The Basics of Health Insurance

By Thomas Cazneau

Understanding any new subject in school or college can feel like learning a new language. This can prove to be especially true when attempting to grasp the subject of health insurance.
Below are some of health insurance basics, which may help you gain a little bit more fluency on your journey to understanding health insurance coverage for you, for your family, or for your small business.

Definition of Health Insurance
In short, health insurance is a method of financing your medical care. Health insurance companies and carriers finance your medical care by:
1. Enrolling millions of people onto their plans.
2. Collecting money from plan holders through monthly premiums and service fees.
3. Paying out that money to doctors, hospitals (see Hospital Insurance Coverage) and other medical providers for the care of their members.
In California, health insurance companies pay doctors and hospitals more than 85 cents out for every 1 dollar they collect. The other 15 cents of the dollar goes to enrolling people, paying claims, negotiating lower costs with medical providers, sending member ID cards, and on and on.

Benefits of Having Health Insurance
Below are two of the main benefits of having health insurance
• Affordability of Health Services
One of the biggest benefits of having health insurance is that you are generally able to pay reduced fees for some or all of your medical services. The amount of the fee reduction for health services depends on which plan you enroll onto. To obtain the lowest costs possible for plan premiums and services, the insurance companies negotiate on behalf of their members with doctors, hospitals, labs and other medical specialists. While these plan premiums and service fees may not be affordable for everyone’s budget, the goal of health insurance companies is to find the lowest possible price for plan premiums and services. They are attempting to negotiate the most affordable prices, all things considered.
• Quality Health Care
The insurance companies are also concerned that the quality of care is the highest. Their staff includes doctors who work directly with the medical providers to ensure a high level of quality care. The insurance companies see how millions of people are treated for very similar diseases and accidents. This data base enables them to work with providers to encourage best practices. The discounts for medical services and the protection of a huge insurance company working for you is a big benefit of having health insurance.

Why do you need health insurance?
Health insurance can protect you from both the expected and unexpected health hazards. Without health insurance, you could be stuck with an extremely large medical bill if something really major happens. For example, getting into an accident or being diagnosed with cancer could prove to be an expensive journey if you are uninsured, because you would be paying out of pocket for all tests and procedures instead of the discounted fees for any health services. On all health insurance plans, there is an out of pocket maximum, which would set a cap on how much you pay total for health services in an annual year. If your out of pocket maximum were, let’s say, $5,000, then that’s the most you would pay for any combination of medical services in a calendar year. By choosing to enroll onto a health insurance plan and by paying a little bit each month to an insurance company, you will have the security of knowing that your health insurance would protect you in the event of a life-threatening emergency.

Plan Features to Consider
1. How much you pay when you see a doctor. Some plans discount doctor visits right away, while others require you to reach your plan deductible first before discounting any office visits.
2. How much you pay when you go into the hospital. Again, this could be before or after a deductible, and there could be a charge per day or per admission, depending on the plan.
3. How much is the maximum you will have to pay if you have a catastrophe. This is the maximum YOU pay. Generally the insurance company pays 100 percent of expenses after this amount.
4. How much you pay for prescription medicine.
With health insurance terms like “deductible”, “maximum”, and “coinsurance”, it’s easy to feel overwhelmed when seeking an understanding health insurance basics. Feel free to give us a call for more information if you would like more customized help and answers health insurance basics.

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