If you had the choice, you and your family would never get sick or injured. That would make life so much easier. Since that can't and won't happen, being prepared and having health insurance is the next best thing. However, if you're like most people, you probably find yourself wondering: how does health insurance work?
It's not a secret that healthcare in the U.S. can be incredibly expensive. Going to the doctor's office for a minor ailment can wind up costing hundreds of dollars. You only hope you don't have to make a trip to the emergency room, as this can wind up setting you back thousands of dollars in medical costs.
How Does Health Insurance Work?
The goal of health insurance is to help offset or reduce medical costs. By paying a monthly premium, when you or a family member gets sick, the insurance should pay for the bulk of the healthcare visit.
By having many people paying into an insurance company, this allows you to share the risk with others. The “risk” they are taking is whether or not someone will get sick. Thus, when you make your monthly payments along with everyone else, that money is used to pay for the small percentage of people who are frequently sick and the few times you and your family need medical treatment.
Insurance Companies and Payments
Insurance companies conduct multiple in-depth studies to figure out risk and determine how much medical expenses will be and help you answer the question how does health insurance work. Since they can't ever know for sure if their clients will need medical services or how much, they are basically gambling, and you are part of that process. The insurance companies are betting that they will take in more money than they will have to pay out. If they want to stay in business, they will have to win this game.
In some cases, insurance companies will place their bets on keeping you and your family from getting sick. This is often why wellness visits and checkups are free. It's much cheaper for the insurance company to pay for prevention than have to deal with a major illness.
Your Role With the Insurance Company
When you sign up to receive insurance, you are signing a contract, often referred to as your policy, that states exactly what the insurance company will pay and how much you will be responsible for. It will also let you know how much you have to pay each month in premiums.
How much you pay each month and how much the insurance company will cover depends on your particular plan. There are many options out there that a person can choose from, and how many people are on the plan will also impact the cost.
Why Do You Need Health Insurance?
As mentioned, healthcare expenses in the U.S. can be incredibly expensive, making a lot of people wonder how does health insurance work. One trip to the hospital for an emergency can completely wipe out your savings. Even a minor incident such as a child getting strep throat can be expensive. You'll have to pay for the office visit, the lab tests, and the medication to help them feel better. All of these add up rather quickly.
With insurance, you will have predictable costs and payments because the information is laid out in your plan. This can help you plan for medical emergencies and the occasional illness that crops up among your family. Insurance makes sure that you can get the medical help you need without having to take on a huge financial burden.
If you or a loved one finds that they have a serious medical condition that is chronic or requires in-depth medical intervention, then having insurance is definitely a benefit. Since these medical issues can wind up costing hundreds of thousands of dollars, you will be able to get the potentially life-saving treatment you need at a cost you can afford.
What Are the Different Types of Health Insurance?
When asking how does health insurance work, you need to be aware that there are many different types of insurance that exist in the world, but they often fall into two categories: group and individual healthcare. Which one you are eligible for will depend on different factors. Getting the right type of insurance will save you money and cover your medical expenses.
Individual Health Insurance
Individual health insurance is the most expensive type of insurance there is. It is often available to individuals who can't get insurance through an employer or can't get enough coverage through their employer. Before being able to get a plan, you'll have to fill out questionnaires and get a physical exam. If you happen to have a chronic illness or other health issues, this could have a huge impact on your ability to get insurance coverage or how much your premium will cost.
If you are in between jobs and need insurance to cover the gap until you get insurance through your place of employment, you can get short-term individual health insurance. This could be a bit more affordable and may not require a physical exam. However, since this is only temporary, you will need to get more coverage at some point in time.
Group Health Insurance
Most health insurance coverage for people under the age of 65 comes from their employer. The vast majority of people take the employer's offer of insurance coverage because it is often more affordable. This is because the risk to insurance companies goes down when more people are on the plan. They can figure out exactly how much is coming in, and then make bets on how much they'll have to pay out.
While employers aren't required by law to offer their employees health insurance, many of them do so that they can attract and retain high-quality employees. Once an employer decides they are going to offer an insurance plan, they fall under the Health Insurance Portability and Accountability Act. This means that they have to offer the same plan(s) to every employee regardless of the employee's health status.
Every year, the insurance rates for a company will be re-evaluated, and they may go up or down in cost. Thus, it is in many companies' best interest to keep employees as healthy as possible, so they may offer wellness programs. This also benefits them because if employees stay healthy, they'll be in the workplace doing their job.
Your employer may also offer the chance to add family members to your insurance plan. In many cases, the employer will cover the employee's premium, but the employee will be responsible for paying for any other person on their plan. This can be beneficial, however, because the rates are usually cheaper than what would be found in an individual plan.
Other Types of Insurance
For those who are 65 years of age and older who no longer qualify for employer insurance programs, there is the option of getting onto the federal government health plan, Medicare. People who are under the age of 65 and who suffer from certain health issues may also be eligible for this type of health insurance coverage.
At the state level, insurance is available through Medicaid. This is available to people who meet specific income levels as well as other specific criteria. Children who can't be covered by group or individual insurance may be able to get State Children's Health Insurance. This is for kids under the age of 19 whose parents meet a certain income threshold.
Different Insurance Plans
Within each of the insurance categories are specific plans. Whether you have insurance through your employer, the federal government, the state, or an individual plan, you have the option of choosing how much and what type of coverage you want. This will have an impact on how much you pay in premiums and how much the insurance company covers when you go to the doctor.
There are far too many plan configurations to go through here, and each company will offer something different. To find the right plan, you'll need to consider what your and your family's medical needs are and how much you can afford. If you have any questions about the plans, consider reaching out to the insurance company or your HR person at work. They should be able to help you with any issues or concerns you might have.
When it comes to finding out how does health insurance work, the process can be confusing. In essence, health insurance is in place to help you pay for medical expenses. How much is covered and how much you pay each month depends on the plan you have. Being without health insurance can be risky, as one illness or trip to the hospital can wind up costing your life savings.
Most people get insurance coverage through their employer. However, if you don't have that option, there are other places you can get insurance, including through individual plans and potentially through the state or federal government. Knowing which plan is right for you will depend on various factors.
Featured Image Source: Pexels