Health insurance can help you pay for the medical expenses you and your family might encounter. In general, most health insurance plans cover the cost of doctor and hospital visits. Some also include dentist visits, physical therapy, and alternative care.
The biggest choice in health insurance today is between managed care and fee-for-service coverage.
Managed care, which includes Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs), requires you to choose healthcare providers that participate in your plan and have agreed to accept a specific fee for their services. You choose a primary care doctor, often called a gatekeeper, who will refer you to specialists if your medical problem is outside his or her sphere of expertise. You pay a small charge, called a copayment, for each visit. The payment usually ranges from $20 to $30.
Fee-for-service medical plans, sometimes known as conventional health insurance, allow you to choose the healthcare providers and specialists you want to use. You pay your medical bills until you reach your deductible, which is a predetermined amount of money, usually set around $250. After you reach your plan’s deductible, your insurance company begins to pick up part of the cost. Generally, you pay the bill first and then submit a claim. Your plan reimburses you a portion—typically 70% to 80%—of the amount the plan approves for the particular service you’ve had.
A high deductible health plan (HDHP) has a higher deductible than traditional plans—minimums of $1,350 for an individual and $2,700 for a family and out-of-pockets maximums for $6,650 for an individual and $13,300 for a family in 2018. When you reach those amounts, coverage begins, but only eligible expenses count toward the deductible. The premiums you pay for the insurance don’t count toward these totals.
There are two attractive features of HDHPs. The premiums are lower, sometimes substantially lower, than premiums on traditional plans. And choosing an HDHP makes you eligible to open a health savings account (HSA), which lets you make tax-free contributions and take tax-free withdrawals to cover eligible medical expenses. You can carry over amounts you don’t spend in one year to following years.
The potential drawbacks are being able to afford the care you need before your coverage begins and being able to afford the contributions to an HSA. It can also be difficult to determine prices for required services from different providers so that you can comparison shop.
Buying insurance as an individual means you pay a premium on a fixed schedule, like monthly or quarterly. You will pay significantly less if you can participate in a group plan offered by your employer or a professional association that you belong to. Some employers pick up the entire premium for your coverage.
An advantage of receiving group insurance is that you are often able to insure family members under your plan, though you may have to pay the premium for that coverage. But, as part of a group, you may not have the flexibility to choose between joining a managed care or fee-for-service plan. If you are married and your spouse is covered under a separate plan, you have the option of choosing the better plan and declining the one with fewer benefits.
If you are changing jobs, and both the old and new jobs provide health insurance options, you qualify immediately for full coverage through portable insurance. Because of the Health Insurance Portability and Accountability Act (HIPAA) of 1997, a waiting period is no longer permitted for preexisting conditions, which are medical problems treated prior to your coverage under the new plan.
Illustration: Cristi Cash
The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 establishes another safety net for the period when you’re between jobs. If you leave a job, you have the right to continue the insurance that’s been provided by your employer for 18 months (29 months if you are disabled) through COBRA.
If your employer has been paying your health insurance premiums, the cost of COBRA coverage can be surprising. You are responsible for the full premium plus up to 2% in administrative costs. Usually, COBRA will be less than what you’d pay to buy insurance independently—and could save you lots of money in case of an accident or illness. COBRA coverage is also available for your adult children or your former spouse for three years after they are no longer eligible for coverage on a family policy.
The Affordable Care Act (ACA) of 2010 instituted a nationwide system of health insurance reforms and health insurance marketplaces where individuals can buy coverage if they aren’t covered by an employer plan. The ACA also introduced premium tax credits to make this coverage more accessible and requires everyone to have insurance or pay a penalty. However, the program has been controversial and its future is uncertain.