The Basics of Purchasing Health Insurance
The cost of medical care can be prohibitive for many people. One accident or serious illness can cause a victim to incur tens of thousands of dollars in medical expenses. Health insurance may be purchased from a variety of sources, and it is designed to keep medical expenses from leading to unmanageable debt or bankruptcy. New health insurance legislation requires everyone to have health insurance that meets minimum federal standards.
How Health Insurance Works
There are several large health insurers in the United States. These companies contract with employers, independent agents, and individuals who do not qualify for group plans. They set rates for people of different ages and health care needs. Everyone pays in each month. Health insurance companies pay claims and expenses from the money they collect. They remain profitable as long as they bring in more money via monthly premiums than they pay out in claims.
Health insurance companies contract with medical care providers in addition to customers. They may negotiate lower costs with a provider in exchange for encouraging their customers to use a specific care provider. This allows all three parties to benefit from more business and lower expenses.
Purchasing Health Insurance
The process of purchasing health insurance has changed considerably in recent years. The majority of Americans qualify for health coverage through an employer or through a spouse's employer. This is considered a benefit of employment. When you get health insurance through your workplace, your employer covers part of the monthly premium and you cover the rest. Employers negotiate with companies to secure low rates and satisfactory coverage for employees.
Some people do not qualify for insurance coverage through work. The cost of employee coverage may be too high for those at certain income levels. Business owners and self-employed professionals may not have any company health insurance options. People in these positions may choose to purchase health insurance on an individual basis from a company or an independent agent who works with multiple insurance companies.
The government has programs that provide health insurance for low-income residents. There are also programs that offset the cost of private insurance or employer-funded coverage. This option typically comes with a fairly long application process, since you must demonstrate your financial need and get approved before being covered.
There are several different costs associated with purchasing health insurance. The biggest expense for most people is the monthly premium. This is a set amount that is deducted from your paycheck or paid manually on a monthly basis. The amount you pay is dependent on the rate negotiated by your employer, the amount of coverage you have, and health conditions. Smokers may pay higher rates than non-smokers. People with chronic health conditions may have higher monthly premiums than those who are in generally good health.
Health insurance plans also have deductibles that you must meet. This is the amount of money you pay out-of-pocket for medical care before your insurance company begins paying part or all of your expenses. Family plans often have individual deductibles and a family deductible. If you have a $2,000 deductible, you pay the first $2,000 in medical expenses on your own. The insurance company then pays between 80% and 100% of your expenses for the rest of the year. Deductibles typically reset at the start of each calendar year. You may pay a smaller monthly premium in exchange for a higher deductible. If you choose a lower deductible to avoid large medical bills, your monthly premium may be slightly higher.
Health insurance plans also determine the copay that you are responsible for paying. The copay is a small amount of money that you pay for an office or hospital visit. It is intended to prevent people from abusing their health insurance and seeking care when it is not necessary. Many plans have a small copay for general care and higher copays for specialist appointments. Emergency rooms copays tend to be the highest of all copayments in a plan.
Benefits of Health Insurance
Health insurance is not a small expense. In the past, some people chose to skip health insurance entirely to avoid the monthly expense that comes with it. This is no longer a viable option. Purchasing health insurance provides numerous advantages.
Having any type of health insurance may protect you from accumulating staggering amounts of medical debt. Even high-deductible plans can keep your bills from reaching tens of thousands of dollars every calendar year. This benefit alone is a good reason to purchase health insurance. In 2014, NerdWallet examined bankruptcy cases and found that medical debt is the leading cause of personal bankruptcy.
Having health coverage is a necessity when it comes to chronic or severe conditions. Just getting a diagnosis may require many specialist visits and rounds of testing. Before treatment even starts, those without health insurance may find themselves thousands of dollars in debt. This makes it impossible for some people to get the care and prescriptions they need to stay healthy.
Health Insurance Legislation
One of the main reasons you may wish to maintain health coverage is the fact that you will incur a hefty fine if you do not have health insurance in 2016. The Affordable Care Act requires everyone to carry health insurance. Certain exemptions apply. According to HealthCare.gov, the fee is determined by a percentage of your income or on a per-person basis. Those paying based on income pay a maximum penalty equal to the cost of a Bronze plan sold through the government. Those paying a per-person penalty pay a maximum of $2,085 per year.
The same legislation that covers these penalties also awards tax benefits to those who must purchase their own plan and fall below a certain income level. This is an option to consider if you feel like the monthly cost of health insurance is unsustainable.
No one wants to find themselves in a position where health insurance is a matter of life and death. Health insurance can help you and your family get the medical services you need to enjoy a higher quality of life.