Health Insurance
In a nutshell, when you purchase a health insurance policy, your healthcare provider (insurance company) agrees to financially protect you if you get sick or hurt by helping to pay for the healthcare services you need. You might ask, why do you need an insurance company to protect when you can easily pay for your hospital visits.
The reason is simple. If you get sick or are injured in an accident, the cost of treating you can quickly exceed your ability to pay. These days a single visit to the emergency room for an unexpected health situation can run into the thousands or tens of thousands of dollars. There's nothing like having that peace of mind knowing that part of your medical expenses will be taken care of when you need it.
How Does Health Insurance Work?
Health insurance which including medical, dental and vision insurance helps protect you from the high costs of healthcare. Having health insurance means you pay a premium every month to an insurer and, in return, your health insurance plan pays part of your bill if you get sick or are injured in an accident, and need a service from a doctor or another health provider. Health insurance usually covers doctors' visits, hospital stays, prescription drugs, and more. Your healthcare provider also agrees to provide preventative services and screening tests at no cost to you.
Mr. Alvarez has a health insurance policy with a $500 deductible and 20% co‐insurance (co‐pay).
This means Mr. Alvarez pays the first $500 of any covered medical care plus 20% of the remaining costs.
Mr. Alvarez fell off his roof resulting in a $5,000 medical procedure that is covered by insurance.
Mr. Alvarez pays $500 + 20% of the remaining $4,500 for a total of $1,400. The insurance company pays $3,600.
On diving deeper, below are some basic health insurance key terms you need to know and what they mean to your healthcare coverage and out-of-pocket expenses.
Your insurance premium or monthly bill is the amount you typically pay every month in order to stay covered, after you sign up for health insurance. Staying up to date with your monthly premium comes peace of mind knowing that you have the coverage you need.
Out-of-pocket costs are medical expenses you are expected tp pay, not your insurance company. These will include:
Deductibles
Co-insurance
Co-pays
Any costs for medical services that are not covered by your insurance
The deductible is the total amount you agree to pay out of pocket for your medical care up to a set dollar amount each year. After you have reached your annual deductible, your health insurance company will then start paying their share of your medical costs. That’s called coinsurance. The deductible is one of the ways you share your medical costs with your insurance company.
Example: Deductible $1,500
Routine preventive checkup $400 | You pay $0
Your Health insurance plan must cover a set of preventive services at no cost to you.
Chest XRay $1000 | You pay $1,000
Procedure $800 | Is your Deductible met?
**See Co-insurance & Co-pay
Once your deductible is met and your insurance company starts picking up the cost of your care, you may need to pay a smaller portion for services through a co-insurance or co-pay fee.
Co-insurance is a percentage of the cost of the insurance.
Co-pay is a flat fee you pay for a service.
Example: Co-insurance (%)
Let's say you need to have a procedure that costs $1,000, and your co-insurance is 20%. You’ll pay for $200 of that bill, and your insurance company will pay the remaining $800.
You pay 20% of your total bill
Insurer pays the remaining 80%
Example: Co-pay ($)
Let's say you visit your doctors office and you have a $35 co-pay. You only have to pay $35, no matter what the whole cost of the visit is.
You pay a $35 Co-pay at the time of your visit
Insurer pays for the cost of care.
Note: Co-pays vary by type of service or provider. You may have a different copay for emergency room services and another one filling a prescription. Co-pays do not count toward meeting your annual deductible.
Out-of-pocket maximum is the most you’ll ever pay in a plan year for eligible expenses. Your deductible, co-insurance and co-pay all count toward your out-of-pocket maximum for the year. Then, your insurance company will pay 100 percent of all covered medical expenses. To continue to get care, you only have to pay your premium.
In-Network is a large group of doctors, hospitals, pharmacies, labs and providers who have partnered with the insurer to provided services to the policyholders at the best possible negotiated rates for the plan.
Using in-network, or participating providers will make your care will be more affordable because, not only are you getting the best possible negotiated rates for the plan, the providers will also handle submitting your claims to the health plan and protecting you from balance billing (see below).
Out-of-network providers do not have a contract with the health plan, as a result members will pay more of the cost when receiving care and most likely will have to complete and submit their claims to the health plan for partial reimbursement.
What is Balance Billing?
Balance Billing is when you use an out-of-network provider and there's a difference between the provider’s charge and the amount your health insurance allows. The provider may bill you for the balance. For example, if the provider’s charge is $200 and the allowed amount is $120, the provider may bill you for the remaining $80. An in-network provider may not balance bill you for covered services.
There are many different kinds of health insurance available to individuals today. Most health insurance is provided through employers as a part of an employee benefits program or through government programs such as Medicare, Children’s Health Insurance Program (CHIP), or Medicaid.
Health Insurance FAQ’s
If you have a benefit earning job you are most likely going to get your health insurance through your employer, however you can be covered under your parent’s plan until you are 26 or you get your own plan through one of MNsure’s offerings.
Unlike having a homeowner’s insurance, which is required if you have a mortgage, health insurance is one of those types of insurance coverage that are largely optional. However, having health insurance is as important as other types of insurance coverage, mostly because the reward of having coverage if you need it outweighs the cost.
Be a Responsible Health Care Consumer
Being a responsible health care consumer is all about maintaining a healthy lifestyle, choosing in-network providers when appropriate, evaluating your health care choices when care is needed and using available resources wisely.
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