Health Insurance Basics: A Brief Guide

Health insurance, just like auto or home insurance, is a type of insurance that covers a specific set of expenses, which in this case are medical, surgical or preventive care expenses.

In this short article, we’ll cover the various ways by which you can make the most out of your money when getting health coverage. Some of these pointers that we will discuss are essential for any health insurance policy holder to know about. Indeed, you might be going about your health insurance all wrong, which would necessarily mean you’ll be spending more than you should. So, we invite you to read the pointers below—it might save you a lot of money.

The Basics

Health insurance typically won’t have a 100% coverage. That is to say, like other kinds of insurance, any health insurance plan will share at least some portion of the cost with the policy holder up to a certain point. This point is typically referred to as the ‘out-of-pocket limit,’ and once the costs have reached this limit, subsequent costs are then shouldered by the insurance provider.

There are a variety of ways by which an insurance provider shares the cost with a policy holder. These are among the most pertinent information all policy holders must be aware of, and they include: the copayment, coinsurance, deductible and out-of-pocket limit. A longer discussion of these terms will be found below.

The Affordable Care Act, which is popularly known as “Obamacare,” has certain provisions that the government as well as health providers must enact, among them are that: all Americans need to get coverage—this is referred to as the ‘individual mandate.’ Failure of an individual to do so will mean they will have to pay a fee on their federal tax return. That fee amounts to whichever of these two calculations turn out to be higher:

  1. 2.5% of household income, or
  2. $695 per adult, and/or $347.50 per child under 18.

This ‘individual mandate,’ however, had been suspended this 2019, which means that a penalty for non-coverage no longer exists.

Reasons for Getting Health Coverage

Quite simply, medical expenses are high for most people to be able to cover ‘out-of-pocket.’ Medical expenses, after all, are the biggest reason people fall into financial debt.

Here are some factors you would to consider when deciding on the right health insurance plan:

  1. If you’re buying for your family, find out what your deductible is, and whether it’s an individual deductible, a family deductible or a combination of both. This latter can be confusing, but in a nutshell, a plan that includes both an individual and family deductible works this way: once an individual reaches his individual deductible amount, the plan will start to cover him, and only him. But when the family deductible is reached, then the plan will cover everyone in the family, regardless of whether each’s individual deductible is reached.
  2. If you’re a student, try to find out if you can remain in your family’s plan. Usually, you’ll be able to if you’re younger than 26. But if you need to leave the household for whatever reason (to take college at another state, say) then you should investigate whether your university offers health insurance plans, which can often be cheaper than if you remained in your family’s plan.
  3. If you’re self-employed, you may still be eligible for COBRA (Consolidated Omnibus Budget Reconciliation Act), a law that gives individuals with the right to continue the group insurance plan provided by their employer for 18 months (or more) following termination of their employment contract. If this avenue is no longer available, then you can always go to the market place and procure a plan that’s best for you. Remember, your premiums might also be tax-deductible, depending on your specific circumstance, so don’t forget this when filing for your taxes.
  4. If your income is low, you might want to check whether you’re eligible for Medicaid, the health coverage the government provides for those with low income and those with disabilities. Under the Affordable Care Act, the requirements for eligibility into this program were also expanded, so you might be able to save a lot of money by applying to the program.
  5. If you’re a veteran, then you’ll likely be eligible for the healthcare that is provided by the U.S. Department of Veterans Affairs (VA). In fact, even if you already have health insurance coverage but qualify for USDVA coverage, you can use both plans, and quite possibly be able to save even more on healthcare expenses.
  6. If you’re a senior citizen—i.e., you are 65 or older—than you qualify for Medicare, the federal health insurance program that helps senior citizens cover for their medical expenses.