Understanding the Basics of Health Insurance

The purpose of health insurance is to pay a designated beneficiary a sum of money called a death benefit when the insured person dies. The policyholder typically pays a premium, either regularly or in one lump sum, to purchase the insurance coverage. Insurance companies may also provide other benefits such as income replacement and critical illness protection.

Most people get their health insurance through their employer, union, or directly from a private insurer. The majority of private insurance plans use managed care models where the insurer contracts with a network of doctors, hospitals, and other providers to deliver care at discounted rates for enrollees. The insurer will often require enrollees to select a primary care physician and to follow their guidance about selecting specialists. Most private insurers also have rules about the kinds of procedures that will be covered, the deductible and copay amounts, and other provisions.

Some types of health insurance are regulated at the state or federal level. For example, Medicare and self-insured group health insurance (including coverage offered by some small businesses) are governed by both state and federal regulations. Medigap, which is sold to supplement Medicare coverage, is also regulated at the state and federal levels. Other types of health insurance, such as Farm Bureau plans in some states and direct primary care ministries (which are not considered insurance), are generally exempt from these rules.

Under the Affordable Care Act, all major medical coverage purchased on the individual or family market must be guaranteed issue, meaning that the insurer cannot deny a coverage application because of past medical conditions or other factors. In the individual/family market, all new policies with an effective date of January 2014 or later are required to be compliant with the ACA. Exceptions to this rule are limited to certain special enrollment periods triggered by qualifying events.

Choosing the right plan depends on an individual’s needs, budget, and preferences. A person should choose a plan that has the most comprehensive scope of coverage, to minimize out-of-pocket expenses during claims. In addition, a person should choose a plan with a competitive premium rate vis-à-vis the coverage provided.

Lastly, a person should avoid plans that have sub-limits on specific expenses such as room rent, ICU room rent, AYUSH coverage, or domiciliary treatments. These limits limit the scope of coverage and might result in out-of-pocket expenses during claims. The best way to ensure that a plan does not have these restrictions is to read the fine print carefully. To do so, a person can visit the website of the insurance provider and look for a link to download the policy document. Alternatively, a person can contact the insurance provider directly to request the policy document. The policy document should contain all the information regarding the coverage, premium costs, renewal conditions, discounts, and other details. This helps a person make an informed choice about the health insurance policy. Also, the policy document should have a free-look period and waiting period for pre-existing conditions.