Why You Need Health Insurance

The United States does not have socialized medical care. If you have no health insurance coverage, you have to pay for health care out of your own finances at the time of service. This can run into many thousands of dollars for serious illnesses.

You buy health insurance for the same reason you buy other kinds of insurance: to protect yourself financially. With health insurance, you protect yourself and your family in case you need medical care that could be very expensive.

You cannot predict what your medical bills will be. In a good year, your costs may be low. But if you become ill, your bills could be very high. If you have health insurance, many of your costs are covered by a third-party payer, not by you. A third-party payer can be an insurance company or, in some cases, it can be your employer.

Many people in the United States are enrolled in some sort of managed care health insurance plan. This is an organized way of both providing services and paying for them. Different types of managed care plans work differently and include preferred provider organizations (PPOs), health maintenance organizations (HMOs), point-of-service (POS) plans and fee-for-service plans.

Individuals enrolled in health care plans pay a monthly or quarterly fee as insurance for the time when they will need medical attention. At the time when a service is provided, the health insurance organization pays part or all of the fee, minimizing the amount you have to pay at the time you receive the service.

The information presented here will help you choose a health insurance plan that is right for you. If you are married or single, have children or no children, this information will help you to find out how to choose a health insurance plan that best meets your needs and your financial circumstances. Definitions of the health insurance terms used are included in the section called Understanding Health Insurance Terms.

Understanding Health Insurance Terms

Coinsurance
The amount you are required to pay for medical care in a fee-for-service plan after you have met your deductible. The coinsurance rate is usually expressed as a percentage. For example, if the health insurance company pays 80 percent of the claim, you pay 20 percent.

Coordination of Benefits
A system to eliminate duplication of benefits when you are covered under more than one group plan. Benefits under the two plans usually are limited to no more than 100 percent of the claim.

Co-payment
Another way of sharing medical costs. You pay a flat fee every time you receive a medical service (for example, $5 for every visit to the doctor). The health insurance company pays the rest.

Covered Expenses
Most health insurance plans, whether they are fee-for-service, HMOs, or PPOs, do not pay for all services. Some may not pay for prescription drugs. Others may not pay for mental health care. Covered services are those medical procedures the insurer agrees to pay for. They are listed in the health insurance policy.

Customary Fee
Most health insurance plans will pay only what they call a reasonable and customary fee for a particular service. If your doctor charges $1,000 for a hernia repair while most doctors in your area charge only $600, you will be billed for the $400 difference. This is in addition to the deductible and coinsurance you would be expected to pay. To avoid this additional cost, ask your doctor to accept your health insurance company’s payment as full payment. Or shop around to find a doctor who will. Otherwise you will have to pay the rest yourself.

Deductible
The amount of money you must pay each year to cover your medical care expenses before your health insurance policy starts paying.

Exclusions
Specific conditions or circumstances for which the policy will not provide benefits.

HMO (Health Maintenance Organization)
Prepaid health plans. You pay a monthly premium and the HMO covers your doctors’ visits, hospital stays, emergency care, surgery, checkups, lab tests, x-rays, and therapy. You must use the doctors and hospitals designated by the HMO.

Managed Care
Ways to manage costs, use, and quality of the health care system. All HMOs and PPOs, and many fee-for-service plans, have managed care.

Maximum Out-of-Pocket Expenses
The most money you will be required pay a year for deductibles and coinsurance. It is a stated dollar amount set by the health insurance company, in addition to regular premiums.

Non-cancellable Policy
A policy that guarantees you can receive health insurance, as long as you pay the premium. It is also called a guaranteed renewable policy.

PPO (Preferred Provider Organization)
A combination of traditional fee-for-service and an HMO. When you use the doctors and hospitals that are part of the PPO, you can have a larger part of your medical bills covered. You can use other doctors, but at a higher cost.

Pre-existing Condition
A health problem that existed before the date your health insurance became effective.

Premium
The amount you or your employer pays in exchange for health insurance coverage. Primary Care Doctor
Usually your first contact for health care. This is often a family physician or internist, but some women use their gynecologist. A primary care doctor monitors your health and diagnoses and treats minor health problems, and refers you to specialists if another level of care is needed. In many health insurance plans, care by specialists is only paid for if your are referred by your primary care doctor. An HMO or a POS plan will provide you with a list of doctors from which you will choose your primary care doctor (usually a family physician, internists, obstetrician-gynecologist, or pedicatrician). This could mean you might have to choose a new primary care doctor if your current one does not belong to the plan. PPOs allow members to use primary care doctors outside the PPO network (at a higher cost). Indemnity plans allow any doctor to be used. Provider
Any person (doctor, nurse, dentist) or institution (hospital or clinic) that provides medical care.

Third-Party Payer
Any payer for health care services other than you. This can be an insurance company, an HMO, a PPO, or the Federal Government