Insurance: Part Two
This week we focus on health insurance,
from how to get it to what it covers.
The health insurance system is so difficult to figure out. But we’d like to help.
Let’s start with what insurance is, at its core – a form of risk management to protect you from financial loss. In the case of health insurance, you (the insured) pay a set amount on a regular basis in exchange for the insurance company providing coverage for regular medical expenses and large costs.
So how can you figure out how your health insurance works?
In the US, it’s common for people to get health insurance through their workplace. But some people buy it individually, and others receive health care through government programs, like Medicare.
If you get health insurance through your employer, you likely pay a portion of the recurring costs and your employer pays the rest. The recurring costs are known as the premium.
In exchange, the insurance company pays for many regularly covered costs. Most commonly, when you visit the doctor or get a prescription filled at a pharmacy, they bill your health insurance company.
There is often also a copay required for the visit or prescription fill.
How much is an insurance copay? The specific amount depends on your insurance coverage. To use ourselves as an example, we pay $30 for each visit to any doctor except the general practitioner.
The insurance company then pays the rest of the cost to the doctor’s office. (One visit a year to your GP should be free, and each additional visit a smaller amount than a visit to a “specialist.”)
It’s called a copay because you and the insurance company both pay a portion i.e. are co-payers (like co-parents or co-owners).
When you face large costs, most commonly a hospital stay, there is often also a large deductible to pay. Every policy is different, but some have a set amount you have to pay toward your medical costs before the insurance company pays for your care. For example, if you have an annual deductible of $2,000, you will likely have to spend $2,000 before your insurance company pays for the remainder of the hospital bill.
Yes, even those with health insurance can often end up footing a sizable bill. Unfortunately, the only way to be truly prepared for this is to have savings.
Find our coverage of several other types of insurance: renter’s, auto, home owner’s – collectively known as property and casualty insurance.
Please note, nothing here is sponsored by or promoting any insurance company.
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