Have you ever read an insurance plan and thought afterwards, “what did I just read?” The health insurance topic is a complex subject. Even if you call to talk with a sales rep for health insurance, you will need to research more on coverage plans. But, what are the things you need to know about health insurance? Look no further! Let’s start with why we need health insurance.
Why Do I Need Health Insurance?
Most companies will pitch this line, “you can’t afford to not” when it comes down to purchasing health insurance. Instead of forcing an opinion onto people, we should explain the main points (pros and cons) of needing health insurance.
Pro #1 Choose Your Coverage
When it comes to purchasing insurance coverage (plan), you can choose between individual or family plan. Each month you are expected to pay a premium, which is a charge for the plan you have chosen. In other words, paying a premium activates your monthly coverage.
In addition, paying a premium for insurance can be a reduced payment if you pay for insurance through your employer. For example, you might pay the premium from a deducted dollar amount from your paycheck as prearranged with your employer.
Economically speaking, let’s replace the word “coverage” when paying a premium with the word “risk”. The insured (you) pay an insurance company each month to cover the risk you are taking in every day life. Each premium is a function (relation between two sets) based on variables like your age, type of employment, medical conditions, and etc. Therefore, the premium cost depends on the current variable.
Pro #2 Your Budget
This is the part where your insurance company helps you, but to the extent of your plan. Three terms we need to understand are deductible, copay, and coinsurance that describe financial responsibility.
Deductible- The dollar amount you will pay out of pocket for health care services before your insurance provider begins to pay. Deductibles are used as a way to share the risk between you and the insurance provider. For example, your deductible might be $1,000 out of pocket for health care services, but the insurance company pays $3,000 of the total cost $4,000.
Often, the insurance company will pay out the entire cost, especially, if you have to pay for another party’s medical bills. Think about it from a different perspective. If you did not have to pay a deductible, you could experience as many accidents as you wanted and only at the cost of your insurance company.
The relationship between deductible and premium:
- Higher deductible = less insurance premium dollar amount
- Lower deductible = more coverage from the insurance company (which increases more monthly premiums to balance out the increased coverage)
On that note, what happens when you want to pay a lower premium? Lets say you experience a terrible and costly incidence. This would result in having to pay more for the health care services than the insurance company. Not to mention, the terrible and costly event would cause you to incur serious financial consequences.
Copay- Short for copayment, is a fixed amount a healthcare beneficiary pays for covered healthcare services (Depesido & Investopedia, 2021). A healthcare beneficiary is someone enrolled in a health insurance plan and receives benefits through the policy (2021).
Moreover, health care services are either routine or essential. The type of service affects the amount a beneficiary will copay. In addition, a standard doctor’s visit will have a less copay than visits with a specialist. No matter what, emergency room visits have the highest copays among all services.
Coinsurance- is the amount and generally expressed as a fixed percentage an insured (you) must pay against a claim after the deductible is satisfied (Kagan & Investopedia, 2021). When dealing with health insurance, coinsurance is similar to a copay, but copays require the insured (you) to pay a set dollar amount at the time of the health care service (2021).
Concerning a budget for health insurance, all insurance plans have a network of providers like doctors, hospitals, labs, imaging centers, and pharmacies. Insurance providers typically cover most prescription drugs, wellness care, and medical devices. Not to mention, most plans cover mental health issues. Finally, the paper work involved can be overwhelming. Therefore, insurance providers offer EOBs (Explanations of Benefits) along with electronic documents for further explanation on your coverage plan (Patient Advocate Foundation, 2018).
Con #1 Penalties
Purchasing health insurance is costly and here’s why. If you do not have insurance, then you will pay more money than the insurance company would pay for towards an incident involving your health. Also, you might have to pay a penalty if you are not insured.
Con #2 Services Not Provided & Medicine Not Covered
Most health insurances will not provide insurance for cosmetic procedures, beauty treatments, new brand technology, fertility treatments and off-label drugs, but why? Each state has its own insurance commissioner who advocates for consumer protection, maintains fair pricing for insurance products, ensures availability of insurance coverage, and etc. (Zucchi & Investopedia, 2021). Depending on state regulations and the sponsor’s needs, there are services and medicine that is not covered by health insurance providers (2021).
First, services like cosmetic procedures (plastic surgery and dermatology), fertility treatments (IUV, IUI, and egg freezing), off-label prescriptions (opioids), and new technology in product services are common services not provided by health insurance. It’s important to understand that new health technology is under scrutiny by medical companies to prove their measurable benefit to the consumer (2021).
According to the American Cancer Society, insurance companies often have a problem with paying (reimbursing) for off-label drugs (2015). For example, an off-label drug is most common in cancer treatments such that involve chemotherapy. Health insurance companies may not pay for the off-label drugs since its purpose of use does not fall under the approved drug label (2015). In other words, health insurance companies will claim that these off-label drugs are “experimental” and “investigative” (2015).
(On a positive note, the issues involving cancer treatment were addressed by the 1993 federal legislation. This law approves using off-label drugs if the treatment is tested in an appropriate research study, written in a a medical journal, and peer reviewed (2015).)
Did you know that most people (individuals) pay roughly between $150-$200 for their standard premium in 2021? One of the best ways to help you stay on track with health insurance is by opening a flexible spending account or savings account for medical expenses. Money can be directly deducted from your bank account each month. Lastly, your insurance company might provide free services like helping you quit smoking, losing weight, managing a condition, and even achieve your other health goals! Teaming up with the right insurance provider will easily help you transition through life!
Depesido, C. D. & Investopedia. (2021, June 26). Copay vs. Deductible: What’s the Difference? Investopedia. https://www.investopedia.com/ask/answers/051415/what-difference-between-copay-and-deductible.asp
Kagan, J. K. & Investopedia. (2021, June 26). Coinsurance. Investopedia. https://www.investopedia.com/terms/c/coinsurance.asp
Patient Advocate Foundation. (2018, November 14). What Does an EOB Statement Look Like? https://www.patientadvocate.org/explore-our-resources/interacting-with-your-insurer/what-does-an-eob-look-like/
The American Cancer Society Medical and Editorial Content Team. (2015, March 17). Off-Label Drug Use. American Cancer Society. https://www.cancer.org/treatment/treatments-and-side-effects/treatment-types/off-label-drug-use.html
Zucchi, K. Z. & Investopedia. (2021, June 21). Services That Health Insurers Often Decline. Investopedia. https://www.investopedia.com/articles/insurance/09/services-health-insurers-do-not-cover.asp