cost of healthcare increases dramatically. Simple same-day surgeries, required
tests and emergency attention can add up to thousands of dollars or more.
The overall benefits of health insurance are obvious. You won't be avoiding the doctor because it
costs too much. The hospital bills won't be piling upon your desk waiting for attention. Your health
insurance will provide the help and care you demand. Also, if you drive a car, health insurance will
work cooperatively with your auto insurance in case of an accident.
What is health insurance?
Simply put, health insurance is protection against medical costs. A health insurance policy is a
contract between an insurer and an individual or group, in which the insurer agrees to provide
specified health insurance at an agreed-upon price (the premium). Depending on your policy, your
premium may be payable either in a lump sum or in installments. Health insurance usually
provides either direct payment or reimbursement for expenses associated with illnesses and
injuries. If your employer does not offer a health insurance plan, you may wish to purchase health
insurance on your own.
Why do you need it?
Let's face it--health insurance is a necessity in today's world. The costs of medical care and
treatment have soared to new heights in recent years and are expected to rise even further in the
years to come. Think for a moment about the enormous medical costs you would incur if you
suffered a major injury tomorrow or were suddenly stricken with a life-threatening illness.
Uninsured people live with such risk every day of their lives; health insurance can shield you from
that risk. Even if you're healthy today and have never had any major problems in the past, you
simply can't predict the future.
In addition to medical emergencies, routine conditions requiring visits to a physician happen all
the time. This is especially true if you have children. Ear infections, rashes, and high fevers are
commonplace with infants and children; numerous trips to the doctor can be pretty expensive
without health insurance.
What do you need to know?
You should know where to get health insurance, and understand the various types of private health
insurance that are available. There are some important differences between indemnity plans,
HMOs, PPOs, and POS plans worthy of understanding.
You should also make every effort to understand your own health insurance policy, and become
familiar with common health insurance provisions, including limitations, exclusions, and riders. It's
important to know what your policy covers, and what you'll have to pay for in out-of-pocket expenses.
When comparing health insurance policies, you should strive to balance coverage against cost.
While price is an important consideration, there are also other factors that may influence your
decision when it come to choosing a health insurance plan.
Understanding the taxation of health insurance benefits and premiums is also an important issue,
especially if you're self-employed.
Being aware of your COBRA rights, in the event that you lose your health insurance coverage due
to a change in employment or other factors is also worth investigating.
When to get it
If you don't have health insurance right now, you should seriously consider purchasing it as soon
as possible. No one can predict the future--you don't know when you might suffer an accident or
become seriously ill. Health insurance can help to protect you against financial ruin.
Health Insurance Basics - Page 1
Common Requirements
A good health insurance policy contains several types of coverage. Basic insurance includes
hospital, surgical, and physicians' expense coverage. In addition, major medical coverage is
necessary in case of a catastrophic accident or illness. These may be purchased separately,
but you will generally get more complete coverage if they are combined in a single policy. Your
policy should discuss the cost of each type of coverage and describe exactly what each pays for.
Your health insurance policy also contains important information regarding your out-of-pocket
costs, namely deductibles and co-payments. The family coverage provisions will be important to
you as well, if your spouse or dependents are covered by the policy. Information about
out-of-pocket maximums and benefit ceilings should also be included.
Basic coverages
Hospital expense insurance
Hospital expense insurance pays your room and board costs if you are hospitalized. Some
plans pay on an indemnity basis, meaning the insurer pays a specific amount per day for a
specified maximum number of days. Other plans may pay on the actual charges, or a
percentage of the actual charges, regardless of what those charges might be. In addition to
room and board, hospital expense insurance typically covers incidental expenses, such as use
of the operating room, x-rays, drugs, anesthesia, and laboratory charges.
Surgical expense insurance
Surgical expense insurance pays surgeons' fees and related costs associated with surgery.
Related costs might include fees for an assistant surgeon, anesthesiologist, or even the
operating room if it is not covered as a miscellaneous hospital item. Surgical expense benefits
are generally paid according to a set schedule, although some plans pay surgical benefits
based on what is considered "usual, customary, and reasonable" (UCR) in a particular
geographic area.
Physicians' expense insurance
Physicians' expense insurance, sometimes called "regular medical expense insurance," pays
for visits to a doctor's office or for a doctor's hospital visits. Typically, the policy specifies a
maximum benefit per visit, as well as a maximum number of visits per injury or illness.
Major medical insurance
Major medical insurance is designed to protect you against losses from catastrophic illness or
injury. It is usually an extremely broad policy with a very high maximum benefit. Most major
medical policies provide at least $250,000 of coverage, although $1,000,000 or more in
coverage is preferable. Although coverage can vary from one plan to another, the following list
features items that are included in most major medical policies:
- Hospital services and supplies (medical and surgical)
- Hospital room and board, including intensive and cardiac care
- Physicians' services (diagnostic, medical, and surgical)
- Nursing services
- Other medical practitioners' services
- Anesthesia and anesthesiologists' fees
- Ambulance service
- Laboratory and diagnostic tests, including x-rays
- Radiology and other therapy
- Blood and plasma
- Oxygen
- Dental treatment resulting from injury
- Prescription drugs
- Outpatient services
- Convalescent nursing home care
- Home health care
- Purchase of prosthetic devices
- Casts, splints, and crutches
Deductibles, co-payments, and coinsurance
Your health insurance plan will include information about deductibles, co-payments, and
coinsurance requirements. These can greatly affect the overall cost of a health care plan. The
deductible is the amount that you have to pay towards your medical expenses (usually annually)
before the insurer begins to pay claims, while the co-payment is the amount you'll have to pay
each time you visit a health insurance provider. Coinsurance is the percentage of your medical
costs you'll have to pay after you satisfy any deductibles that apply.
Out-of-pocket maximum
Also called a "stop-loss" or "coinsurance maximum," this provision limits your liability for
medical expenses. Imagine, for example, you run up $1,000,000 in medical bills. If you're
required to pay 20% of your medical costs after you satisfy your deductible, you'd end up paying
$200,000. Most people could not afford to pay this much. A good health insurance plan might
pay 80% of the first $10,000 and 100% of any further expenses. Thus, your maximum liability
would be $2,000 (plus any deductible).
Benefit ceiling
The benefit ceiling, or "maximum lifetime payout," is the maximum amount the insurance policy
will pay. Most experts recommend a policy with a benefit ceiling of at least $1,000,000. While
this may seem like an exorbitant amount, keep in mind that the expenses resulting from a
catastrophic illness or injury can certainly reach this level.
A good health insurance policy contains several types of coverage. Basic insurance includes
hospital, surgical, and physicians' expense coverage. In addition, major medical coverage is
necessary in case of a catastrophic accident or illness. These may be purchased separately,
but you will generally get more complete coverage if they are combined in a single policy. Your
policy should discuss the cost of each type of coverage and describe exactly what each pays for.
Your health insurance policy also contains important information regarding your out-of-pocket
costs, namely deductibles and co-payments. The family coverage provisions will be important to
you as well, if your spouse or dependents are covered by the policy. Information about
out-of-pocket maximums and benefit ceilings should also be included.
Basic coverages
Hospital expense insurance
Hospital expense insurance pays your room and board costs if you are hospitalized. Some
plans pay on an indemnity basis, meaning the insurer pays a specific amount per day for a
specified maximum number of days. Other plans may pay on the actual charges, or a
percentage of the actual charges, regardless of what those charges might be. In addition to
room and board, hospital expense insurance typically covers incidental expenses, such as use
of the operating room, x-rays, drugs, anesthesia, and laboratory charges.
Surgical expense insurance
Surgical expense insurance pays surgeons' fees and related costs associated with surgery.
Related costs might include fees for an assistant surgeon, anesthesiologist, or even the
operating room if it is not covered as a miscellaneous hospital item. Surgical expense benefits
are generally paid according to a set schedule, although some plans pay surgical benefits
based on what is considered "usual, customary, and reasonable" (UCR) in a particular
geographic area.
Physicians' expense insurance
Physicians' expense insurance, sometimes called "regular medical expense insurance," pays
for visits to a doctor's office or for a doctor's hospital visits. Typically, the policy specifies a
maximum benefit per visit, as well as a maximum number of visits per injury or illness.
Major medical insurance
Major medical insurance is designed to protect you against losses from catastrophic illness or
injury. It is usually an extremely broad policy with a very high maximum benefit. Most major
medical policies provide at least $250,000 of coverage, although $1,000,000 or more in
coverage is preferable. Although coverage can vary from one plan to another, the following list
features items that are included in most major medical policies:
- Hospital services and supplies (medical and surgical)
- Hospital room and board, including intensive and cardiac care
- Physicians' services (diagnostic, medical, and surgical)
- Nursing services
- Other medical practitioners' services
- Anesthesia and anesthesiologists' fees
- Ambulance service
- Laboratory and diagnostic tests, including x-rays
- Radiology and other therapy
- Blood and plasma
- Oxygen
- Dental treatment resulting from injury
- Prescription drugs
- Outpatient services
- Convalescent nursing home care
- Home health care
- Purchase of prosthetic devices
- Casts, splints, and crutches
Deductibles, co-payments, and coinsurance
Your health insurance plan will include information about deductibles, co-payments, and
coinsurance requirements. These can greatly affect the overall cost of a health care plan. The
deductible is the amount that you have to pay towards your medical expenses (usually annually)
before the insurer begins to pay claims, while the co-payment is the amount you'll have to pay
each time you visit a health insurance provider. Coinsurance is the percentage of your medical
costs you'll have to pay after you satisfy any deductibles that apply.
Out-of-pocket maximum
Also called a "stop-loss" or "coinsurance maximum," this provision limits your liability for
medical expenses. Imagine, for example, you run up $1,000,000 in medical bills. If you're
required to pay 20% of your medical costs after you satisfy your deductible, you'd end up paying
$200,000. Most people could not afford to pay this much. A good health insurance plan might
pay 80% of the first $10,000 and 100% of any further expenses. Thus, your maximum liability
would be $2,000 (plus any deductible).
Benefit ceiling
The benefit ceiling, or "maximum lifetime payout," is the maximum amount the insurance policy
will pay. Most experts recommend a policy with a benefit ceiling of at least $1,000,000. While
this may seem like an exorbitant amount, keep in mind that the expenses resulting from a
catastrophic illness or injury can certainly reach this level.