Understanding Health Insurance Policy Options
Your physical health and your financial health are connected through health insurance: not having the right insurance for you means not only gambling with your physical health, but also endangering your financial stability if you have a health crisis and can’t pay for treatment or a hospital stay. When you choose a plan, don’t forget to add your health insurance payments into your personal budget to stay in control of your finances.
Under the Affordable Care Act, adults up to age 26 can be covered under their parents’ or guardians’ health insurance. The majority of people under 65 receive medical insurance coverage through their employers’ group insurance. This means lower premiums (what you pay each month) for everyone in the group, regardless of health, because the insurance company is collecting premiums from a large collection of people and will probably have to pay out very little. Group plans are also a great deal for employees because it ensures everyone is given access to the health insurance plan regardless of health status—you will never be penalized for a pre-existing condition because group insurance falls under the Health Insurance Portability and Accountability Act (HIPAA)— that waiver you always sign when visiting the doctor’s office that says your medical information will not be shared or used against you.
Most employer group plans are managed care plans of three varieties: health maintenance organization (HMO), point of service (POS), and preferred provider organization (PPO). Managed care plans focus on preventive health care and cover regular check-ups and preventive services to avoid greater health concerns in the long run. These plans use selected doctors, hospitals, and clinics to offer services at reduced group rates; these are called in-network. If you choose an out-of-network doctor, you could end up paying much more in a higher copay.
HMOs are generally cheaper than other managed care plans, but you have the least amount of control over choosing your doctors. There usually aren’t deductibles (the amount you must pay before insurance begins footing the bill), but you pay a small copay for each visit ($10–$25). In order to see a specialist, your primary care physician (PCP) must make a referral. If you see an out-of-network doctor, you will pay the full price of services. Exclusive provider organization (EPO) plans are similar to HMOs, except you don’t always need a primary care physician to coordinate your medical care and make referrals.
A POS combines some aspects of an HMO and a fee-for-service (FFS). Like an HMO, with a POS you have a primary care physician who makes referrals, you have no deductible when seeing an in-network physician, and you only pay a small copay (around $10). Like an FFS, you can see an out-of-network doctor without consulting your primary, but you will have to pay a deductible as well as coinsurance.
PPOs are groups of doctors and hospitals providing service to specific groups, sometimes sponsored by an insurance company, a group of employers, or another organization. PPO members do not need a primary care physician referral and can receive care from doctors outside the PPO group. Like a POS, there is a deductible if you go outside the group. A benefit of PPOs is the existence of a cap on out-of-pocket expenses (with deductible and coinsurance payments counting toward this cap).
FFS insurance offers basic coverage like doctor visits, hospitalization, surgery, and other medical expenses. For major injuries and illness that incur big bills, you can purchase major medical. The third FFS option is comprehensive coverage, which combines basic and major medical. An advantage of FFS plans is the ability to go to any doctor, clinic, or hospital of your choice. However, the reimbursement process can be longer and more involved as you submit qualifying forms to your provider. Also remember, you’re paying a higher out-of-pocket deductible before you receive any reimbursement. They also tend not to cover preventive care.
A flexible spending account (FSA) is set up by an employer so an employee can automatically deposit a pre-tax portion of their paycheck into an account that can be used later for qualified medical expenses (QMEs). An FSA can be opened in addition to an employer-sponsored health plan. The biggest drawback is money not used in an FSA by the end of the year is forfeit: you use it, or you lose it.
Similar to the FSA, a health savings account (HSA) is an account where you can make tax-deferred deposits to be used for qualified medical expenses. To open an HSA, you must be enrolled in a catastrophic insurance plan. Unlike an FSA, the funds in an HSA stay with you even if you leave your employer or stop participation in the catastrophic insurance plan. You can also invest the money in your HSA, with all earnings sheltered from taxation until you withdraw them.
Individual health insurance
Individual health insurance can be used to fill the gap between employer coverage and need. It’s the most expensive option to receive health insurance but sometimes the only option for those who are self-employed. Physical exams are part of the application process, so poor health or pre-existing conditions have a big impact on cost and eligibility. Types of plans include FFSs, PPOs, HMOs, and catastrophic insurance. Catastrophic insurance exchanges low monthly premiums for higher deductibles when you do visit the doctor. Routine doctors’ visits or prescriptions are much more expensive, but a significant health catastrophe is covered. If you are young and healthy or have low income but want a health care safety net, this can be a short-term health insurance option. Just remember, everyone ages, medical costs increase, and new medical conditions develop, so it’s best to only rely on this type of coverage for a limited time before securing a more comprehensive policy.
Medicare and Medicaid
Medicare is health insurance offered through the federal government for people 65 and older with certain conditions and for those under 65 with certain disabilities. It also covers people of all ages with end-stage renal disease.
Medicaid is offered through individual states to certain low-income individuals and families who meet strict eligibility requirements. Eligibility varies from state to state. If total family income is the only reason disqualifying a family from receiving Medicaid, they may still qualify for State Children’s Health Insurance(SCHIP), which covers uninsured children under 19 for doctor visits, immunizations, hospitalizations, and emergency room visits for little or no cost.
High-risk health insurance pools
High-risk health insurance pools are an option for those ineligible for other plans due to poor health. These state-mandated programs combine uninsurable individuals into a single group for whom the state sets up a plan similar to private insurers, though at a higher cost. Plans offered by high-risk pools are comparable to most major medical plans with a range of premiums and deductibles. Benefits vary but usually include prescription coverage, maternity care, and disease management.