Healthcare is very expensive, so you need to have health insurance in case you get sick. Without health insurance, a simple broken bone or even a minor illness could put you thousands of dollars in debt — or even lead to medical bankruptcy. Unfortunately, figuring out how to buy health insurance is much more complicated than most purchases you make. There’s a wealth of jargon to learn, it’s hard to estimate which plan is the best deal for your situation, and the price of a policy can be painfully high. There’s good news, though: This guide will give you details about everything you need to know, so you can shop for health insurance and find a policy that works for you. Image source: Getty Images. As you compare policies, you’ll come across industry-specific language that may be unfamiliar. Covered service: A covered service is a service included in your policy.
For example, a doctor’s visit to treat illness would usually be a covered service, but elective cosmetic surgery wouldn’t be. Just because a service is covered doesn’t mean your insurer pays for 100%. If you haven’t met your deductible, you may have to pay out of pocket — but the payments would count toward meeting your deductible. Services that aren’t covered don’t count toward your deductible. Copay: Copays are money you pay when you get a covered service. 5 for each prescription you fill. Many policies have different copays for different services. Coinsurance: Coinsurance is the part of your medical bills you’re obligated to pay. Deductible: This is the amount you pay out of pocket each year before the insurer begins to pay for care. 2,000 for covered services before your insurer paid anything. Preventive care: This is care you need to stay healthy, rather than treatment for disease. It includes cancer screenings, an annual physical, and vaccinations.
Premiums: Premiums are the monthly fees you pay for an insurance policy. They can go up or down each year when you renew your policy, but they’re the same each month from the time you sign up for coverage until the renewal period. Out-of-pocket limit: The out-of-pocket limit is the maximum you’ll pay for covered healthcare services over the course of the year. 5,000 — including your deductible and co-insurance costs, but not including insurance premiums — you don’t have to pay any more. Some policies have different out-of-pocket limits for in-network care versus out-of-network care. In-network care: In-network care is care provided by a medical service provider that participates with your insurer. When a caregiver is in-network, the caregiver agrees upon rates with your insurer. You can’t be charged more than those agreed-upon rates. And if you pay for a covered service from an in-network provider, the entire amount you pay counts toward meeting your deductible. Out-of-network care: Out-of-network care is provided by a medical service provider that doesn’t participate with your insurer. The provider doesn’t have negotiated rates with your insurer and thus may charge more than your insurance company pays for a particular service.
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If the out-of-network provider charges more, you’ll have to pay the rest of the cost — and only a portion of what you pay might count toward meeting your deductible. You’ll need to know what these terms mean as you decide what kind of policy you want and comparison-shop among different plans. Not all insurance policies are created equal. Some policies provide much more coverage, with lower deductibles, lower copays, lower out-of-pocket limits, and low or no coinsurance costs. Those policies usually have higher premiums. Other policies provide much less coverage but charge lower premiums. Policies also differ regarding when you can receive services and what you must do to get those services covered. For example, with some insurance policies, you can only see a specialist if you’ve received a referral from another doctor. High-deductible health plans (HDHPs): Also called catastrophic health plans, these policies have the lowest premiums, but their deductibles and out-of-pocket limits are extremely high.
You’ll be responsible for covering essentially all routine care if you opt for an HDHP. However, you may be able to pair these plans with a health savings account (HSA), healthcare reimbursement account (HRA) or flexible spending account (FSA) so care can be paid for with pre-tax funds. We’ll talk more about HRAs, HSAs, and FSAs later. Health maintenance organizations (HMOs): HMOs typically cover only in-network care and require you to get referrals from a primary care doctor to see specialists. HMOs can be cheaper than other policies, but they limit where you can get care and require you to jump through hoops to get services. Typically, if you see in-network doctors, there’s no deductible or a small deductible, and routine care is 100% covered after you pay a copay. Exclusive provider organizations (EPOs): These are essentially the same as HMOs, but you can get care from a national network of providers, instead of only caregivers in your geographic area. Point of service plans (POS): These are a form of HMO that allows some coverage for out-of-network doctors if your in-network primary care doctor provides a referral.
Preferred provider organizations (PPOs): These plans give you the most flexibility, but they often come at a higher cost. You don’t need referrals from a primary care doctor, and you can see any physician at any time. PPOs usually participate with a network or providers. If you see them, your coinsurance costs, deductible, and out-of-pocket limit are lower. However, you can opt to see out-of-network doctors and still get most costs covered. Different plans work best for different people. If you have extensive healthcare needs, you may be better off buying the most comprehensive PPO plan you can find with the lowest deductible and out-of-pocket limit. You’ll pay a lot more in premiums, but you would know your costs up front, because most services would be covered. But if you’re healthy and would only get care in emergency situations, an HDHP may be your best option. The best way to determine what policy make sense is to estimate your family’s healthcare needs and determine what option provides the lowest overall cost, factoring in both premiums and the costs of services. Will you require a significant amount of covered services?
If you’re planning to have a baby or managing a chronic disease such as diabetes, you can expect to have more ongoing health expenditures during the year. You may want a policy that costs more up front but provides coverage for care you’ll need so you don’t have to worry about big unpredictable expenses. Do you need to see out-of-network providers? If you see specialists that don’t participate with most insurance networks, you may want a PPO that provides the most coverage for out-of-network care. Do you have money to cover care if you need it? If you have a high-deductible health plan, you may need to come up with several thousand dollars if you experience a health issue. For some people, the threat of a big expense suddenly cropping up is harder to budget for than paying higher premiums on a steady basis. Remember, there’s always a trade-off: The more covered services, the higher the premiums.