Health insurance is the product you purchase to cover any essential or emergency medical expenses. Much like other insurances, many complicated terms and requirements make health insurance confusing for first-time buyers.
However, you must do your research, so you can make sure you have the right coverage for when you need it most. You don’t want to risk being uninsured or underinsured. To learn more about the basics of health insurance, keep reading this guide!
What Does Health Insurance Cover?
There are many different plans and coverage options available, but the government requires all public and private health insurance policies to cover the basics. These required services are referred to as the 10 health essential benefits, and they include:
- Prescription Drugs
- Pediatric Services
- Emergency Services
- Hospitalization
- Preventative Services & Chronic Disease Management
- Addiction & Mental Health Services
- Pregnancy, Maternity, and Newborn Care
- Laboratory Services
- Ambulatory Patient Services
- Rehabilitative & Habilitative Services
You may find that your state requires insurers to offer more essential coverage. It is very rare that you would find a state that restricts these 10 essential services.
Commonly-Used Health Insurance Terms
When you start to compare health insurance plans beyond the essentials, you’ll notice that there are many different terms thrown around. Some plans may offer a high deductible with a low coinsurance rate. Others may vary based on out-of-pocket limits. In order to find the right plan for your needs and budget, you need to know what all of these terms mean.
- Deductible: The amount of money you must pay before your health insurance starts to cover any of your medical expenses. Your deductible amount resets every year, even if you exceed it the previous year.
- Copayment: The flat fee you pay for certain services, such as doctor visits and prescription drugs. It’s also referred to as a copay, and you typically pay it regardless of whether you met your deductible or not.
- Coinsurance: Unlike your flat-fee copay, coinsurance is a percentage of the medical costs you have to pay after reaching your deductible.
- Out-of-Pocket Limit: This amount is the most that you will be required to pay for your medical costs. Your deductible, copays, and coinsurance all make up your out-of-pocket expenses.
How to Determine the Cost of Health Insurance
Since all of the different factors can vary from plan to plan, you need to know how to calculate your health insurance costs. You shouldn’t compare the premiums alone. Instead, you need to calculate the overall expenses by adding up the five major features of your plan.
Premiums
Your premium is your monthly bill that you pay for health insurance coverage. It’s important to understand that this isn’t the amount you’ll pay for your actual health care services. A low premium often means that you have less coverage, so you should expect to pay more out of your own pocket for your health care expenses. This amount also does not contribute to your deductible or maximum out-of-pocket limit.
Deductibles
Your deductible is the amount that you have to pay before your insurance provider steps in to cover your expenses. A lower premium usually means that you’ll have a higher deductible, so you need to find the balance between what you can afford to pay now versus in an emergency.
Coinsurance
Once you meet your deductible, your insurer helps to pay for a percentage of your health care expenses. You are still responsible for the other portion until you reach your maximum out-of-pocket limit. However, there are some plans that cover 100% of your expenses after you reach your deductible.
Copayment
Before and after you meet your deductible, you’ll have to pay this flat rate every time you go to the doctor or receive prescription drugs. The amount of your copay depends on your insurance provider and the plan you select. A common copay is around $15 to $25 for a routine visit to an in-network doctor.
Maximum Out-of-Pocket Limit
If you want to know the maximum amount of money that you’ll ever have to pay for health care, you should look at the maximum out-of-pocket limit. Aside from your premiums, every cost contributes to the limit, so you’ll never have to pay more than that amount for your health care expenses. Keep in mind that a higher monthly premium usually gives you a lower maximum limit.
Learn More About Health Insurance
Since payments and plans can vary so much from one provider to another, you should request a health insurance quote from several different companies. We suggest that you speak with each provider to learn more about their coverage options. You can also read some of our other health insurance guides to find out more about how it works.