Health Insurance

Health Insurance is another of those expensive carrying costs until you need it.  Every month or, for those people with health insurance through their employer, every paycheck you see a deduction for health insurance and this can be one of the most expensive insurance payments, easily 5 to 10 times the cost of auto insurance.


Let's discuss the concepts of health insurance without dealing with the costs or the politics.  Health Insurance is very simple - you have coverage in case you are hurt or get sick.  Assume you feel a tightness and pain in your chest one night.  The next day, you go see your doctor and he refers you to a specialist.  You go see the specialist and he runs some tests, with the thought that you may need a stent in your chest to open blocked blood vessels around your heart.  They go in and look around and determine that you need more than a stent, lots more.  You are packed into an ambulance and taken to a specilized hospital, checked in, stuck in your room with a brief understanding that the next morning they are going to operate.


Wait, stop, first there is a little matter of payment because this type of surgery can run up to $100,000 and some can be more and most people don't have this kind of cash in their piggy bank and this is where health insurance comes in.  With health insurance there is a simple matter of a deductible, the part you pay and then the insurance kicks in and pays the rest.  This is a generalization but there are lots of specifics that need to be understood so a discussion with an agent can be very helpful.


On with the story, you have a policy that has a deductible of $3,000 annually.  You pay the hospital the $3,000 and the story goes on because your insurance steps in.  You sleep the night and are woken up early the next morning, put on a stretcher and rolled into a prep room and they give you a drug to make you sleep. To find out the specifics of what happens next, you need to ask someone else because the next thing you remember is waking up and gagging because they have a breathing tube down your throat.  Once you are awake, they will remove the breathing tube and now the PAIN starts because you had surgery.  Surgery means they cut you open and fiddled around and fixed things and then used super glue to close up the opening, but the truth is you are in pain because breathing hurts and your chest hurts.


The point of the story is very simple, you do not know when you will need health insurance because you could fall down in your house and break your arm or you could be in a car accident (your fault because you hit a telephone pole) and you need to be fixed or you pick a virus and become very sick and go to the hospital.  None of these things are out of the realm of possibility, along with a lot more so it is critical that you be prepared for what you cannot predict.  Health insurance may seem expensive until the option comes up and you go into debt for the rest of your life because you did not have any insurance.


Okay, are your scared enough?  Health insurance is like every other kind of insurance, you get what you pay for.  There are two primary groups of health insurance: insurance provided by your employer or health insurance bought in the free market.  Frankly, the health insurance from your employer is probably the better price but the free market insurance may give you better options.


Health insurance can cover almost anything you want or it can be limited to specfic items.  To start with there is the story above - being admitted to the hospital and stuff being done to fix as much as can be fixed.  Funny thing is that being admitted to the hospital is not the same thing as going to the emergency rooom, they are different and require different coverage so understanding what is covered is critical.  You can cover lots of tests that are not done in a doctor's office like an MRI or X-rays.  Both of these items require specialized equipment and, most important, a specialist that can read the results and explain it to the doctor.


On top of tests there are things like prescriptions or therapy once the fixing has been done and there are lots of options here.


Sorry for the scare, but it is needed.  Too many people think that they do not require health insurance because they do not intend to get hurt or sick.  The simple truth is that it is not up to you - to be blunt - SHIT HAPPENS!!.  Health insurance protects your health if something happens to you that cannot be blamed on someone else.  The easiest example is the next time the flu is going around.  Flu, not properly treated, can put you in the hospital or worse, cause you to infect everyone around you.  Of perhaps you are walking out to your car from the the house and step on the cat, fall and break your leg, who can you blame because being a klutz is a personal thing but that broken leg could result in thousands of dollars in costs.

So, let's assume that you might need insurance and get some coverage, one of the first things is the deductible, as discussed above.  If you are checking into the hospital then you pay this to the hospital first, not later, now.  I would suggest getting a credit card that is used minimally every month but has a limit that is more than the deductible and plan on keeping the card clear so this option is available when needed.

Individual Deductible refers to the annual amount that the insured must pay before the insurance payments start.  Here is a real life example: insured was bitten by a rattlesnake.  He went to the closest emergency room and was admitted.  While in the emergency room, the insured was visited by the doctor three times and had blood taken three times for venom tests.  While no treatment was needed, the total bill for the services was $5,145.  If the Individual Deductible was $3,500 then he paid the deductible amount of $3,500 and the insurance company paid the balance.  The Individual Deductible is an annual amount, each year the amount resets, but once paid during the year, then it is fulfilled for the rest of the year.

Coinsurance is a term often used in conjunction with Individual Deductible.  The coinsurance means that the insured is responsible for part of anything over the Individual Deductible.  The amount would depend on the percentage included in the coverage.  If the coinsurance is 20% then after the deductible, the insured would pay 20% of the costs and the insurance company would pay 80% of the costs.

In most cases, there is normally a limit on the total amount that may be paid by the insured during the year.  This is referred to as the Out-of-Pocket Limit and is defined in the policy.  Assume that you were in a car accident and spent time in the hospital and the total costs incurred reached $20,000.  If you have $1,500 deductible and 20% coinsurance with an out-of-pocket limit of $5,000, then how much would you pay and how much would the insurance company pay?  You would pay $1,500 (deductible) and 20% of the balance (($20,000 - $1,500) times 20%) is $3,700, added to the $1,500 totals $5,200 (which is more than the $5,000 limit).  With the $5,000 limit then that is all you would pay and the insurance company would pay $15,000.  Note that you have now satisfied your limit for the year so there is no longer any payments required for any other medical services for this particular year.

There can be some specific costs that are split between the insured and the insurance company without regard to how much you have paid.  These costs could include a standard office visit in which you will pay a fixed amount based on the type of office visit.  This is referred to as Co-Pay.   The various types of office visits and the co-pay for each type are defined in the policy.

Many policies also provide coverage for prescription drugs and there is normally a co-pay, this would also be defined in the policy.

Various tests will also be defined, along with various types of treatments and hospital costs.

Lastly, many health insurance policies may limit the total amount that the insurance company may be required to pay during your life.  This is referred to as the lifetime maximum.

Health insurance comes in two basic flavors: Preferred Provider Organizations (PPO) and Health Maintenance Organizations (HMO). 

The PPO provides a slightly higher level of flexibility in terms of the physicians that can be used by the insured.  PPO programs also will provide a directory of the doctors and hospitals that are included in the preferred list.  This list is valuable since these institutions can bill the insurance company directly.  If you use a service provider outside of the list, then you will probably have to pay the bill when the service provider invoices you and you will have to request reimbursement from the insurance company.  Be aware that preferred providers prices are agreed between the insurance company and preferred provider which are normally lower than otherwise (which can impact the amount that you are required to pay).

On the flip side are the HMO health plans.  HMO plans are known for being less flexible because of the need to stay in the network (approved list of providers).  If there is a need for a specialist, a referral is required from the primary care physician that you have selected.  While many of the terms discussed above also apply in the HMO, the actual coverage amounts will change along with the monthly premium required.  Please note that since you stay in the network then out of pocket amounts are normally limited since costs are charged directly to the insurance company by the service provider.

If the options exist, then there are a number of factors to consider before selecting a coverage plan.  For some people, the premium may be important, whereas others may want to limit the cost incurred for doctor visits.  For many people, the issue may be the prescription costs and others may believe that the best local physicians are in the network. 

Dental Insurance: This insurance, normally in association with health insurance coverage, is designed to assist you and your family from dental related costs.  This insurance will often cover the cost of semi annual dental visits and an annual set of teeth x-rays.  If there is additional work needed for cavities or braces, this may also be partly covered by the dental insurance or you may be required to pay for part of the cost.

Vision Insurance: This insurance, normally in association with health insurance coverage, is designed to help you cover the maintenance costs for your vision.  Some people need glasses or contacts while other people might changes in their vision from year to year.

Supplemental Insurance: This insurance, normally in association with health insurance coverage, is designed to provide a second level of coverage on top of your existing coverage.  This insurance is often chosen to assist in the deductible or the higher levels of participation.  Some of these policies will also provide payments to offset lost wages during a health problem.