Paul Sanchez
Unlike many countries, the US does not have a universal government healthcare system. Instead, it has a complex system of private insurers, subsidies, and tax incentives, with many people getting health coverage through their employers. Health insurance plans can vary widely in what they cover and how they work, but they typically involve paying a premium every month, and in return, the insurance company covers some of the costs when you need medical services.
| Characteristics | Values |
|---|---|
| How to get health insurance | Through an employer, through public programs like Medicaid and Medicare, or by buying it on your own through a state or federal health exchange or directly through a health insurance company |
| What health insurance covers | Doctors' visits, prescription drugs, medical and surgical services, emergency care, behavioral health, and sometimes vision and hearing |
| What health insurance doesn't cover | Alternative medicine, cosmetic surgery, weight-loss surgery (unless specified in the plan) |
| How to lower out-of-pocket costs | Stay in-network, as network providers agree to give lower rates to the insurance company's customers |
| How to keep costs low | Preventative care is typically covered 100%, including annual check-ups, routine health screenings, and certain vaccinations |
| How to avoid paying unnecessary out-of-pocket costs | Know how your health plan works, including what services require prior authorization |
| How to save money on lab work | Go to an in-network lab, as your health plan negotiates lower rates with them |
| How to save money in an emergency | Many health plans do not require you to go to an in-network ER in an emergency, but plans can differ |
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What You'll Learn
Sources of medical insurance
There are three primary sources of medical insurance plans: employer-sponsored plans, government programs, and individual policies. These sources help individuals navigate the complex sector of health insurance options and make informed decisions to secure appropriate coverage for their healthcare needs.
Employer-sponsored health insurance plans are the most common form of health coverage in the United States. Employers offer this as part of their employee benefits package, with both the employer and employee typically sharing the premiums, making it a cost-effective choice for many individuals and families. This type of insurance usually provides comprehensive coverage and is more accessible for individuals with pre-existing conditions. However, the choice of plans is limited as the employer makes the selections, and coverage is lost when changing jobs.
Government programs, such as Medicare and Medicaid, are another crucial source of medical insurance. Medicare is a federal health insurance program primarily for individuals aged 65 and older, as well as those with specific disabilities. It covers a range of healthcare needs, including hospital care, medical services, and prescription drugs, and is funded through payroll taxes. On the other hand, Medicaid is a collaborative initiative between the federal and state governments, providing health coverage for low-income individuals and families who may not be able to afford private insurance. Eligibility criteria and benefits may vary across states.
The third source of medical insurance is individual policies, which individuals purchase directly from insurance providers or through their state's Marketplace. These plans are organized by the level of benefits they offer, typically categorized as bronze, silver, gold, and platinum. Bronze plans have the least coverage, while platinum plans offer the most. Deductibles, copays, and coinsurance are important factors to consider when choosing an individual policy, as they impact the overall cost of healthcare.
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What medical insurance covers
Medical insurance typically covers a wide range of medical care and services. These often include preventive and non-preventive care, as well as emergency care, behavioural health, and sometimes vision and hearing.
Preventive care is typically covered 100% by most insurance plans. This includes annual check-ups, routine health screenings, certain vaccinations, and more. Some plans may require a copay—a small fee you pay at the time of the doctor visit. Preventative care can also include annual check-ups for children, flu shots, and certain kinds of childhood vaccinations.
Non-preventative care includes doctor visits for illnesses or injuries. For in-network doctors and specialists, you will get a reduced rate as part of the network. If you go to an in-network lab, your costs for lab work will also be lower.
Your insurance plan may also cover prescription drugs. If so, it will have a list of the medicines it covers, also known as a formulary or drug list. Review this list to ensure the prescriptions you need are included and if they need any special approvals (pre-authorisations).
In the case of an emergency, many health plans do not require you to go to an in-network ER. However, plans can differ, so it is important to check the specifics of your plan.
In addition to the above, health insurance plans can also come with perks that come at no extra cost, like health and wellness rewards programs and discounts for services and products.
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Out-of-pocket expenses
Deductibles are the amount of money you must pay out-of-pocket before your insurance company starts covering your medical expenses. For example, if your deductible is $1,000, you will be responsible for paying the first $1,000 of covered medical expenses out-of-pocket. Once you have met your deductible, your insurance plan will start contributing to your medical costs.
Copayments, or copays, are fixed amounts that you pay for specific services, such as a doctor's visit or a prescription medication. These copays are typically set by your insurance plan and are paid at the time of service. Not all insurance plans include copays, so they will only be an out-of-pocket expense if your plan includes them.
Coinsurance refers to the percentage of covered health expenses that you are responsible for paying after meeting your deductible. For example, if your coinsurance rate is 80/20, your insurance plan will cover 80% of the cost, and you will be responsible for paying the remaining 20% out-of-pocket. It's important to note that coinsurance rates can vary depending on the service, insurer, and plan.
To estimate your potential out-of-pocket costs, it is important to review your insurance coverage, annual deductible, and out-of-pocket maximum. The out-of-pocket maximum, set by federal law, caps the total amount a policyholder must spend annually on covered healthcare expenses. By understanding these factors, you can make informed decisions about your healthcare and choose the right coverage for your needs.
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Prior authorisations
Prior authorization is a requirement by health insurance plans for patients to obtain approval for a health care service or medication before the care is provided. This gives the insurance company the chance to review how necessary a medical treatment or medication may be in treating a patient's condition. It is also a way for the insurance company to control costs. Prior authorization is pre-approval from your health insurer and is usually required if you need a complex treatment or prescription.
The process for obtaining prior authorization varies by insurer but involves the submission of administrative and clinical information by the treating physician, and sometimes the patient. This may include filling out paperwork, sending faxes, and making phone calls. The process can take a long time, with patients waiting days, weeks, or even months for approval. If prior authorization is not obtained, the insurance plan may deny coverage.
The use of prior authorization has come under scrutiny, with advocates and policymakers calling for closer scrutiny of its use across all forms of health coverage. Some states have adopted or are considering "gold card" laws that would require health plans to waive prior authorization for services ordered by providers with a track record of prior authorization approval. There is also a push for increased transparency around the process, with H.R. 3173 requiring Medicare Advantage insurers to report on the types of treatment that require prior authorization, the percentage of claims approved, denied, and appealed.
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Supplemental coverage
Supplemental health insurance is an additional coverage option that can be purchased to enhance one's primary health plan. It provides extra financial protection against unexpected medical expenses and fills potential gaps in primary coverage. This type of insurance is especially useful when facing costly and unforeseen situations, such as accidents, injuries, or serious illnesses.
Supplemental insurance policies are designed to help with out-of-pocket medical expenses and daily living costs that may arise during challenging times. These expenses could include copays, deductibles, utility bills, groceries, childcare, and other indirect costs related to medical treatment, such as transportation or hotel stays.
One of the key advantages of supplemental coverage is the flexibility it offers in how the cash benefits can be utilized. The benefits are typically paid directly to the policyholder, unless otherwise assigned, allowing individuals to allocate the funds as they see fit. This means that the cash can be used not only for medical bills but also for everyday expenses, providing peace of mind and financial stability during difficult periods.
There are several types of supplemental health insurance plans available, each tailored to specific needs. Accident insurance, for instance, provides coverage for injuries caused by accidents and often includes a lump-sum payout. Critical illness insurance, on the other hand, offers benefits and coverage after a serious illness diagnosis, providing funds for medical care, experimental treatments, or household expenses. Cancer insurance is another specialized form of supplemental coverage, helping to reduce out-of-pocket expenses related to cancer treatments and offering recurrence benefits if the illness returns.
Supplemental health insurance can usually be obtained through one's employer during open enrollment periods. However, if an employer does not offer the desired benefit, individuals have the option to purchase supplemental coverage directly from insurance companies, such as Cigna and Aetna, at any time of the year.
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Frequently asked questions
Medical insurance is a legal agreement between you and a health insurance company. This agreement includes a health plan that helps you pay for certain medical care and services, so you don’t have to pay all the costs on your own.
There are several ways to get medical insurance. You can get coverage through your employer, who may offer you a health plan as part of your job. You can also buy one on your own through a state or federal health exchange, or directly through a health insurance company.
Medical insurance plans can cover a wide range of medical care and services. These often include preventive and non-preventive care, as well as emergency care, behavioural health, and sometimes vision and hearing.
The cost of medical insurance depends on the plan you choose. You usually pay a premium, which is a monthly fee for having the health plan. Your employer may chip in for this payment.
Once you meet your deductible, you start sharing costs with your plan. For example, your health plan may pay 80% of your medical costs and you pay 20%. This is called "coinsurance". Preventative care is typically covered 100% and includes things like annual check-ups, flu shots, and certain wellness screenings.
