Health Insurance Basics

Understanding your health insurance options today can seem daunting. Below we have created a guide to help you understand what health insurance is, what it offers, and how it works. 

What is Health Insurance?  

Health insurance is a generalized term that refers to a variety of different insurance policies. These policies can cover the cost of doctors, hospitals, specialists, and specific needs such as vision or dental. In most cases however, when we talk about health insurance it refers to the type of plan that covers your doctor, surgery, and hospital bills. Just like most types of insurances, you can customize a health insurance plan to make it just right for you. This includes agreeing to pay a specific rate or premium for your selected policy. In return for paying your premium, your insurance company will pay a specific percentage of your medical expenses for your covered services.  

How Does Health Insurance Work?  

Once you have selected and paid for your policy, you become a member of that health plan. This means that you are a part of a group that insurance companies call a “risk pool.” In that pool are others who could be considered high risk or low risk. High risk members are deemed so due to specific ongoing illness, for example. Usually, these members need more medical services than others who are considered low risk. Low risk members in your pool are those who are deemed healthy and are those who don’t seek medical services as frequently as those higher risk members.  

Insurance companies will look at everyone in a risk pool and calculate the amount of money needed, potentially, to pay for everyone’s medical expenses. All members pay a premium which is used to defray the pool’s medical expenses. In return for that paid premium your insurance company shares the cost of covered medical services with you. These services are listed in your policy along with out-of-pocket costs for each service, co-pay, a deductible, or coinsurance. Let’s look at some of these terms: 

• Premium: Your premium is the amount of money you pay to your insurer each month (or quarter or year) to stay enrolled in your healthcare plan and maintain coverage. 
• Co-Pay: Co-pays are your payments, also known as “out of pocket” payments, to receive services. These are typically flat-rate payments, like $25 for a doctor’s visit. 
• Deductible: This is the amount of money you pay before your insurer starts paying / sharing in the cost of your healthcare coverage. If you have a $500 deductible, for example, you bear the full costs of service up to $500 and your insurer will begin “helping” with these costs above $500. You will likely still have a co-pay even after you meet the deductible. 
• Coinsurance: This is another type of cost sharing payment you may see, which is similar to a co-pay. Instead of a flat amount, it is usually a percentage of the cost of services, medication, etc. For example, if you have a 10% coinsurance for a doctor’s visit that cost $100, you will pay $10 for that visit (10% of $100).  

Types of Health Insurance Coverages  

There are different types of insurance plans you can purchase to meet your needs, which may or may not include dental and vision coverage. If you are employed, you will have less options than if you are not. However, your employer will share in the cost of your healthcare coverage thereby making it cheaper to get and be covered as an employee. If you are over 65, most become eligible for Medicare, a federal health insurance program, where again, you will find many options to customize your plan. 

• Employer-sponsored coverage 
• Individual and family plans 
• Medicare 
• Special coverages for special situations
• Dental 
• Vision 

If you find yourself wanting more answers regarding health insurance, try Understanding Health Insurance.