Types of Medical Insurance

medical insurance

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Medical insurance is a form of risk transfer that helps pay for health care costs when you’re ill or injured. It can be provided by private insurers, the government through programs like Medicare and Medicaid, or employers through group health plans. Some people also purchase individual health policies. The main reason to buy medical insurance is to protect against high, unexpected health care costs. While the odds are that you won’t need major medical coverage, thousands of people each day break bones, need stitches, get into car accidents and find out they have illnesses or require surgery or other health care services. Those costs can be very high, and they’re not necessarily covered by the standard medical insurance offered by employers or by many other sources.

There are many different types of medical insurance, including major medical coverage and prescription drug coverage. Some of the different kinds of coverage include:

Deductible: An amount that you pay out of pocket each year before your health plan starts to cover your costs. Once you meet the annual deductible, coinsurance or copayments are typically applied. A deductible is generally applied to each type of service, such as a doctor’s visit or a prescription.

Copayment: A flat fee, usually a small dollar amount, that you are required to pay for a service when it is subject to a copayment. For example, a copayment of $20 may apply to each visit to the doctor, or to a specific type of care such as an MRI. Copayments are sometimes called co-insurance because they share the cost of a service with the insurer.

POS – Point of Service Plan

POS stands for “point of service” and refers to the arrangement where a patient can receive health care services from providers that are in their health plan’s network (or preferred provider list) rather than going out of network, which is more expensive. Generally, in-network providers are required to accept rates from health plan members that are discounted from the typical “usual and customary” charges for the service.

Prescription Drug Coverage: A health plan that covers all or most of the cost of prescription drugs for its enrollees, either directly or by paying a portion of the cost to the pharmacy. The list of drugs that a health insurance program agrees to cover is called a formulary.

Health Insurance Terms You Should Know

There are a few other important terms that you should know about health insurance. For example, a health care exchange is the marketplace where you can shop for and enroll in a health insurance plan. Also, if you work 30 or more hours per week for a large employer that has 50 or more employees, your employer must offer you a health insurance option that provides minimum value.