Understand Health Insurance

From: http://health.howstuffworks.com/health-insurance/health-insurance1.htm:

Insurance is a bit like a gamble between you and the insurance company. The company bets that they’ll take in more money in premiums than they have to pay out in benefits, whether it’s for health insurance, auto insurance, life insurance or homeowners insurance. You’re paying a premium every month just in case something happens.

Health insurance is a contract between you and the insurance company that says that the insurance company will pay a portion of your medical expenses if you get sick or hurt and have to visit a doctor’s office or hospital. Some contracts also specify that the insurance company will pay a portion of your medical expenses to ensure you don’t get sick, such as paying for annual physicals or immunizations. However, the amount of your bill that the insurance company will pay and under what circumstances they’ll pay it is known as coverage and can vary greatly from policy to policy.

The contract, or policy, spells out what the insurance company will pay for and how much of the bill you will have to pay. For example, the policy may cover an office visit, but you may have to pay a $20 co-payment. Or, the policy may not cover anything until you’ve paid an agreed-upon amount out of your pocket, which is known as a deductible. These deductibles and co-payments, along with any other non-reimbursable expense you may pay is referred to as an out-of-pocket-expense. Other policies may have co-insurance, which is a percentage of the bill that you’re required to pay, which may be in addition to your deductible and co-payment. Often, the total amount of co-insurance you have to pay in a given policy is capped by the policy’s maximum. The policy will also state the amount you have to pay each month for the coverage, known as the premium, and the total amount the insurance company will pay out for the life of the policy, which is commonly referred to as a lifetime maximum.

Since a single hospital stay could wipe out your savings (and more), not many people can afford to go without some kind of health insurance — even if they’re healthy. Not only will health insurance protect you from bankruptcy in the event of a major medical event, it also gives you peace of mind.

Before deciding on an exact type of health insurance plan, it’s important to know what kind of coverage is out there. While there are a lot of different ways to get health insurance, it’s good to know what you may be eligible for before you start your health insurance search.

Group Health Insurance

The majority of people under the age of 65 have medical insurance through their employers’ group insurance. This is usually because employers and other organizations can get better rates because they have a large number of people to cover. The insurance company sees it as good risk because they’ll probably end up paying out very little for many people in the group, while collecting premiums from everyone. Normally, this translates into premiums that are much lower than those found in individual health insurance plans and are the same price for everyone in the group regardless of their health.

While employers aren’t required by law to provide health insurance, they may have a difficult time finding good employees if they don’t. Also, once group insurance is offered, it falls under the protection of the Health Insurance Portability and Accountability Act (HIPAA) regulations. These regulations protect employees by ensuring that everyone is given access to the employer’s health insurance plan regardless of their health status. The act also helps regulate waiting periods of health plans to help achieve continuous coverage for most employees and helps ensure that employees have access to health care if they lose their job.

Individual Health Insurance

Individual health insurance is the most expensive option for people who don’t have coverage (or don’t have enough coverage) through employers. Physical exams and questionnaires are usually a part of the application process, so poor health can really make a difference in the cost and eligibility.

National Health Insurance

The federal government also has health insurance programs for those who are eligible.


Medicare is health insurance for people age 65 or older, those who are under age 65 with certain disabilities, and people of all ages with end-stage renal disease (those with permanent kidney failure requiring dialysis or a kidney transplant). Medicare includes hospital insurance, medical insurance and prescription drug coverage.


Medicaid is a state-administered health insurance program available to certain low-income individuals and families who fit into a recognized eligibility group. You must meet very specific requirements and considerations that include age, pregnancy, disability, blindness, income, resources, and U.S. citizenship or a lawfully admitted immigrant. These rules can vary from state to state.


So what happens if you have health insurance through your employer but are laid off from your job? Thanks to the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), your employer may be required to continue your health coverage for a limited amount of time. Depending on the circumstances, it can be as long as 36 months. The reason for loss or reduction of employment must be a qualifying event, meaning there are specific circumstances that do and don’t entitle you to continued coverage. For instance, if you’re caught pilfering from the company and get fired, don’t expect to continue your health benefits through COBRA.

Dental and Vision Insurance

Individual check ups for vision or dental care aren’t that expensive, but if you have problems related to your teeth or eyes, the bills can get costly. Some health insurance plans do offer coverage for these, but special coverage can also be purchased separately for those that don’t.