Health Insurance Explained

It seems like everyone is confused about health insurance. Every time the topic comes up in a conversation, people always seem to have more questions than they do answers, and never know what to believe or who to trust. Well, we’re here to help! This article tells you everything you need to know about health insurance: what it is and how it works, how much it will cost you this year (and next year), where the benefits go in case of an emergency, and more! So if you want a better understanding of what healthcare coverage means for you - this article has all the information.

Health insurance is a type of insurance policy that pays for the costs of health care services and products. In the United States, most people obtain their health insurance through an employer or government program, such as Medicare or Medicaid. The terms “health plan” and “healthcare plan” are sometimes used interchangeably. However, healthcare plans are generally preferred by consumers because they include benefits other than just medical coverage, such as prescription drug coverage or dental coverage.

Health insurance is contract between a plan sponsor (either an individual or a company) and an insurance company that helps supplement health care costs. Some plans cover routine checkups, prescription drug benefits, and other medical services for employees and their families. Players on a company's sports team may also be covered by the plan, as long as they are full-time employees. Other plans provide additional coverage to individuals who have specific medical conditions or needs that require costly services related to their ongoing care.

The cost of health insurance varies based on the individual or family’s financial circumstances, the type of policy selected, and the number of coverage providers that are chosen. The amount that an individual would pay the employees towards their health insurance would be based on a separate form of compensation for each category of coverage, with specific benefits attached thereto. The premiums paid for a particular plan would also depend on:

Health insurance is defined as the purchase by an individual or small group of the contractual rights usually associated with coverage of medical expenses, or the voluntary agreement to pay a pre-determined amount for the protection of those associated rights, as contractually agreed upon by both parties. The form in which health insurance is provided may vary according to type and duration. A policy may be provided by insurers (directly or through group purchasing organizations), governments, nonprofit groups and even private individuals.

The benefits provided under a health insurance policy are generally administered by a central organization such as an insurance company or government program. The costs of administering the policy may be borne directly by the policyholder, shared between the policyholder and the insurer, or paid for entirely by the insurer on behalf of the policyholder. In some cases, particularly in workers' compensation plans, benefits may be provided directly by employers.

Health insurance companies issue policies, which contain both the terms and conditions of the coverage (the "policy") and information about premiums and service coverage areas (called "schedule of benefits"). The policy, which usually lists the names of insured persons and defines who will pay for a claim, is the agreement between the insurance company or government program and the insurance consumer. The schedule of benefits describes each covered service and its price (if any); it also describes circumstances in which benefits are paid even if services were not covered by the policy. The schedule includes details such as deductibles, coinsurance percentages, copayments (amounts paid by an insured person directly in cases when he or she incurs expense) and other expenses that might not be covered by insurer.

Benefits are usually subject to the rules and limitations of the applicable group health plan, health insurance company, or other third-party payer. In terms of benefits allowed for specific conditions, there can be restrictions on what is provided (such as a list of drugs that can be purchased without a prescription) or on what is not provided (such as all surgical procedures). Benefits may be subject to the rules of another group health plan, except when a separate contract exists between them. Some sponsored groups allow their medical plans to be supplemented by non-affiliated or non-sponsored insurance products.

The most common type of benefit provided in most group and individual health insurance plans is hospitalization insurance coverage. Hospitalization insurance coverage pays for a set number of days in a hospital, and will usually include all of the following (subject to exceptions for certain health care services): the "inpatient" or "general" service, with all required diagnostic testing done before the service is rendered; surgeon's and anesthesiologist's services; laundry services; daily doctor visits (in some cases); physician's fees for treatment received while in the hospital; pharmacy drugs only, with no copayment or deductible; and emergency room visits. This type of insurance is often referred to as "medical-only" coverage.

Some health insurance policies also offer additional benefits such as gym memberships or other benefits unique to the policyholder.

The types of health insurance plans are broadly grouped into four categories:

Medicare, the federal government health insurance plan for the elderly, is by far the largest single source of medical insurance coverage in America. With 13.9% of the population covered by it in 2005, Medicare covers about 47% of hospital and physician visits and 20% of prescription drug costs, with no out-of-pocket costs to beneficiaries. Today, Medicare is a managed care program that "covers nearly all patients eligible for Medicare benefits." The program pays most or all Medicare-eligible bills after a beneficiary has paid a monthly premium. It also operates as a defined benefit program, under which the beneficiary is guaranteed coverage and the insurer pays specific amounts towards a covered service.

Most people go to free clinics for routine medical care if they are uninsured, but others can qualify for Medicaid. In many states, qualified low-income adults without dependent children are eligible for Medicaid or the Children's Health Insurance Program (CHIP). Almost all states have agreements with the federal government that permit these programs to pay for nursing home care.

In some cases where there is a risk of significant loss to other members of the group or community or hospitalization expenses when the policyholder is hospitalized in extreme cases, insurance companies will cover all or most of the cost.

Conclusion

Although there are many different types of insurance plans available, the primary concern of any insurance purchaser is coverage. The following table summarizes how health insurance plans compare in terms of their coverage plans.

Health Insurance Plan Covers Annual Deductible Coinsurance Copay Young adults Children Adults Senior citizens Medicare Part A Yes No No Yes, if eligible for Part B Medicare Part B Yes* No** Yes, if eligible for Part A Medicaid May cover some services and prescription drugs Not applicable Not applicable Not applicable Private Health Insurance Plans (no HMOs) May cover some services and prescription drugs. Some have high deductibles and copayments Some have high deductibles and copayments May cover some services and prescription drugs.