Financial Fiddler

Health insurance can be expensive, so why get it if you never get sick?  This could be one more expense you could cut from your budget, especially if you never use it.  However, not having health insurance could be devastating to you and your family. Here are several reasons why you need health insurance and how to better understand coverage options.

1. Medical emergency could put you in financial ruin

A trip to the emergency room could cost you thousands and thousands of dollars.  If you do not have health insurance, you could be on the hook for covering all of the medical bills that you incur.  According to a recent study, CNBC found that around 66.5 percent of all bankruptcies were tied to medical issues.  

Imagine for a second that your health has been pristine over the last several years.  One day you wake up, and you feel chest pains. You rush to the emergency room and the doctor determines that you need immediate open-heart surgery or you will die.  The only problem is you decided not to get health insurance because you have always been “healthy.” Not having health insurance is a big risk. Even though you might be thinking that you are wasting money on monthly premiums, there may come a time that you absolutely need health coverage and not having it will destroy your finances.

2. Preventive care

If you do not have health insurance, chances are you do not see the doctor at all or only on extremely rare occasions.  Routine check-ups, health screenings and patient counseling are all types of preventive care. Preventive care is used to reduce the risk of something bad happening to your health in the future by doing tests and treatments now.

For instance, if you have a small medical issue but do not have health insurance, you probably will put off going to the doctor for treatment.  That small issue could develop into a very serious medical condition and then all of a sudden, you will be responsible for more medical costs. Those with health insurance will probably get medical treatment or a health screening right away before it turns into something larger.

3. Changing Lifestyles

Let’s face it: having a more sedentary lifestyle has caused many more health problems, including: heart issues, cancer, lung conditions, strokes and many others.  There are other times when we are on the go constantly and just do not have time to worry about what we are eating or the quality of food we are putting into our bodies.  Having health insurance is important because our lifestyle opens us up to many different health issues. Having the ability to see a doctor when we need to is important.

4. Trouble getting follow-up care

So you were able to go to the emergency room and the doctors saved your life.  However, your condition is going to cause you to have numerous follow-ups with specialists, a primary care doctor, physical therapists, and many others.  Without health insurance, much of this care will be impossible to get, unless you are willing to pay for it out of pocket.

5. Because it covers much more than hospital visits

We all know that a hospital visit will cost you an astronomical figure, especially if surgery and a long visit is involved.  Having health insurance can help cover much more than just your hospital visit. Depending on your coverage, health insurance can help cover services, including but not limited to:

• Chiropractic care

• Outpatient care

• Mental health and substance abuse services

• Prescription drugs

• Lab tests

• Pediatric services

• Physical and occupational therapy

Understanding Your Coverage Options 

Health insurance is very complex and can be hard to understand.  With so many types, options and coverages, it can be overwhelming.  We will start with the basic types of coverage that an individual or family can be eligible for:

1. Group health insurance

A group health insurance plan is a private insurance plan purchased and managed by an employer or employee organization.  The employer or employee organization selects the plan(s) and health insurance companies. Typically, the coverage is more comprehensive than an individual plan.  The most common ways that a group plan is structured are either fully insured or self-insured.

• Fully insured.  Under a fully insured plan, the employer pays the premium directly to the insurance company and the premium is set every year based on the amount of employees the employer has.  The insurance company deals directly with claims and the employer does not need to deal with administrative expenses.

• Self-insured.  Larger employers are more likely to have this type of plan.  This option is cheaper for employers because they do not have to pay for a separate insurance carrier.  However, the employer now acts like their own insurance company and they get to dictate coverage options.  

2. Individual health insurance

An individual health insurance plan is a plan that you purchase on your own.  Your employer is not involved and these plans are for individuals or families.  Typically, an individual plan is more expensive than group coverage and provides less benefits.  You can purchase individual plans either directly through an insurance company or on a state or federal-run exchange.  These exchanges are sometimes referred to as the Marketplace. If you purchase an individual plan using the Marketplace, you can choose between four different categories: Bronze, Silver, Gold or Platinum:

• Bronze.  Your insurer pays 60 percent of the cost and you pay 40 percent.

• Silver.  Your insurer pays 70 percent of the cost and you pay 30 percent.

• Gold.  Your insurer pays 80 percent of the cost and you pay 20 percent.

• Platinum.  Your insurer pays 90 percent of the cost and you pay 10 percent.  

3. Medicare

Medicare is a federal health insurance program for seniors over 65, disabled adults who receive Social Security benefits, and those with End Stage Renal Disease (ESRD).  There are four parts to Medicare that cover different healthcare services. Medicare uses a combination of premiums paid for by individuals and government funds to cover the costs of the program.

4. Medicaid and Children’s Health Insurance Program (CHIP)

Medicaid is a federal and state health insurance program for low-income families and individuals.  Medicaid eligibility is managed by states and each state has its own rules and regulations. Typically, income requirements are tied to the federal poverty line.  

The Children’s Health Insurance Program (CHIP) is a federal and state health insurance program that is designed to cover children under the age of 18.  This program is mainly for families who have income above the Medicaid limit, but too low to afford private health insurance.

5. Short-term insurance

Short-term health insurance, also known as temporary insurance, is designed to cover you for a period of transition in your life.  Typically, you get coverage fast and can pick a specified time period up to one year for the coverage to be effective. Generally, you have access to an extensive network of doctors and health care professionals and you can drop coverage with no penalty.  This type of insurance is meant for individuals who are:

• Unable to apply for Affordable Care Act (ACA) coverage

• Waiting for ACA coverage to begin

• Between jobs and waiting for new coverage to become effective

• Just turned 26 and are no longer eligible on their parents’ insurance

• Looking for coverage to bridge the gap until Medicare

• Healthy and under 65 years old  

A Deeper Understanding of Health Plans

So you have narrowed down your health plan choices, whether through your company or individually.  Understanding the coverages is getting more complex. You start reading all types of terminology and have no idea what you are looking at.  The five most common types of health plans you will likely come across are: HMOs, PPOs, EPOs, POS and HDHPs.

1. HMO (Health Maintenance Organization)

Health Maintenance Organization plans, or HMOs, are the most restrictive type of health plan when it comes to accessing your network of providers.  With an HMO, you are asked to choose a primary-care physician (PCP) who is in your network. All of your medical care is then coordinated through your PCP.  If you need to see a specialist, your PCP will need to give you a referral. Typically, HMOs do not pay for care by providers outside of their network.

2. PPO (Preferred Provider Organization)

Preferred Provider Organization plans, or PPOs, are the least restrictive type of health plan when it comes to accessing your plan’s network and getting care outside of your plan.  Many times, you are not required to choose a PCP and you have more choices than in an HMO. PPOs allow you to get care both in-network and out-of-network, although anything outside your network will cost a little more.  You also do not need a referral to see a specialist if you participate in a PPO.

3. EPO (Exclusive Provider Organization)

Exclusive Provider Organization plans, or EPOs, are a mix between a PPO plan and an HMO plan.  With an EPO, you can see a specialist without having a referral from a PCP. EPO plans do not cover out-of-network providers and typically, the in-network is not that large. 

4. POS (Point of Service)

Point of Service plans, or POS, is more of a hybrid between a PPO plan and an HMO plan.  You pick a PCP on an HMO-style network who will coordinate all of your care. You have the option to go outside your network, but it will cost you more.

5. HDHP (High Deductible Health Plan)

High Deductible Health Plans, or HDHP, can be associated with an HMO or PPO and are tied to a Health Savings Account (HSA).  An HSA allows you to save pre-tax money to pay for qualified medical care. Depending on your employer, they may or may not contribute to your HSA.  If you do not use all your funds in the HSA, then they automatically roll over to the next year and typically do not expire. The deductible of a HDHP is higher than other plans.  Ultimately, you must reach your high deductible before your HDHP is able to contribute to your medical costs.  

Summary

Health insurance can be very complicated and confusing.  It may be tempting to just forget about getting health insurance, however, not having it at all could put you at risk for financial ruin.  Overall peace of mind, if something major were to happen health-wise, should be enough motivation to get health insurance in place for you and your family.