GUIDE: Health Insurance Basics

An unexpected medical expense can wipe your savings clean. And, that’s why you need a comprehensive health insurance plan to cover your medical expenses. Just like how an auto insurance plan covers the cost of car repairs if you meet with an accident, a health insurance plan will come to your aid (financially, of course) if you get injured or fall sick. If this is your first time buying health insurance, here’s a quick guide for you. 

Who Should Purchase Health Insurance?

Whether you are young and healthy or older with health complications, you need a health insurance plan. Medical costs are too high for you to cover out of your pocket, without a policy. 

Types of Health Insurance

There are two types of insurance plans you can buy – private health insurance and public health insurance. Most people have some sort of private insurance, usually offered to them by their employer. The federal and state exchanges can offer residents private and public health insurance plans. Many people are also solely dependent on public health insurance schemes like Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP). 

Health Insurance Costs Explained

When you shop for health insurance, it’s important to be aware of how much you’ll actually have to pay. These are the costs you’ll need to bear:

• Premium: It’s easiest to think of the premium as a monthly bill that you need to pay to get continuous coverage. 
• Deductible: A deductible is what you will need to pay out-of-pocket before your health insurance plan’s coverage kicks in. Policies that have higher premiums usually have lower deductibles and vice versa. 
• Co-payment: The co-payment, or co-pay, is a specific amount of money that you’ll need to pay for if you need prescription medication or healthcare services. 
• Co-insurance: Unlike the co-pay, co-insurance is not a fixed amount. It’s, in fact, a percentage of the cost of the healthcare service you are getting.
• Out-of-pocket maximum: This is the most amount of money you’ll need to pay for healthcare services in a year. Keep in mind that monthly premiums don’t count here.

How to Buy an Affordable Health Insurance Plan

Finding an affordable health insurance plan doesn’t have to be challenging. The smartest thing you can do when shopping for health insurance is comparing the premiums of different plans – get the one that’s most affordable (without compromising on the coverage). Also, look for other ways to make the plan affordable. For instance, if you hardly ever use healthcare services, get a plan that has a high deductible and low premium. If you have a chronic illness, get a plan that has lower out-of-pocket expenses, but higher premiums. 

You’ll need to find ways like these to tailor your plan such that it suits your coverage needs and also your budget.