Health insurance

Health insurance is a type of insurance coverage that pays for medical and surgical expenses incurred by the insured. It may also offer coverage for other health-related costs, such as prescription drugs, preventive care, and mental health services. Health insurance helps individuals and families afford healthcare services by sharing the costs of medical treatment with an insurance company.

How Health Insurance Works

Health insurance operates by the insured (the person or family) paying regular premiums to the insurance company. In return, the insurance company covers part of the medical expenses as per the terms of the policy. The cost-sharing between the insured and the insurer typically involves:

Premiums: The regular amount paid to maintain the insurance policy, often monthly or annually.
Deductibles: The amount the insured must pay out-of-pocket before the insurance company starts to cover medical expenses.
Co-payments (Co-pays): Fixed amounts the insured must pay for specific services (e.g., doctor visits, prescriptions).
Coinsurance: The percentage of the cost of care the insured is responsible for after meeting the deductible.
Out-of-pocket maximum: The maximum amount the insured will need to pay in a year for covered health expenses. After reaching this limit, the insurance covers all further costs.

Types of Health Insurance Plans

Employer-Sponsored Health Insurance
- Overview: Many employers offer health insurance as part of their employee benefits package. The employer typically pays a portion of the premium, and the employee pays the rest.
- Advantages: Often cheaper than individual plans because of employer contributions. Group plans may have better coverage and lower premiums.
- Example: A company may offer a health insurance plan where they cover 70% of the premium, and the employee pays the remaining 30%.
Individual Health Insurance
- Overview: This type of health insurance is purchased by individuals or families on their own, rather than through an employer. These plans are available through the health insurance marketplace (like the Affordable Care Act, or ACA, in the U.S.) or directly from insurance companies.
- Advantages: Provides coverage when no employer-sponsored health insurance is available. Offers more flexibility in plan selection but can be more expensive than employer-sponsored insurance.
- Example: A self-employed individual buys a plan directly from an insurance company or the government marketplace.
Government-Sponsored Health Insurance Programs
- Overview: Government programs, such as Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP), provide health insurance for specific populations.
- Medicare: A federal program for people aged 65 and older, and some younger individuals with disabilities.
- Medicaid: A state and federal program that provides health coverage for low-income individuals and families.
- CHIP: A program that provides low-cost health coverage for children in families that earn too much to qualify for Medicaid but cannot afford private insurance.
Marketplace or Exchange Health Insurance
- Overview: Under the Affordable Care Act (ACA) in the U.S., individuals and families can purchase health insurance through the Health Insurance Marketplace. The marketplace allows people to compare various plans and offers subsidies for lower-income individuals to make insurance more affordable.
- Advantages: A wide range of options, with potential subsidies depending on income.
- Example: A person might qualify for a silver plan on the marketplace with a premium subsidy, based on their income.
Short-Term Health Insurance
- Overview: Short-term plans are designed to provide temporary coverage, typically lasting from a few months to a year. These plans often have limited coverage and are not required to meet the same standards as long-term plans (e.g., ACA requirements).
- Advantages: Lower premiums than regular health insurance, but with limited coverage.
- Example: A person who is temporarily between jobs may buy a short-term plan to have health coverage while they look for a new job.

Common Health Insurance Plans and Networks

Health Maintenance Organization (HMO)
- Overview: HMO plans require members to choose a primary care physician (PCP) and get referrals from the PCP to see specialists. They typically have lower premiums and out-of-pocket costs, but less flexibility in choosing healthcare providers.
- Pros: Lower premiums and lower out-of-pocket costs.
- Cons: Requires referrals and limits choice of providers to a network.
- Example: A person with an HMO plan may need a referral from their primary care doctor to see a specialist.
Preferred Provider Organization (PPO)
- Overview: PPO plans offer more flexibility in choosing healthcare providers, allowing members to see any doctor or specialist without a referral. However, staying within the network of providers results in lower costs.
- Pros: More flexibility and no referral requirements.
- Cons: Higher premiums and out-of-pocket costs.
- Example: With a PPO, a person can see any doctor or specialist without needing a referral but may pay more if they go outside the network.
Exclusive Provider Organization (EPO)
- Overview: EPO plans are similar to PPO plans but require members to use the plan’s network of providers, except in emergencies. There are no out-of-network benefits.
- Pros: Lower premiums than PPOs, no referrals needed.
- Cons: Limited to in-network providers, with no coverage for out-of-network care.
- Example: A person with an EPO plan can see any in-network provider without a referral but would pay all costs if they see an out-of-network doctor.
Point of Service (POS)
- Overview: POS plans combine features of HMO and PPO plans. Members choose a primary care physician (PCP) but can see out-of-network providers at a higher cost.
- Pros: Flexibility to see out-of-network providers with higher costs.
- Cons: Need for referrals and higher out-of-pocket costs for out-of-network care.
- Example: A person with a POS plan needs a referral to see a specialist but can see a specialist outside the network for a higher cost.
High Deductible Health Plan (HDHP)
- Overview: HDHPs have higher deductibles but lower premiums compared to traditional plans. These plans are often paired with Health Savings Accounts (HSAs), which allow individuals to save money tax-free for medical expenses.
- Pros: Lower premiums and the ability to save for future medical expenses in an HSA.
- Cons: High out-of-pocket costs until the deductible is met.
- Example: A person with an HDHP might pay a higher deductible, but the lower premium allows them to save money, and they can use an HSA to pay for medical expenses.