Health insurance helps pay for your medical care. People usually get health insurance through an employer, Medicare or Medicaid. The Affordable Care Act also created exchanges for people to find individual and non-group health plans. Health insurance works this way: You visit a health care provider. You may have to pay a copay when you arrive. After your health care services, the provider bills your insurance company. The insurer reviews the services and pays what it believes it owes the provider. In most health plans, the insurer reimburses the bulk of the costs. The patient pays for the rest of the costs.
Nearly half of Americans get their health insurance through an employer. This is usually more cost-effective than getting an individual plan. An employer helps pay for your coverage and will likely get a better rate than individual insurance. Employers often provide employees multiple health plan offerings that vary based on premiums, out-of-pocket costs, and provider networks. PPOs are the most common type of employer-sponsored plan, though high-deductible health plans have become a more common option in recent years.
Medicare and Medicaid cover more than one-third of Americans combined. Medicare is usually based on age or disability. People 65 and over are eligible for Medicare as are people under 65 with disabilities or those with end-stage renal disease. Medicaid is income-based. Each state has its own income requirements and benefits. Both Medicare and Medicaid are usually lower cost options than employer-sponsored insurance or an individual plan.
About 7 percent of Americans have individual or non-group health insurance. Insures offers these plans through the Affordable Care Act marketplace and outside of the marketplace. These plans, especially those outside of the marketplace, are often more expensive than an employer-based plan. Plans within the marketplace may offer tax breaks and subsidies for lower-income Americans. Those discounts are not available in the individual market outside of the exchanges.
The three most common types of health insurance plans in employer-sponsored health insurance are preferred provider organization (PPO), high-deductible (HDHP), and health maintenance organization (HMO) health plans. Here are the differences:PPO: The most common type of health insurance plan. PPOs cover about half of Americans with employer-sponsored health insurance. PPOs usually have higher premiums, but with lower out-of-pocket costs when you need health care services. PPOs also offer more flexibility. Members can see in-network and out-of-network doctors. However, you’ll likely have to pay more to see an out-of-network provider. HDHP: As the name suggests, HDHPs have high deductibles. They usually have cheaper premiums, but you’ll pay more out-of-pocket when you need health care services. Slightly less than one-third of Americans in an employer-sponsored plan have a HDHP. HMO: HMOs have lower premiums then PPOs and fewer out-of-pocket costs than HDHPs. HMOs have restricted provider networks. That means you’ll probably only be able to see in-network providers. If you get care outside of your network, you may have to pay for all the services without any help from the insurer. HMOs also require a referral from a primary care provider if a patient needs to see a specialist.
Choosing a health plan isn’t a one-size-fits-all. What’s a perfect option for one person doesn't make sense for another. Here’s what to consider when choosing a health plan:
All of these issues play into which health plan is best for you.
Health plans have provider networks. Patients can see in-network doctors and facilities without added out-of-network charges. Out-of-network providers and facilities don’t have in-network contracts with your insurer. That means you’ll have to pay more or even all of the health care costs. Out-of-network medical bills are a common reason for surprise billing. Surprise billing is when you get an unexpected massive medical bill. That’s often caused by getting care from an out-of-network provider or hospital. This is especially common in emergency rooms.
Open enrollment varies by how you get your health insurance. If you get coverage through an employer, the business will decide on its open enrollment period. People who get health insurance through an Affordable Care Act (ACA) plan have a set period depending on your state. The federal government sets open enrollment for these plans from Nov. 1-Dec. 15. However, a handful of states offer longer open enrollment periods. Meanwhile, Medicare’s open enrollment is Oct. 15-Dec. 7. People can make changes to their Medicare plans at that time. Also, Medicaid doesn't have open enrollment. Instead, people who are eligible can apply during any time of the year.
COBRA allows you to keep your employer-sponsored health plan if you change jobs or lose your job. The coverage is costly. COBRA plans can charge you up to 102 percent of health care costs. That means you pay for all costs with no help from the employer. The benefit of COBRA is that it allows you to stay on your former employer’s plan. That comes with a cost.
A short-term health plan offers low-cost coverage that may not provide the same protections as regular health insurance. You may pay hefty out-of-pocket costs and have limited provider choices with a short-term plan. Short-term plans also offer fewer consumer and patient protections than ACA plans. These plans provide coverage to people for a year. You’re able to request two renewals. In effect, you can have a short-term plan for three years. These could be an option for young, healthy people, who don’t expect to need much health care. However, if you need health care services, a short-term plan can be costly.
Yes. You could qualify for Medicare if you’re 65 and over or have a disability. You’re also eligible for Medicaid if you’re a low-income American. People who can get both Medicare and Medicaid are called dual-eligibles. Most people in nursing homes are dual-eligible. If you’re dual-eligible, the health plans coordinate what each one pays.
Medicare includes original Medicare, which is Parts A and B. This coverage is for care done by hospitals and physicians. Medicare Part C, also called Medicare Advantage, is offered through a private insurance company. Part D is prescription drug coverage. Medicare Advantage usually has dual prescription drug coverage, so you only need Part C. However, people with Parts A and B may want Part D coverage to help them with prescription drugs.
Health insurance costs vary by plan. Medicaid usually costs the least. Medicare is also more affordable than employer-sponsored health insurance. ACA plans’ costs vary depending on your income. The ACA allows subsidies and tax credits for people for lower-income people. Here is more information about average annual premium costs for different plan types: