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What is Health Insurance?

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Insurance that covers the cost of medical and surgical expenses for an insured person is called health insurance.

Insurance companies use the term “provider” when referring to a doctor, lab, pharmacy, clinic or laboratory that offers treatment for a patient’s condition.

The owner of the insurance policy, or the person covered by the insurance coverage, is considered the “insured”.

This article will explain what health insurance is and why it is important. It also explains the types of plans available and details about legislation.

What is it?

Depending on which type of insurance coverage the person has, the insured can either pay out-of-pocket and get reimbursement, or the insurer will make payments directly to them.

Health insurance is often included in employee benefits even though no universal healthcare coverage exists.

According to the Kaiser Family Foundation (KFF), the number of people who did not have insurance after the Affordable Care Act was introduced in 2010 fell to 20 million, reaching its lowest level ever in 2016.

The number of adults who don’t have insurance has increased by 2.2 million since 2017, from 26.7million in 2016 to 28.1 million in 2019. The percentage of people who don’t have insurance increased from 10% to 10.9% between 2016 and 2019. However, the number of people with health insurance is higher than before the Affordable Care Act.

According to a 2012 Commonwealth Fund report, 25% of Americans over 25 have had their health insurance coverage cut. Many people in the survey lost their insurance coverage when unemployed or changed jobs.

According to the KFF, Blacks and people with low incomes are more likely not to have insurance than any other group.

The type of insurance you have will impact your care level in an emergency department.

Types

There are two types of insurance available: public and private. There are also some other, more specific types. These will be discussed in greater detail in the sections below.

Private health insurance

According to the Centers for Disease Control and Prevention, the U.S. healthcare system heavily relies on private insurance. Researchers found that 63.7% of Americans under 65 have private insurance coverage.

Health insurance for the public, as well as government employees

This type of insurance allows the state to subsidize healthcare for a premium. Examples of public insurance in the United States include Medicare, Medicaid and the Veterans Health Administration.

Other types

An insurer may be defined by how it manages its plans and connects to providers. These are just a few examples of the available types of plans.

Managed Care Plans

This plan will allow the insurer to have agreements with network providers to offer lower-cost medical care to its policyholders. Out-of-network clinics and hospitals will incur additional fees and penalties. However, they will still provide treatment.

The policy’s cost will determine how flexible the policy is with the network hospitals.

Plans that provide indemnity or a fee-for-service

A Fee-for-Service plan covers treatment equally across all providers. This allows the insured to choose the best place for treatment. The insurance company usually pays 80% of the costs for an indemnity plan, while the insured pays the rest as coinsurance.

Plans for Health Maintenance Organization

These organizations provide direct medical care to the insured. The policy will typically have a designated primary care physician coordinating all care.

Health Maintenance Organization (HMO) usually plans only to cover treatment referred by a family physician. They will also negotiate fees for each service to reduce costs. This plan is often the most affordable.

Plans for Preferred Provider Organizations

Preferred Provider Organizations (PPO) plans are similar to indemnity plans in allowing the insured to see any doctor they choose. A PPO plan has a network that has been approved by providers and has negotiated costs.

The insurer will cover treatment with outside-of-network providers at a lower cost. People with a PPO plan can self-refer to specialists without needing to see a primary physician.

Point-of-Service Plans

Point-of-Service plans are a combination of a PPO and an HMO plan. An insured can choose to coordinate all care through a primary physician, receive treatment in the insurer’s network or use non-network providers. The progress of treatment will depend on the type of plan they have.

What is the importance of choosing the right type of insurance plan?

The individual’s plan will determine how they approach treatment and how much they will have to pay.

The U.S. Congress introduced the Health Savings Account (HSA) in 2003. It combines HMO, PPO, indemnity, savings, and tax-benefits accounts. In 2020, however, the policyholder will need to pair this type with a current health plan with a deductible greater than $1,400 for individuals and $2,800 for family members.

HSAs are a way to increase coverage and extend existing plans to include more treatments. The employer can pay for an HSA on behalf of their employees. These payments are exempt from tax. Individuals can save money for poor health later in life by building up funds in an HSA while they’re healthy.

  • People with chronic conditions like diabetes might not be eligible to save much in their HSA because they often have to cover high medical expenses for their care.
  • These plans have high deductibles. Even though premiums may be lower, many people pay all medical expenses.
  • As plan types change, there is more overlap. As policy types evolve, the distinctions between them are blurring.

Most indemnity plans employ managed care to manage costs and ensure sufficient resources are available to cover the cost of appropriate care. Many managed care plans also have some elements of Fee-for-Service plans.

Legislation

The Affordable Care Act makes it mandatory that all Americans have some form of insurance. Without health insurance, a person must pay the penalty.

In 2019, however, the Affordable Care Act’s Individual Mandate was removed by policymakers. In the United States, insurance is no longer a legal requirement for individuals.

If the policy covers the children, the person can remain on the parent’s insurance for up to 26.

  • Get married
  • Living away from your home
  • They are not financially independent of their parents
  • They are eligible to be covered by their employer

Insurance is regulated at the state level. This means purchasing a policy in one place is different from buying it in another.

While state legislation may affect the cost of a policy, the insurer is responsible for making the most important decisions regarding a person’s coverage and reimbursements. Customers should discuss with their broker the effects of changing legislation on their policy.

Summary

Insurance covers medical and surgical costs for an insured person. There are many types of plans available. They vary in how they cover treatment and what they allow for.

A person living in the United States must have health insurance. Without coverage, you may be subject to a fine.

Brian Santiago

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