Understanding Health Insurance

Overview

What is health insurance?

Health insurance helps you pay for your health care costs. Having insurance can help protect you from high medical costs, and it may help cover expenses if you need unexpected care. It also can make it easier to have routine doctor visits and preventive care. Insurance sometimes helps pay for prescription medicine costs.

Health insurance pays some, but not all, of your medical costs. Some plans pay more of your costs than others.

How can you get health insurance?

Many people get a health insurance plan through their work. The employer often helps pay for the plan. Some people buy health insurance on their own, directly from an insurance company, rather than getting a plan through an employer.

The Affordable Care Act provides a marketplace for people to look for and compare health insurance plans. You can learn about the Affordable Care Act and how to get health insurance at www.healthcare.gov or at www.hhs.gov/healthcare.

The United States government provides health insurance for people who qualify, such as seniors, people with certain disabilities and health problems, and some people with low incomes. Medicare and Medicaid are government insurance programs that help pay certain medical expenses for people who are eligible.

There are different kinds of health insurance plans to choose from. To get the best care, it's important to read your insurance plan closely. Be sure you understand the plan's rules and costs, how it works, and which medical services are covered.

Some organizations, such as the National Committee on Quality Assurance (NCQA), give reports on insurance companies. This may help you choose which plan is best for you. Find out more at www.ncqa.org.

Types of Health Insurance

Private insurance

Many employers and organizations offer private health insurance. Some employers offer only one type of plan that they will help pay for. Others may let you choose from more than one plan.

Buying health insurance on your own, instead of getting a plan through your work, is likely to cost more. And you pay for the plan yourself. You don't share the cost with your employer.

Some plans work with certain health care providers and facilities to provide care at lower costs. The providers are part of the plan's network. This is called managed care. There are many kinds of managed care plans:

• Health maintenance organizations (HMOs). These plans usually pay only for care within their network. HMOs may cost less than plans that offer a greater choice of providers.
• Preferred provider organizations (PPOs). These plans cover more of your costs if you get care within the network. But they still pay some costs for care outside of the network.
• Point of service. You can choose between an HMO or a PPO each time you get care. These plans give you more choices of doctors and hospitals.

Indemnity (fee-for-service) plans are not the same as managed care plans. The choice of doctors or hospitals you can use is not restricted. Your provider is paid a fee each time you get care covered by the plan.

Public (government) insurance

• Medicaid. Medicaid is a state-run, government insurance program. It helps some people with lower incomes pay for medical care. Medicaid pays your health care provider. You may have to pay a small fee for certain types of care.
• Medicare. Medicare is insurance provided by the government for people age 65 or older. People with certain disabilities or health problems also may get insurance through Medicare. For instance, a younger person with long-term (chronic) kidney failure treated with dialysis or a transplant may get Medicare. It covers some, but not all, medical costs for people who qualify. Medicare has four parts:
  • Part A (hospital insurance). This helps cover care in certain medical facilities, such as hospitals or nursing facilities.
  • Part B (medical insurance). This helps pay for doctors and certain outpatient care. It covers some services not covered by part A. And it includes some home health care and some physical therapy.
  • Part C (Medicare Advantage Plan). This allows you to get health care coverage for parts A and B (and usually part D) through a private health plan, like an HMO or a PPO.
  • Part D. This helps to cover some prescription drug costs. People with lower incomes may get extra help with prescription drug costs.

To learn more about:

• Medicaid, go to www.cms.gov.
• Medicare, go to www.medicare.gov or call 1-800-MEDICARE (1-800-633-4227).

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Choosing a Plan

When you choose a health insurance plan, carefully read the plan's rules and policies. Find out the cost of the plan (the premium). What medical services are covered? How do the payments work? And how much choice will you have when you choose providers and hospitals? Ask for a summary of the plan's benefits.

Read the plan's brochure closely before you sign up. Ask questions about parts you don't understand. It may be helpful to know these terms:

• Deductible: The amount you have to pay each year before your plan starts to pay for your care
• Out-of-pocket expenses: Health care costs you have to pay with your own money
• Co-pay: A set fee you pay each time you get certain types of care
• Premium: The amount you pay to have your plan
• Exclusions, limitations, or noncovered: Services that aren't covered by your plan
• Out-of-network: Health care services received outside of a plan's network of providers. Services you get out-of-network often cost more than services you get in-network.
• Pre-existing condition: A health problem you already have when you apply for health insurance
• Health savings account: An account a person or employer sets up to save money for health care costs
• Flexible spending account: An account where you can use pre-tax dollars to pay for certain services not covered by your insurance plan, such as co-pays and dependent care
• Formulary: A list of medicines that your plan will cover or help you pay for
• Denial of claim: When a plan refuses to pay for a health care service

It's a good idea to talk to your doctor's office. They can tell you which health plans are accepted and how the payments work. It's also a good idea to talk to your health insurance company before you have a planned surgery or procedure so you can be sure it's covered under your plan. In an emergency, get the care you need right away. As soon as you safely can, call your insurance company to find out what services will be covered.

Coverage for medicines

In general, you'll pay less for generic medicines than for brand-name medicines. Some insurance companies require prior authorization from your doctor before they'll help you pay for a medicine. For instance, this may be the case if you'd prefer to take a brand-name medicine over a generic one in the same class of drugs. With some plans, you may have to pay more for medicines that aren't on the plan's list of preferred medicines (formulary). Some insurers cover medicines that are bought only at certain pharmacies.

A formulary may put drugs into three groups, or "tiers," based on how much your health plan will pay and how much you will have to pay.

Group 1: Generic drugs.

These are usually drugs that have been in use for a long time, have proven benefits, and cost less to make and sell. You pay the least for drugs in this group.

Group 2: Brand-name drugs that are on the formulary.

Your health plan may have agreements with some drug companies to offer their brand-name drugs at a lower cost. You still pay more for the "formulary" brand-name drug than for the generic, but it costs less than brand-name drugs that aren't on the formulary.

Group 3: Brand-name drugs that are not on the formulary.

These drugs cost more because your health plan doesn't have an agreement with the drug company to reduce the price. When the health plan pays more, so do you.

If you have a choice between plans, check what your co-pay for prescription drugs will be, the maximum amount the plan will pay in a year, and other details.

Questions to ask

When you are choosing a health insurance plan, think about questions you want to ask. For example:

• What benefits and services are covered?
• What plan does your doctor accept?
• Which doctors are available in the plan?
• Does the plan offer coverage for foreign travel?

Learn more

Help for the Uninsured

If you don't have health insurance, there may be health insurance programs and assistance available to you.

Affordable Care Act

The Affordable Care Act (ACA) provides options for those seeking health insurance. It provides a health insurance marketplace that allows people to compare health plans, look for a plan that fits their needs, and find out if they may qualify for lower costs. It also sets guidelines for insurance companies, including rules about cost increases, coverage for preexisting conditions, and requirements for certain kinds of coverage, such as preventive care.

The ACA works in partnership with individual states. Parts of it may vary from state to state. Be sure to find out the options for health coverage in your state. You can go to www.healthcare.gov or www.hhs.gov/healthcare to learn more about the Affordable Care Act.

Health centers and state programs

Federally funded health centers provide medical and dental care for people who don't have health insurance. Health centers may offer services such as checkups, pregnancy care, immunizations for children, and other medical treatment. The amount you pay for care depends on your income.

Many states offer programs that help people get health insurance. Medicaid provides health coverage for certain families or individuals who are eligible. The Children's Health Insurance Program (CHIP) provides low-cost insurance for children whose families don't qualify for Medicaid coverage but cannot afford private insurance. You can go to insurekidsnow.gov to learn about programs for children, such as CHIP.

There are also ways to get help with medicine costs. Find out whether the drug company that makes your medicine has a patient-assistance program. Some companies offer free or discounted drugs for people who cannot afford them.