Health Insurance is often a topic that involves confusion or a lack of understanding, frequently causing you a lot of frustration to purchase or use your coverage. Having a better understanding of health insurance will help you make better decisions for your health insurance coverage. Our guide to understanding health insurance is a high level overview of the topic. There are many types of health insurances, this guide is a very brief description of how it all fits together.
Health Insurance vs. Health Care
Health insurance and health care are two completely different things. In the US, everyone has access to health care. Health care is simply the services that you receive from a medical facility. Anyone can schedule an appointment with a doctor, or walk into an urgent care clinic or go to an Emergency room.
Health Insurance helps pay for health care. If you don’t have health insurance, you can still health care; but you are considered “self pay” or “self insured” and you are responsible for paying all of the charges.
Purpose of Health Insurance
The purpose of health insurance is financial protection. Health care can be very expensive. Very few people in the world have enough money in the bank to logically risk being self insured. A health insurance policy transfers part of the financial risk to the insurance company.
Some of our health care needs are predictable like routine preventative care. However, often the larger medical bills are from unforeseen situations like accidental injuries and illnesses. It’s these unforeseen situations where we benefit the most from having health insurance coverage.
Health Coverage Puzzle
A common misconception of health insurance coverage is that you can purchase one policy and you’re good to go. If you only have one policy (no matter what type of policy), then there are a lot of gaps in your coverage. There are multiple pieces to the puzzle of health insurance; no such thing as an all-in-one health insurance policy.
Your health insurance coverage should be centered around a main medical plan. There are different types of medical plans to choose from and we we will explain more about them below.
To fill the gaps in coverage left by the main medical policy, you need to have ancillary plans. These ancillary plans are:
- Dental & Vision
- Accidental Injury Protection
- Deductible Protection
- Critical Illness Protection
- Fixed Indemnity Benefits
- Life Insurance
Health Insurance Puzzle Pieces
The main medical plan is what all of your health insurance coverage is centered around. This plan will generally be the insurance card that you hand to a medical facility. This is the insurance policy that will often have the highest coverage to cover large medical bills if needed. Usually, your main medical policy will be one of a few different types of plans. It can be a major medical policy, often times referred to as an ACA or ACA compliant policy. Major medical policies can be either “on-exchange” or “off-exchange”; the exchange is the marketplace that the federal government has setup as part of the Affordable Care Act (Obamacare).
Your main plan can also be what’s called a short term medical policy or even a fixed indemnity policy, it just depends on what the best fit is for you. These types of health insurance policies are often a lower price alternative to the high prices of major medical policies through the Affordable Care Act.
Whichever type of medical plan you have, there are always some sort of “shared costs” that you are responsible for. The most common out of pocket costs are copays, deductibles, and coinsurances. These out of pocket shared costs can be substantial sometimes and that is part of the reason why ancillary plans are such an important part of your overall health insurance coverage.
Ancillary insurance plans help fill in the gaps of coverage left by your main medical plan. Not only do they protect you financially from the out-of-pocket shared costs but they can also help pay for things that your medical plan doesn’t cover (household bills, housing, car payment, food, etc.).
Dental and Vision insurance policies are two of the most common types of ancillary plans. They help control the costs of routine and unexpected dental work as well as the typical eye exam and glasses or contacts.
Deductible Protection plans are some of the most important ancillary coverages to have. Often times, the deductible protection in your health insurance coverage will consist of Accidental Injury, Critical Illness, and Fixed Indemnity benefits. Accident coverage’s will help pay your out of pocket costs with your medical plan in the event of an accidental injury. Critical illness coverages will usually pay out a large lump sum of cash to you in the event of a critical illness diagnosis. Fixed indemnity coverages will pay out pre-set amounts to you for various things. Your fixed indemnity coverage can focus on additional coverage for accidents, critical illnesses, hospitalization, sickness, doctor visits, surgeries, etc. There are a lot of options for ancillary fixed indemnity coverage to protect you financially.
Life Insurance is often thought of as its own type of policy, separate from health insurance, and that is correct. Having a life insurance policy is very important. It is common to have a relatively small life insurance policy be part of your overall health insurance coverages, because the cost is often very little when combined with other policies.