Health Insurance 101

• Why do I need health insurance?

  Because routine doctor’s visits can cost hundreds of dollars and medical procedures are usually thousands of dollars to pay for, health care can be a costly expense. If you ever become sick or get in an accident that results in an injury, you will need health insurance to help pay for your medical bills. Health insurance is also an important factor in preventative health care, or regular doctor’s visits to help keep you in good physical shape.

• How does health insurance work?

  There are two ways to acquire health insurance. If you work for a company that provides health insurance options for its employees, you are probably part of a group plan in which your employer covers some of the cost of your insurance. However, if your company does not provide health insurance options or you have your own business, you can also purchase an individual plan to cover your health care needs. Because they are not eligible for group rates, individual health insurance plans are usually more expensive to pay for than group plans.

• What are the terms of a health insurance plan?

  Health insurance plans are paid for in premiums, or regular installments that keep your plan active. However, other payments are usually involved depending on how often you seek medical treatment or attention. Each plan includes a yearly deductible, which is a monetary amount you must pay each year before your insurance company begins to pay for your medical expenses. For example, if all of your doctor’s visits for one year total $3,000 and you have a $1,000 deductible, your company will provide you with $2,000 in medical expenses coverage after you have paid the $1,000.

• There are several ways that insurance companies design their policies to share the cost of your medical treatments. To begin, your company may require a co-payment for doctor’s visits, which is a set dollar amount that you will pay for each doctor’s visit before the insurance company covers the rest of the bill.

• Another way that insurance companies split the cost of your medical expenses with you is through co-insurance. In a co-insurance agreement, the insurer agrees to pay a portion of your total expenses after you have fulfilled your deductible requirement. For example, in the previous situation described, an insurance company could agree to pay just 60 percent of the remaining $2,000 of medical expenses after you have met your $1,000 deductible.

• To ensure that you have an insurance plan you can afford, even in case of major medical expenses such as surgery and hospitalization, you should carefully research each plan’s out-of-pocket limit. This figure is a cap on how much money you will be required to pay for your own medical expenses each year, and it includes your deductible. Out of pocket limits come in handy when your medical bills are far more than your deductible and you cannot pay the entire percentage that you would be responsible for according to your co-insurance agreement.