Understanding Health Insurance

Often times we look primarily at salary when evaluating an employment offer, but there are many things to consider. Will this new company contribute towards your retirement account? How much vacation or sick time is offered? Is your schedule flexible, and can you telecommute? And what about health insurance?

The cost of health insurance in the United States is a major factor in determining whether or not people have access to quality medical care. More and more, job-seekers are considering their health insurance benefit when evaluating their employment benefits package, sometimes allowing that one factor to decide whether or not to accept a job.

Understanding health insurance can be confusing. This tool will help you learn about health insurance and how to choose the right policy.

What is health insurance?

For decades, Americans have paid for health insurance policies in order to ensure that they can get health care when they need it. Rather than paying for the full cost of medical care from our pockets, we - and, typically, our employers - pay insurance premiums each month.  This insurance coverage means that the insurance company agrees to cover part (usually most) of the health care expenses.

This may not be your primary concern now, but health insurance is really important. Even for people who believe they are relatively healthy, it is likely that you will have to seek medical care: for a check-up and regular screenings, for a health emergency, or to treat a chronic condition.  The costs of treatment can quickly add up. For example, a visit to the emergency room can easily cost thousands of dollars.

There are different types of health insurance?!

• Health Maintenance Organization (HMO): A type of health insurance plan that usually limits coverage to care from doctors who work for or contract with the HMO. This set of contracted providers is generally known as “the network.” HMO plans generally won't cover out-of-network care, except in an emergency or during travel.  An HMO may require you to live or work in its service area to be eligible for coverage.
• Point-of-Service Plan (POS): A type of plan in which you pay less if you use doctors, hospitals, and other health care providers that belong to the plan’s network. POS plans may require you to get a referral from your primary care doctor in order to see a specialist.
• Preferred Provider Organization (PPO): A type of health plan that contracts with medical providers, such as hospitals and doctors, to create a network of participating providers. You pay less if you use providers that belong to the plan’s network. You can use doctors, hospitals, and providers outside of the network for an additional cost.
• High Deductible Health Plan: A plan that features higher deductibles than traditional insurance plans. High Deductible Health Plans can be combined with a health savings account or a health reimbursement arrangement to allow you to pay for qualified out-of-pocket medical expenses on a pre-tax basis.
• Indemnity Health Plan: An indemnity plan offers more freedom in choosing which doctors and hospitals to use, typically has higher out-of-pocket costs and more paperwork. An indemnity plan usually has a higher deductible, but once the deductible is met, the insurance company will begin to pay your insurance claims based on the typical service rate in your area. Often times, you may be required to pay for the service up front and be reimbursed by the insurance company.
• Catastrophic Plan:  Currently, some insurers describe these plans as those that only cover certain types of expensive care, like hospitalizations. Other times insurers mean plans that have a high deductible, so that your plan begins to pay only after you've first paid up to a certain amount for covered services.

The above section was taken from: U.S. Centers for Medicare & Medicaid Services. 2013. Glossary. Retrieved from www.healthcare.gov on 10/21/13.

Different Kinds of Medical Care

Health insurance is used for primary care, specialty care, and emergency and urgent care.

• A primary care provider is a person who treats your for illness and provides your regular check-ups.  Primary care providers provide preventive care, treat common medical conditions and make referrals to specialists when necessary. The co-payment due at your primary care provider’s office is often less than the co-payment at a specialist’s office.
• A specialist is a medical provider who specializes in a particular area of medicine. Your primary care provider might refer you to a specialist if he or she feels your medical condition requires focused attention.

Using Urgent Care and Emergency Rooms Appropriately

When a person is in need of medical intervention, there are three primary options in levels of care to access. The first option should always be a primary care provider. Office-based appointments are typically at least $250 less expensive than other levels of care. Additionally, since a relationship has already been established with a primary care provider, it is most likely that you will receive care that accounts for your previous medical history. Most primary care providers offer various appointment times throughout the day for last-minute appointments. Since you have an appointment time, this will likely be the quickest level of care you receive. When you need medical care, primary care is the best first choice.

When primary care is not available – no appointments are available or your physician’s office is closed – the next level of care to access is urgent care. Urgent care facilities are walk-in clinics and do not require appointments. They are staffed by doctors, nurse practitioners, nurses and other medical professionals and are often open seven days per week. Urgent care facilities provide comprehensive medical care for non-life threatening illness or injury such as respiratory issues, ear, eye, or dental complaints, skin issues, injuries to soft tissue or bones, minor head injuries, gastrointestinal issues, and fevers. They often provide x-rays and laboratory services. Urgent care visits are typically less expensive than emergency room visits. Additionally, visits to urgent care facilities generally quicker than visits to an emergency room. 

In the case of a true, life-threatening emergency, a person should immediately visit the nearest hospital emergency room. Emergency rooms are best-equipped to address emergency health conditions. Utilizing emergency rooms in cases of non-emergency affect the quality of care that medical professionals are able to offer in to people in true emergencies. Additionally, the wait for non-emergency situations is often much longer, as severe medical cases are treated before the less severe cases.

So where will you go when you are in need of care? Learn where the closest urgency care facility and emergency room is to you and choose the appropriate level of care for your medical condition.

What is Preventive Care?

Regular check-ups are considered preventive care.  Preventive care is care that you receive to keep yourself from getting sick in the future. Preventive care prevents illness. Services include annual exams, well-baby and well-child visits, vaccinations, flu shots, cancer screenings, and many other things.

The Affordable Care Act changed the way preventive care is provided. As of September 23, 2010, patients with health insurance are no longer responsible for medical costs for preventive care services.  A full list of preventive care services can be found here.

So I don’t pay for Preventive Care. But what do I need to pay?

If you become ill or injured, and require medical attention, you will pay what is outlined in your health insurance plan’s explanation of benefits.

It is likely that the amount you pay for your insurance premium, or the cost of your health insurance benefit, will be automatically withdrawn from your check each pay period. But in addition to this premium, you will likely have a few other responsibilities when paying for your health care, known as “out-of-pocket” costs.

• Deductible: A deductible is the amount of money you must pay for medical care before your insurance company will begin to pay. Generally, a new deductible must be paid each calendar year. For example, if a deductible is $500, the insured person must pay for $500 of medical service costs before the insurance company will begin to pay.
• Co-Payment: A co-payment (or co-pay) is a form of medical cost-sharing where a health insurance plan requires an insured person to pay a fixed dollar amount each time a service is received. Once co-payment (and deductible, if applicable) is paid, the insurer pays the remainder. For example, if an insured person visits a primary care provider due to illness and pays the $10 co-pay, the insurer will pay for the rest (assuming there is not a deductible left to be paid). Co-payments are generally paid for office appointments, diagnostic tests, emergency room visits, hospital stays, prescription drugs, and more.
• Co-Insurance: A co-insurance is a percentage of the cost of a medical service that you are required to pay. For example, if an insured person has a co-insurance of 20%, the person will be responsible for paying for 20% of all future medical costs while the insurance company pays for 80%. This may be in addition to a deductible responsibility.

So how do I budget for out-of-pocket costs?

Many companies allow their employees to set up health spending accounts to help pay for medical expenses throughout the year. These accounts are called Flexible Spending Accounts, Health Reimbursement Accounts, or Health Savings Accounts. By allowing an employer to withdraw a small amount of money from paychecks each pay period, employees are able to “save up” for potential medical expenses they may incur.

• Flexible Spending Accounts (FSAs) are accounts offered and administered by employers that provide a way for employees to set aside pretax dollars from paychecks to help pay for the employee shares of medical expenses not covered by the insurer, such as deductibles and co-payments.
• Health Reimbursement Accounts (HRAs) are employer-funded group health plans from which employees are reimbursed tax-free for qualified medical expenses up to a fixed dollar amount per year. Unused amounts may be rolled over to be used in subsequent years. The employer funds and owns the account. Health Reimbursement Accounts are sometimes called Health Reimbursement Arrangements.
• Health Savings Accounts (HSAs) are available to taxpayers who are enrolled in a High Deductible Health Plans. The funds contributed to the account aren't subject to federal income tax at the time of deposit. Funds must be used to pay for qualified medical expenses. Unlike a Flexible Spending Account (FSA), funds roll over year to year if you don't spend them.

So now that I understand the aspects of health insurance, how do I choose a plan?

There are a lot of things to consider when choosing a health insurance plan. Here is a list of questions to consider before you make a decision:

1. How much will the plan cost you? Be sure to consider premiums, deductibles, co-insurances, and co-payments.
2. Does your current medical care provider accept the health plan?
3. How large is the plan's network of providers?
4. How large is the plan’s network of providers?
5. What does your insurance plan cover? Your Schedule of Benefits will provide this information for you. Below is a listing of medical services that are sometimes covered and things that are generally not covered. If these things are important to you, find out if your prospective plan covers them.

 Sometimes, insurance plans cover other things as well:

• Drug and Alcohol Treatment
• Mental Health Services
• Durable Medical Equipment
• Fertility Treatments
• Routine Eye Care
• TMJ Treatment

 These things are rarely covered:

• Experimental Drugs
• Alternative Therapies
• Cosmetic Procedures
• Dental Care

But I don’t have health insurance and my employer doesn’t offer it. What should I do?

1. Find out if you can get covered another way. As part of the Affordable Care Act, dependent children are allowed to remain on their parents’ health insurance plan until they turn 26.
2. Negotiate with your providers. There is a ton of variation in the cost charged for medical procedures. There is also significant price mark-up to increase profit margins. If you can’t afford what your treatment plan indicates, ask to negotiate.
3. Use discount drug programs. Many major supermarkets, drug stores, and big box stores offer discounted drugs to customers, with many generic medications being as low as $4.
4. Try COBRA. If you have recently left a job that did offer health insurance, you are eligible for COBRA coverage for up to eighteen months. COBRA is short for the Consolidated Omnibus Budget Reconciliation Act, a federal law that protects you and your family if you lose your employer-sponsored health benefits.
5. Find free or sliding-scale-fee clinics. Federally funded health centers offer free care in both urban and rural areas. To find a center near you, click here.
6. Beginning in 2014, people without health insurance are able to purchase health insurance the Health Insurance Marketplace. The Health Insurance Marketplace is just one piece of the Affordable Care Act (ACA), which is helping to extend health coverage to millions of people.