Health Insurance | What It Is and Why You Need It

There’s probably nothing more valuable than one’s health. Each of us faces a different set of medical circumstances, and regardless of our material or economic circumstances, access to quality healthcare is essential to our well-being, longevity, and overall quality of life.

The basic premise of health insurance is that the policyholder pays premiums into the policy, as well as copays and deductibles, and in return, the insurance company will pay some portion of their medical expenses.

Previously, because of the individual mandate, health insurance was required for all. Those who didn’t have it would face a tax penalty. Currently, at the federal level, there is no fee for not being covered, though some states might still assess a penalty when you file your state tax returns.

What is Health Insurance?

Health insurance helps cover the cost of medical services, from preventative care to treatments for diseases.

The amount of coverage you receive versus how much you pay out of pocket (your deductible and copayments) will depend on your specific plan and the type of healthcare services you require.

For example, if you go to the doctor twice a year for a physical, with most plans, your insurer will pay for the full price of those visits.

However, if you’re diagnosed with cancer and need several surgeries to fight it off, you can expect the insurer to only cover a portion of the costs.

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Why You Need Health Insurance

Because everybody has medical needs, and because those needs can be expensive, all people have some need for health insurance coverage. (For more information, read our “What does health insurance cover?“).

Preventative Care

Having coverage means an individual is more likely to seek routine care. Even those of us who seem to be in peak physical condition benefit greatly from regular medical checkups.

First of all, preventive care is far less costly than managing an illness or treating an injury.

Second, seeking out care when you’re well, makes for better long-term health history.

It’s far more effective to preliminarily detect that somebody is at risk for type 2 diabetes and help them avoid it than it is to wait until they have symptoms of the disease and treat it.

Unexpected Injuries

No matter how healthy you are, accidents are always a possibility, and without health insurance, you could suddenly find yourself under a mountain of medical bills with no help in digging yourself out from under them.

Keep in mind that a sudden injury could necessitate a trip to the emergency room, a notably expensive way to receive medical care.

Factor in ambulance rides, diagnostic tests, hospital stays, medical treatments, or surgery, and the cost can immediately balloon, depending on the severity of your injuries.

Types of Health Insurance

Most health insurance policies, which are typically acquired through employers or the healthcare exchanges, are either HMOs or PPOs.

HMO and PPO

Health management organizations (HMOs) and preferred provider organizations (PPOs) are the two main types of health insurance plans.

HMOs typically have lower premiums and out-of-pocket costs for the policyholder, while PPO’s generally provide greater flexibility.

HMOs require that you coordinate care through a primary care physician (PCP), and don’t cover out-of-network services.

If you have the choice between these two types of options, you’ll want to consider what’s a better fit for your needs.

POS and EPO

There are additional health insurance policy categories that are similar to HMOs.

They are point of service (POS) and exclusive provider organization (EPO) plans.

These two policy types are similar to HMOs in that they, too, typically have lower premiums and upfront out-of-pocket expenses compared to PPOs.

POS plans still require PCP referrals, but they’ll cover out-of-network services, just at a higher rate.

EPO plans also cost a bit more than HMOs for similar coverage, which is restricted to the network, but they have larger networks, and they may or may not require referrals.

How Do I Find Health Insurance?

Employer Sponsored Plans

Many people enroll in health insurance policies through their employers. They can enroll in an individual or family plan, depending on their circumstances. Family plans could cover spouses, children up to age 26, and other dependents. Children are not required to live with their parents to be enrolled in a family plan.

Dual-income houses will have to decide whether they’ll maintain separate policies or share coverage. If the whole family is on one plan, they should choose the policy that fits the whole household best, and they should consider if one partner can receive better perks for refusing coverage through their own employer.

COBRA for Those Who Lost Their Job

Those who have lost insurance after leaving a job may be eligible for temporary extended health coverage through COBRA, the Consolidated Omnibus Budget Reconciliation Act.

Healthcare Exchange Open Enrollment

Otherwise, during open enrollment periods, many people purchase insurance through the healthcare exchanges that were established following the Affordable Care Act, some of which might be subsidized, depending on your income and other circumstances. Still, other people purchase private plans independently.

Medicaid for Low Income

Low-income individuals may be eligible for Medicaid coverage, and there is additional support for children in low-income families.

Medicare for Seniors

Seniors have access to Medicare, and they may purchase supplemental insurance as well.

Department of Veterans Affairs for Veterans

Veterans can receive healthcare through the Department of Veterans Affairs. Enrolled members of federally recognized tribes might also have coverage through federal, state, or tribal programs.

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How Much Does Health Insurance Cost?

Like all types of insurance, the cost of your monthly premiums will be determined by several different factors. The more risky you are in the eyes of the insurer, the more expensive your policy will be.

It will also depend on the type of coverage you go with and whether or not you’re purchasing coverage for just yourself or the entire family.

In 2018, the average monthly cost of health insurance for an individual was $574. For families, the average cost was $1,634.

Here are some of the components that will play a role in determining the price of your individual health insurance policy:

Level of Coverage

The level of coverage you go with will obviously make an impact on the cost of your monthly premiums. Most providers will break their coverage levels up into the following tiers:  Bronze, Silver, Gold, and Platinum.

At the bronze level, you’ll pay lower premiums but will have higher out-of-pocket expenses when you receive care. Your insurer will cover roughly 60% of the cost while you pay 40% in the form of deductibles and copayments (the amount you pay after the deductible).

At the platinum level, you’ll pay the highest premiums possible, and your insurer will cover 90% of your healthcare costs.

Personal Details

Your personal details are the most important factor here.

First, the insurer will need to know how old you are. The older you get, the more expensive your health insurance premiums will become. After all, older people have a higher chance of getting injured or being diagnosed with diseases.

The insurer will also want to learn about your lifestyle to find out if you have any unhealthy habits such as smoking.

People who regularly smoke tobacco will pay more for health insurance than people who don’t.

Do You Need Health Insurance?

Generally speaking, the short-term cost savings of being uninsured are not worth the risk to your physical and financial health.

Health insurance is practically essential to your well-being, and there are many opportunities to get covered.

If your coverage lapses, you should reinstate it or get a new policy as soon as you’re able.

Learn more about your health insurance options today.

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