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Health Insurance

What is health insurance?

Health insurance is a type of coverage that specifically pays for health and medical expenses. This coverage extends to routine care as well as emergency care for injuries, illnesses and other maladies.

With health insurance, the company either reimburses the insured for medical expenses or the company pays the provider directly. By paying a premium each month, individuals can lower their overall medical costs.


How health insurance works

A person pays a monthly premium to an insurance company, and the company agrees to pay a certain amount of medical costs. The insured often has other out-of-pocket expenses to pay for medical care, but the insurance company usually covers the bulk of the costs.

How much a person pays and what or how much the insurance company covers depends on the company and the plan. The goal of insurance is to lower the cost of medical and surgical expenses to make it easier for people to access health care.


Common health insurance terms

In order to understand health insurance, it is important to learn some of the terminology. These terms are commonly used when describing health insurance policies:

  • Premium: The amount that the insured must pay to the insurance company to receive coverage. This amount is often billed monthly, quarterly or yearly.
  • Deductible: The amount the insured must pay out of pocket for health care services before the health insurance company begins to pay.
  • Copay: The fixed amount paid by the insured to the provider for certain health care services, medications or medical equipment.
  • Co-insurance: The percentage of health care costs that the insured must pay, even after they meet the deductible. For example, after meeting the deductible, the insured may be responsible for 20 percent of costs and the insurance company covers the other 80 percent.
  • Provider: The physician, health care professional or facility that provides medical services to the insured. A primary care physician is the doctor that oversees the patient’s overall care and manages a wide range of services.
  • Network: The providers and facilities contracted to provide health care services for patients who have coverage with a health insurance company.
  • Preauthorization: Prior approval from a health insurance company that a patient must receive before receiving certain health care services, medications or equipment.

Types of health insurance coverage

Health insurance plans fall into two broad categories: private insurance and public insurance. Private insurance is available from a private company and is often offered through an employer as part of the benefits package. Some of the top private insurance companies in the U.S. include:

  • United Health
  • Humana
  • Anthem
  • Cigna
  • Blue Cross/Blue Shield
  • Wellpoint

In contrast, public insurance is provided by the government to eligible individuals and families. Medicaid is a state-run government insurance offered at little to no cost to low-income people. Who qualifies and what this type of insurance covers varies from state to state.

Medicare is available to everyone over the age of 65 and people with certain disabilities. Medicare only covers a portion of medical expenses, and individuals often need supplemental coverage to go along with it.

RELATED: Know the differences – Medicaid vs. Medicare


Types of health insurance plans

The numerous health insurance companies offer a variety of health insurance plans. The five main types of insurance are:

  • Health maintenance organizations (HMO)
  • Preferred provider organizations (PPO)
  • High deductible health plans (HDHP)
  • Point of service plans (POS)
  • Exclusive provider organization plans (EPO)

These different plans offer varying amounts of freedom to the people who choose to hold that coverage. Some allow patients to visit any doctor they choose while others only allow patients to visit doctors within a small network.
The amount that the insured has to pay for premiums also varies. Those shopping for health insurance can choose the type that best fits their medical and financial needs.

 

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