Health Insurance 101


Why So Many Types of Fees?

As you can see, some fees are charged upfront, no matter how much medical care you use, and others are charged only when you use a service. Lots of health insurance companies will make this tradeoff in their plans: Let’s say your premium is low, so you’re paying very little upfront. Most likely, then, the insurer will require you to pay a lot out of your own pocket if you actually get sick. That means you will have a high deductible. But if you’re generally healthy and are willing to bet that you won’t have an accident, it makes sense for you to pay a small premium every month and to make the gamble that you won’t ever have to pay your high deductible.

On the other hand, if you know you’ll likely use medical services regularly, you’ll probably agree to pay more every month as long as you don’t have to pay a lot every time you use the service. And that’s a tradeoff that the health insurer is willing to make as well. So, that user may select a policy with a high premium but a low deductible.

In the end, health insurance is a game in which the insured is trying to pay and the insurer is trying to charge what they each deem a reasonable amount for the health services that the insured will use.

Different Kinds of Health Insurance

The laws regulating health insurance plans are changing things up, but for now there are two main kinds of plans. With a fee-for-service/indemnity plan, you can visit any doctor, hospital or health care provider and the insurer will pay for a portion of the total charges.

Insurers offering managed care plans try to incentivize their patients to use certain doctors, hospitals and other providers with whom the insurer has established an agreement. (If you’d like to learn more about the types of health insurance providers, check out the I Want to Get Health Insurance Checklist.)

How Health Insurance is Changing

Obama’s Affordable Care Act mandates that all Americans carry health insurance beginning January 2014. But don’t worry! 98% of Americans either won’t be affected by this law because they already have insurance through their employers or the government or they will qualify for subsidies to help them buy private insurance. People who don’t want to buy a private plan will pay a tax penalty of $695 or 2.5% of their income, whichever is higher. That’s way less than what health care premiums usually cost in a given year. But of course, none of you would gamble with your health or finances like that!

Your Health Insurance Rules

  1. Always, always, always have health insurance.
    There are already too many people out there who didn’t have health insurance who got pushed over the financial edge by one big medical expense. We don’t need any more! If you don’t have health insurance, learn how to choose a plan here.
  2. Make sure you choose a plan that is appropriate for your needs.
    If you don’t, you could end up paying more than you otherwise would have with a more suitable plan.
  3. Take advantage of all the preventive care you can.
    Flu shots, vaccinations, regular checkups and pap smears each cost a fraction of what treating a full-blown disease does, so it’s best to visit your doctor regularly and choose a plan that best covers your expenses.

Remember …

Although the health insurance world may seem daunting with its jargon and high prices, health insurance is worth it in the long run since it protects both your health and your finances. If you take the time now to learn the lingo and compare your options, you can make sure you score the best deal for you and your family.