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Ins and Outs of Health Insurance: A Novice Explanation

Health Insurance Need to Knows:


What is a deductible?

  • The amount you pay each year before the plan is active.

What's a premium?

  • The amount you pay for an insurance policy.

What is a covered cost?

  • Medical tests, office visits, treatments, supplies, medications, and services specific plan covers.

What is coinsurance?

  • The percent you pay for covered services. Not all plans have this.

Is Health Insurance a legal requirement?

  • Ehhh, technically no, but in some states you will face a tax penalty if you don't have it. It used to be a legal requirement as a result of the Affordable Care Act, but that changed in January of last year. It is no longer mandatory.


How do you pay for health insurance?


Privately, you will typically pay a premium to the insurance company. This payment makes it so you share the risk with other enrollees. The company is trying to collect enough premium to cover the cost of enrollees, but how they collect that varies company to company, plan to plan. The percentage the customer pays and the percentage the insurer pays can be broken down into metal tiers:


  • Bronze – 40% consumer / 60% insurer

  • Silver – 30% consumer / 70% insurer

  • Gold – 20% consumer / 80% insurer

  • Platinum – 10% consumer / 90% insurer


These percentages do not take premiums into account, but generally speaking, Bronze plans will have the lowest premiums and Platinum will have the highest.


What types of insurances you can get:


(All plans are required to cover 10 essential benefits mandated by the Affordable Care Act.)

  • On-exchange private

Plans sold on government run exchanges. This is the only plan where premium tax credits and cost sharing reductions are available.

  • Off-exchange private

Plans sold by insurance companies, 3rd party brokers, or privately run health insurance marketplace.

  • Employer Provided/Group Plans

Private plans purchased and managed by employer. This plan usually has lower premiums and deductibles.

  • Short-term

This one is good for 1-2 month periods, like before one insurance kicks in. It usually has very limited coverage.

  • Medicare

Federal insurance for elderly. Provides free/very reduced cost care.

  • Medicaid/CHIP

Federal plan for low income families and individuals. Eligibility will depend on the state. CHIP is for children whose guardians make too much to qualify for Medicaid, but too little to afford a private plan.


Types of Private Insurance


Health Maintenance Organization (HMO)

  • Restrictive

  • Pick on in-network physician

  • No out of network care is covered

  • Need referral for specialist

Preferred Provider Organization (PPO)

  • Flexible

  • Covers out of network providers at higher cost

  • Usually have more expensive premiums

  • No needed referral for specialist

Exclusive Provider Organization (EPO)

  • No needed referral for specialist

  • No out of network care is covered

  • More expensive than HMO but less than PPO

Point of Service (POS)

  • Primary in-network provider

  • Covers out of network providers at higher cost

  • Need referral for specialist

  • More expensive than HMO but less than PPO


Short on EOB


An EOB is the Explanation of Benefits. It's a statement of the services you've received, what your insurance plan has paid for, and what you owe. It's important to have because it gives a snapshot of how you've used your benefits and how your claim is being processed. You use it to check the accuracy of your bill. (Hot damn, you do not want to be on the hook for $12,000).


Helpful Resources:

https://www.trustedchoice.com/health-insurance/coverage-faq/#faqitem_7

https://www.policygenius.com/health-insurance/learn/health-insurance-basics-and-guide/

https://vaden.stanford.edu/insurance/health-insurance-overview/how-us-health-insurance-works

https://www.investopedia.com/is-health-insurance-mandatory-4773106

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