Health Insurance does not have to be complicated. If you understand the core principles behind a health insurance policy and the system itself, you are way ahead of the majority. People often get too caught up with what insurance company they believe to be superior to others or what insurance plan they believe will conquer the rest. Long story short, there is no one insurance company or plan that would make even God jealous.
Insurance premiums are regulated by the department of insurance at the state level. No one insurance company or agent can offer you discounts or a magic dream policy that will cover hospitalization 100% at 5$ a month. You will always pay the same premium for the plan listed weather you go directly to an insurance company or through an insurance agent.
In the insurance market today premiums generally increase about every year. However, there are exceptions to this general rule. Some carriers can negotiate up to a 2 year rate guarantee. This can directly provide more security to the insured. Rate guarantee plans are usually a wise choice considering the current status of our economy in 2009.
Key parts to a health insurance plan
If you become familiar with the following core parts of a health insurance policy you will be much more informed the next time you find yourself shopping the insurance market place. It is better to understand your policy now instead of when you end up in the hospital! If a plan has an extremely low premium chances are it is lacking in one of the following areas:
Deductible
This is often the first part of the health insurance policy that you will encounter when viewing or researching a plan. A deductible is the amount of money that you must pay up front before the insurance company will cover you. You start paying your deductible when you start incurring medical bills. Let's say I go to the hospital for stitches in my arm and the hospital bill ends up costing $250. If I have a health insurance policy that has a $1500 deductible I must pay the full $250; now I am left with $1250 of my deductible to satisfy before the company will start paying a Co-insurance percentage (see below) of my bill.
Out-of-pocket maximum
Out-of-pocket maximum is the most important element of a health insurance policy and basically the reason you buy it in the first place. It is the total amount of money that you can be exposed to in a given year. For example, if I have an out-of-pocket max of $4000 and I have a serious accident that leaves me with $1,000,000 in hospital bills, I will pay $4000 and the insurance company pays the rest.
Prescription Drug Coverage
People often get into some hot water if they don't take a close enough look to see how prescription drugs are covered within their policy. You may be extremely healthy and feel that you do not need medication but you would feel differently if you had a catastrophic emergency that required expensive prescription drugs only to find out later that they were not covered. The end result could leave you thousands out-of-pocket!
Some insurance companies will have plans offering generic Rx only. Again this will result in you paying full price for brand name drugs if some reason there is no generic available. Most companies will offer generic Rx, no Rx or apply a yearly maximum cap to lower the overall cost of the health plan. It is all a matter of how you weigh the risk but it is usually recommended that you purchase full prescription drug coverage. With full Rx benefits it is common to see a $35 co-pay for brand drugs and a $10 co-pay for generic. It is common to see a small brand Rx deductible applied to brand name Rx. This can range anywhere from $250 to $750.
Co-Insurance
Co-Insurance is simply the percentage that your medical bills will be covered at after you satisfy the deductible. If I have a $1000 deductible with 80/20 co-insurance and a $3,500 out-of-pocket maximum this means that once my deductible is satisfied I will be responsible for 20% per medical bill until the total cost reaches $3,500 (deductible is usually included in out-of-pocket maximum).
Co-payment
More than likely you have heard the term "Co-payment," which refers to a flat dollar amount that you pay for a specific medical service. It's common to have a co-payment for primary care and preventive care office visits. Co-pays can range anywhere from 10-50 dollars (sometimes more) depending on the service you receive and what type of policy you enroll. If you visit the doctor frequently you should enroll in a plan offering co-pays before satisfying the deductible. On the other hand, if you are very healthy and never go to the doctor it would be beneficial to enroll in a high deductible HSA compatible plan with out co-pays.
