Imagine you’re rushing to the nearest hospital due to your wife’s sudden heart attack. You couldn’t see this coming from a mile away since she exercises daily while adhering to a well-balanced diet.
After conducting a serious of tests, the doctor concludes your wife needs to undergo congenital heart surgery to correct a genetic heart defect.
The surgery is scheduled for next month. However, you cannot afford health insurance premiums due to financial hardship, and your emergency cash fund can only cover so much. The cost of the surgery is overbearing, and you’d like to avoid depleting your entire savings all at once.
Similar to life or car insurance, health insurance is designed to protect one’s financial assets from taking any unnecessarily hard hits. However, families become virtually bankrupt every day due to unforeseen medical emergencies or ongoing treatments.
It seems health care costs are continuing to climb, making insurance premiums unattainable for many. But, there are several reasons to consider purchasing health insurance for yourself and your loved ones if you haven’t already.
What is Health Insurance?
Health insurance involves purchasing an insurance policy guaranteeing the provider will cover various medical costs for the policyholder and possibly any dependents in exchange for payments.
These medical costs include preventative care, such as doctor’s visits or tests, in addition to certain medical procedures or treatments.
Like life or car insurance policies, the insured is expected to pay an outlined premium and to comply with any specific policy terms or conditions in order to take advantage of coverage benefits. In reality, it’s a straightforward system of give and take where both parties benefit in some capacity.
For instance, policyholders and any dependents receive coverage for sizeable medical costs, and insurance premiums help fund the company’s day-to-day operations or overhead costs.
Also, the more individuals purchasing health insurance from providers, the more rates and discounts the provider can negotiate with their extensive medical networks. This results in a more competitive market, and therefore you’ll qualify for more affordable coverage in the long run.
How Does Health Insurance Work?
Certain health insurance plans may require the insured to seek medical care from a designated network of licensed health care providers and hospital systems. Many carriers often ask policyholders to select a primary care physician for themselves and their family.
If the insured visits a health care provider not included in the carrier’s network, either the policyholder may incur additional fees or the insurance company will refuse coverage outright.
It’s important to note that health insurance providers do mandate coverage exclusions that are often based on the type of medical treatment or condition in question.
Although policyholders must seek preauthorization or prior approval for certain medical procedures, most health insurance plans will not cover cosmetic surgeries.
Some plans may choose to cover mental health treatments or drug rehabilitation programs, but alternative medical practices are often not included, such as acupuncture or massage treatments.
There are also often distinct coverage limits to keep in mind. In other words, in keeping with good practice, insurance companies generally guard against liability risk through disclosing a maximum coverage limit.
These limits can range from $500,000 to even $1 million, but some insurance carriers work with clients’ requests to raise a select coverage cap on a case-by-case basis.
If you’re working with a private insurance company, you can always ask about different riders and how those provisions could further customize your coverage.
Why is Health Insurance Important?
For individuals without car insurance or unable to purchase a vehicle, finding a way to get around town isn’t that hard. There are several alternate forms of transportation to choose from these days, such as carpooling, taking a bus, or ridesharing services.
But, when your daughter unexpectedly experiences a second or third-degree burn, visiting the doctor becomes a need, not a want. However, not everyone is in need of a traditional health insurance policy.
The affluent can cover medical expenses with ease using their own allocated funds. Research has even suggested that the higher the income bracket, the healthier the individual. As the saying goes, the wealthier you are, the healthier you are.
On the other end of the spectrum, individuals who can’t afford health insurance premiums often delay seeking medical attention or treatments to avoid mounting medical bills.
Those 65 years of age or older or with certain disabilities can take advantage of federally funded Medicare benefits, while low-income families and pregnant women, among others, often qualify for health insurance coverage through state-administered Medicaid.
It’s also important to note that individuals or families can face unwanted tax penalties for maintaining an uninsured status.
If you have a recent high school graduate, many universities now require proof of health insurance to enroll. Most students can remain a named dependent on their parents’ health insurance policy until age 26.
For any students needing health insurance for college, university-sponsored health care plans have become a convenient alternative.
Basic Health Insurance Terms
As with any insurance policy, there’s a myriad of moving parts to be aware of, especially for first-time policyholders.
When it comes to health insurance, there are at least five components the insured needs a working knowledge of:
No matter what type of insurance you’re looking into, insurance companies require some form of monetary payment in exchange for guaranteed coverage. These payments, also referred to as “premiums,” are often charged to the insured on a monthly basis.
When premiums are paid in a timely manner, insurance coverage is guaranteed for the selected term.
Just as life insurance companies calculate liability risks during the underwriting process through evaluating factors, such as age, family health history, and lifestyle habits, health insurance providers review both the likelihood and projected costs of different treatments in determining premium amounts.
This is the pre-determined amount a policyholder must agree to pay out-of-pocket before the carrier will even consider taking on liability. Deductible amounts do vary depending on your health insurance plan, and some policies do not feature deductibles.
Ranging from $500 on the lower end to upwards of $10,000, deductibles are charged on an annual basis.
Premium and deductible amounts usually have an inverse relationship – when you choose a higher up-front deductible, you’ll encounter a lower premium. Or, if you select a lower deductible, you’ll experience a higher premium.
Also referred to as “copay,” copayments constitute the flat fee policyholders must handle whenever visiting the doctor or for certain medical treatments.
Compared to deductibles, copayments are typically more affordable for families to pay. But, copayment installments cannot be allocated toward lowering an annual deductible.
After the deductible has been paid in full, most health insurance policies require the insured to share liability with the provider by paying a certain percentage of medical expenses. This percentage is generally around 80% for most insurance companies.
Let’s look at an example. If Sue incurred a $100 medical bill from an unexpected doctor’s visit, her coinsurance total at the hospital would be $20 for plans mandating 80% shared liability.
Some health insurance plans boast 100% coverage, so coinsurance wouldn’t be an issue here.
At some point in your life, you’ll need to file an insurance claim for reimbursement purposes. Even if you don’t currently have health insurance, the claims filing process is important to understand for any type of coverage you may purchase in the future.
Often your personal health care provider electronically submits the claim directly to your insurance provider. Some policyholders choose to fill out paperwork and file claims on their own.
For successful claims filing, you’ll need to compile the following information:
- Itemized Bill: Outlining all of the services, treatments, and/or medications provided by your health care provider, this document can be easily obtained from your doctor’s office. Make sure costs are outlined for filing purposes.
- Insurance Policy Number: Most claims forms will ask the insured to disclose their insurance policy number or group plan number for employer-funded health care plans.
- Recipients of Services: The form will more than likely ask who received the services or treatments outlined in the itemized bill. For instance, did the primary policyholder or dependents receive the services?
- Reasons for Services: After determining the service recipients, you’ll need to also disclose why the doctor was visited in the first place. Was the visit related to chronic treatment, or was it related to an unforeseen accident?
- Form of Coverage: This simply refers to whether you’ll be handling co-insurance, or if the insurance company will need to review your dual coverage status.
If your claim was denied for any reason, check with your insurance provider to ensure no administrative errors were made.
Maybe the treatment or service is not covered by your policy or was provided without proper preauthorization. You also could have simply missed the filing deadline. If not, you may have to re-submit your claim.
Alternatives to Traditional Health Insurance
If purchasing an individual health insurance policy is not the best fit for your situation, there are various alternatives you and your loved ones can consider:
- Employer-Funded Health Care: Many companies or organizations offer their employees employer group insurance plans. Some opt out of these packages, but employees are generally afforded the same rate without health prerequisites.
- Military Health Care: For those who have served in our military, popular health insurance options include TRICARE or VA health care benefits for veterans. Some insurance providers may work with military families to secure ideal coverage.
- Universal Health Care: In certain countries, such as Germany, a universal health care system or “Medicare for all” covers a significant chunk of citizens’ medical bills. But, this can translate into significant wait times or treatment delays.
- Allocated Funds: Well-to-do families can more readily afford unforeseen doctor’s visits. They may allocate some of their own personal funds toward medical emergencies, or consider setting up an HSA.
- Medical Cost-Sharing Programs: Since these programs aren’t funded by insurance companies, medical bills are paid via monthly shared amounts through a large network of members. For some organizations, there may be certain eligibility requirements. Some examples of these include health care ministries such as MediShare, Liberty Health Care, and similar health sharing ministries.
In today’s market, there are quite a few alternatives to traditional health insurance that may be more ideal for certain families.
As an added bonus, some companies even include wellness program benefits with their group insurance, encouraging employees to live healthy lifestyles.
Remember, any form of insurance is not one-size-fits-all, so it’s best to peruse all of your options before making a final decision.
Final Thoughts on Health Insurance
If you find yourself in the midst of an unforeseen medical emergency, such as a heart attack or broken arm, you’ll want to avoid delayed access to treatment or thousands of dollars of debt.
For many families, this is where health insurance comes in to save the day.
As with any significant financial obligation, it’s critical to conduct your own research to find a quality health insurance plan that fits your current budget and lifestyle.
Purchasing health insurance from a reputable carrier or taking advantage of your employer’s group insurance are both excellent ways to safeguard your family’s overall health and financial aptitude for years to come.
Seeking medical attention out of the blue is not ideal for anyone, no matter how much money you make. When life happens, you’ll rest easy knowing your coverage provides access to a trusted network of highly qualified health care providers.