Understanding Health Insurance - A Basic Overview

If you have health insurance coverage, whether through your employer or an individual health insurance plan, it's essential that you understand the basics of health insurance and your plan.

Understanding Why We Have Health Insurance

First, why do we have health insurance? Here are some common reasons:

• Accidents or health problems can happen at any time.

• Health care is expensive — in fact medical expenses are the number one cause of bankruptcy in the US.

• Health insurance provides access to a network of doctors and hospitals that have negotiated lower rates with the insurance companies.

Additionally, health care reform requires all individuals to be covered in 2014, or else pay a tax penalty. This is often referred to as the individual mandate.

Understanding the Type of Health Insurance You Have

There are two main types of health insurance coverage: employer health insurance, or an individual/family plan. 

1. Individual Health Insurance: If you are enrolled in a health plan on your own and pay the premiums directly to the carrier, then you likely have an individual health insurance plan.

2. Employer Health Insurance: If you are enrolled in a health plan through work, you likely have employer health insurance, also known as a group health plan or group health insurance. 

Understanding Health Insurance Terms

Here are basic terms used by insurance carriers and medical providers to help you understand your coverage and benefits. Note: These are general terms, and may vary by your specific coverage.

• Deductible: This is a set amount you have to pay toward your medical bills every year before your insurance company starts paying.

• Premium: This is the amount you pay your health insurance company to keep your coverage active. Most people (and/or their company) pay a premium monthly. 

• Co-Insurance: The percentage of allowed charges for covered services that you're required to pay. For example, the health insurance may cover 80% of charges for a covered hospitalization, leaving you responsible for the other 20%. This 20% is known as the co-insurance. If the plan has a deductible, you generally pay the co-insurance for covered services after the deductible is met.

• Co-Payment (or “Co-pay”): Your co-payment, or co-pay, is the flat fee you pay every time you go to the doctor or fill a prescription. Generally speaking, co-pays do not count toward your deductible. 

• Pre-existing conditions: Until 2014, individual health insurance plans can deny or up-rate individuals based on previous medical conditions.

• Service limits per calendar year: Plans may also limit certain services in a calendar year. For example, your plan may cover only two dental cleanings a year or up to $1,000 for prescriptions each year.