Health insurance coverage can come from many sources, including employer-sponsored plans, private plans purchased in the marketplace and government programs like Medicare and Medicaid. Understanding the basic terms of plan structures can help people shop smartly for a policy that meets their individual and family needs.
For instance, it’s important to consider whether a plan requires you to select a primary care physician and obtain a referral before seeing a specialist. This can impact the cost of services, since doctors in networks typically have negotiated lower rates with insurers.
What is Health Insurance?
USA health insurance is a type of financial protection against high medical costs. It works by pooling the risk of expensive medical treatments across a large group of people, permitting those individuals (or their employers) to pay a premium in exchange for a percentage of their treatment cost covered by the insurer. This allows even those with modest incomes to afford a reasonable amount of coverage. Without health insurance, the financial burden of catastrophic or chronic illness can quickly deplete savings and erode household budgets.
Typically, monthly premiums are paid in exchange for out-of-pocket costs (deductibles, copays, and coinsurance) when the insured needs medical care or medication. Health insurance may be provided through employment (large-group or small-group insurance), through the individual/family market, through Medicare Advantage plans, and through federal government-assistance programs such as Medicaid and Medicare Part D. Individuals who are members of the armed services or their families are covered through Tricare. Employees of the federal government are covered through the FEHB program.
The Affordable Care Act (ACA) requires all non-grandfathered individual and small-group major medical plans to include all of the essential health benefits, limiting maximum out-of-pocket expenses. Additionally, the ACA prohibits health insurance companies from imposing lifetime or annual benefit caps on these plans. The ACA also requires certain preventive services to be provided free of charge, as well as a ban on requiring pre-authorization for some types of medication.
In the United States, most private health insurance is provided through employer-sponsored benefit plans. Employees choose to participate in their employer’s plan by paying a premium; in exchange, they receive an insurance card that gives them access to the doctors, hospitals and other healthcare providers listed on the plan. Other private health insurance includes self-insured group health coverage, such as the ERISA-governed self-insured plans of some large corporations; and short-term health insurance, which is designed to be stand-alone coverage for a limited period of time.
In general, state insurance commissioners and departments oversee regulated private health coverage. On the federal level, the Department of Health and Human Services/Centers for Medicare and Medicaid Services regulates Medicare, as does the Department of Labor/Office of Personnel Management for ERISA-governed self-insured group plans and individual/family coverage.
How Does Health Insurance Work?
Health insurance is a contract between you and an insurance company. In exchange for your monthly premium payment, the insurance company agrees to pay a portion of your medical costs for covered services. You will generally be responsible for out-of-pocket costs like copays, deductibles and coinsurance until you reach your annual out-of-pocket maximum. In addition, some plans may have limits on certain services and some services may be excluded. You will need to review your plan’s summary of benefits and coverage to understand your specific coverage.
When selecting a health insurance plan, it is important to consider both the monthly premium and out-of-pocket costs. Typically, the higher the monthly premium, the lower the out-of-pocket costs. However, out-of-pocket costs can add up quickly, especially for major medical expenses. You can determine the amount of these costs by reviewing your plan’s policy booklet or using online tools that provide estimates of potential out-of-pocket costs.
Many people receive health insurance through their employer. Employees can choose whether or not to participate in their employer’s health plan. If they do, the health insurance will usually be a pre-tax benefit, which reduces the employee’s federal and state income tax payments. Individuals can also purchase health insurance through private companies. These plans are often more flexible than employer-sponsored options, but they can have different rules and arrangements regarding care.
There are many different types of health insurance available, including HMOs, POS, PPOs and HDHPs. These plans differ in how much they cost and what they cover. Some plans require enrollees to receive all of their care from a network of designated healthcare providers. Others allow policyholders to choose their own doctors and hospitals. Still others restrict coverage to preventative care.
All of these differences make selecting the best health insurance plan a complex task. Ultimately, you need to decide what is most important for your needs and budget. Regardless of the type of health insurance you choose, it is important to have coverage in case of unexpected medical expenses or illnesses. Without health insurance, these expenses can be financially devastating.
What Are the Benefits of Health Insurance?
Health insurance provides a financial foundation for accessing meaningful health care. Even though health insurance does not always pay for all health services, it helps you overcome significant financial barriers that might prevent you from receiving needed medical care, such as high deductibles and copayments. Health insurance also covers routine health services that can help you manage chronic diseases and conditions, such as diabetes or high blood pressure, avoiding expensive and potentially disabling complications.
In addition, health insurance can provide a financial safety net for unexpected illness or injury. Without health coverage, these expenses can be financially devastating. Studies show that the uninsured are more likely to delay or forgo health care, especially preventive services. In fact, the uninsured are more than twice as likely to go without care until they experience a serious health problem, such as a heart attack or stroke (Lurie et al., 1984; Schoen and DesRoches, 2000).
The majority of states regulate the business of health insurance, including standards on when and how insurers can deny or alter policies. At the federal level, the Department of Health and Human Services/Center for Medicare and Medicaid Services oversees regulations governing Medicare and fully-insured group health coverage. The Department of Labor/Department of Treasury oversees compliance with the Employee Retirement Income Security Act (ERISA) in relation to self-insured group health plans.
Consumers are able to compare health insurance policies using a standardized form, called the Summary of Benefits and Coverage, which is available from each insurer. It is similar to the Nutrition Facts label required on all packaged foods. The Center for Consumer Information and Insurance Oversight is also developing a tool that would allow consumers to compare health plans by simulating how claims would be processed for common benefits scenarios.
Most people obtain health insurance through their employers or through a private individual health insurance policy, or the public marketplace. Other sources include health care sharing ministries, direct primary care physicians and the self-insured. People without employer-sponsored health insurance can also acquire coverage through the individual market, or through Medicare and the Veterans Affairs program. Regardless of how individuals purchase health insurance, they must meet minimum coverage requirements.
How Can I Get Health Insurance?
You can get health insurance through your employer, a private insurer, the federal marketplace, or your state’s marketplace. You can also apply for free or low-cost coverage through Medicaid and the Children’s Health Insurance Program (CHIP) any time of year.
You might also be able to find coverage through an association or membership organization, or through a non-governmental entity like a church or civic group. These entities may sell their own health plans, or they might be brokers for a number of different insurers. Some of these options may be available through the health insurance exchange, and some might qualify for subsidies. However, you should be aware that if you purchase insurance through one of these sources, it might not meet ACA requirements and you may not be able to receive premium tax credits or other subsidies through the marketplace.
Whether you buy health insurance directly from an insurer, through the marketplace, or through an association or membership organization, you should carefully review what each plan offers to make sure that it meets your healthcare needs and budget. You should also understand what the costs are and how they work, including things like deductibles, copays, and coinsurance.
All major medical health insurance plans sold both inside and outside of the marketplace are required to provide coverage for preventive services, treatment of pre-existing conditions, and other basic benefits under the ACA. But cost and coverage can differ widely between plans.
Inside the marketplace, there are three types of health plans available to consumers: health maintenance organizations This link will open in a new tab (HMOs), preferred provider organizations This link will open in a new window (PPOs), and exclusive provider organizations.
