Understanding Your Health Insurance Coverage

admin | June 6, 2018

A recent Harvard study found that 62% of personal bankruptcies were caused by unmanageable medical debt. Now, if you have health insurance, you might think that you’re safe from this kind of debt.

However, the study went on to learn that 80% of people who filed bankruptcy due to medical bills already had medical insurance!

It’s important that you go beyond just knowing that you have medical insurance. You should also understand your coverage, and how to make it work for you when the need arises.

Far too many of us just hand over our card when we walk into a medical situation and then try to stay afloat when the bills come pouring in.

Mistakes in billing are made much more often than you think, and miscommunications between your healthcare provider and your insurance company can leave you to mopping up unnecessary costs.

Additionally, many people misunderstand what’s covered by their insurance, leaving them wondering why they’re not getting help paying for a chiropractor visit, or addiction recovery.

So, how well do you know your health insurance coverage? Here’s a basic guide to help people understand common terminology, and how they can make sure that their healthcare choices are good for both their body… and their wallet.

3 Sources of Health Insurance Coverage

Employer-based (also known as group or workplace coverage): Usually the cheapest because the employer pays a portion of your premium.
Marketplace: This is insurance set up by the government, through the healthcare act, making it accessible to people who aren’t covered by their employers. Marketplace coverage is ideal for low income individuals who are eligible for subsidized coverage.
Individual plans: Individual plans are provided by most big insurance companies. Individual plans can be a good option if you don’t have employer-based healthcare, and you’re not eligible for subsidized healthcare.

Common Terms to Understand

Premium: Your premium is the amount that you (and/or your employer) pay each month in order to get coverage. If you have employer-based healthcare, your premium is probably taken directly out of your paycheck.

Deductible: The deductible is the amount is that you pay out-of-pocket before your healthcare benefits kick in. Sometimes, it takes a little while before you hit your deductible and insurance starts covering (or helping with) healthcare costs. If you have a high deductible, it’s important to make sure that you have enough money saved to cover your deductible, even if you’re insured.

Co-pay: Your co-pay (or co-payment) is a fixed cost that you pay each time you get a healthcare service. For many people, there’s a co-pay set on preventive doctor visits which they must pay, and then any additional cost is covered by insurance.

Coinsurance: Similar to a co-payment, coinsurance requires you to pay a portion of the cost of a healthcare service. However, coinsurance will charge a percentage of the service instead of a fixed amount.

Maximum out of pocket: When you add up the co-pays, coinsurance, and deductible costs of healthcare, they can be more than you thought. Fortunately, many insurance plans have a maximum out of pocket, which limits how much you have to pay for each of these things within a year. Most of the time, after you hit your maximum out of pocket expenses, insurance pays for any additional costs.

Types of Insurance Plans

Health Insurance Understanding the type of insurance plan you have is one of the most important things to know in order to make wise healthcare decisions that won’t incur (as many) unexpected costs.

Knowing your insurance plan will help you choose covered healthcare providers and keep your out-of-pocket costs from getting out of hand.

There are several other kinds of insurance beyond those listed below, but the following plans are the most common ones found.

PPO: Preferred Provider Organizations have a network of “preferred” physicians. Individuals are allowed to venture outside of this network for care, although they are responsible for a higher percentage of costs than if they had stayed within the preferred network. Often, PPO networks have higher premiums each month, and your out of pocket expenses can be more complicated.
HMO: Health Management Organization plans require the covered individuals to have a designated primary care physician, who always acts as the first point of contact for medical care. In order to get care beyond your primary physician, it must be referred by the primary physician. In an HMO, you’re restricted to a certain network of care providers in order to get coverage.
EPO: An Exclusive Provider Organization is much like an HMO, but even more restrictive. You don’t need a referral from a primary care physician in order to see a specialist, but you won’t get coverage for any care outside of the narrow network, except in the case of an emergency.
POS: Point of Service plans are much like HMO plans. Like an HMO plan, you must designate a primary care physician, and you have to cover more costs for out-of-network providers. Usually, POS plans have no deductible, and there’s often some wiggle room on out-of-network coverage.
Catastrophic: Catastrophic insurance is a more rare form of insurance, available only to specific people, usually those under age 30. This kind of insurance has a very low premium, and a very high deductible. The idea is that it’s there if you have a really severe problem, but for normal healthcare costs, you’re going to be exclusively responsible for costs.