Health Insurance 101
How does health insurance work?
Nearly all of us have some form of health insurance. In fact, the Kaiser Foundation has stated that in 2015, 91% of Americans had some sort of health care coverage either through private or public plans. Yet most of us have very little understanding of how exactly health insurance works. Let’s explore the basics, and how different types of insurance work.
What is health insurance?
Although there are tens of thousands of plans in the United States taking several different forms, all health insurance plans have one defining feature. They spread risk across a pool of individuals so that when someone has a medical event, their out of pocket cost is much less than the actual cost of services received.Common Terms and What They Mean
Types of health insurance and how they workTraditional Affordable Care Act Health Insurance/ Qualified Health Plans
A Qualified Health Plan, which you can purchase from the health insurance marketplace (e.g. Obamacare) or obtain through your employer, offers comprehensive health insurance coverage. It includes provider networks, ten essential benefits (as defined by the Affordable Care Act), and does not require underwriting. Thus, an individual’s application cannot be rejected, no matter the health history. With a Qualified Health Plan, you will have copays and deductibles. HSA
Health Spending Account (HSA) compatible plans are major medical health plans coupled with a tax free savings account that is specifically used for only medical expenses. The HSA model is often characterized by high deductibles, and are a way for consumers to still get high quality protection with a greater flexibility and lower their monthly premiums.
Short Term Health Insurance
Short Term Health Insurance has been around for decades in the individual health insurance market. These plans are purchased for a determined time period, after which they expire. Often a consumer uses them as a transition plan, when their employer or Obamacare open enrollment periods are closed. . While still major medical insurance, Short Term Health plans do not fall under Obamacare so insurers can reject an application because of pre-existing conditions.
Health Benefits Insurance
Health Benefit Insurance, or HBI for short, approaches health insurance coverage differently than major medical insurance. HBI plans often offer first dollar coverage, so instead of paying a percentage of a member’s health costs, they instead pay a benefit directly to the consumer if the consumer obtains a particular health service, such as seeing a doctor after for an illness
Public Health Coverage
Medicaid, Medicare and CHIP are all versions of public health coverage. These plans are offered by the government for consumers who meet certain qualifications, such as age or income.