What Is Health Insurance?

health insurance

Health insurance is a contract between a consumer and a health care provider that will cover some or all of the costs of medical services. This contract is typically valid for a year. The cost of the plan varies, and deductibles, copays and other out-of-pocket charges are often included in the monthly premium.

The contract usually contains a list of in-network providers that the insurance company will pay for. These in-network providers include doctors, clinics, hospitals, pharmacies and laboratory services. Some health insurance plans offer extra no-cost programs, such as wellness discounts or cash awards for healthy activities. If you choose a plan that offers out-of-network services, your provider may charge you more than the plan’s coinsurance. However, you can ask the insurance company for a list of in-network providers and get the most for your money.

There are three main types of health insurance. There are indemnity, self-funded, and public. Most of these are regulated by the federal government. Typically, the insurer will pay 80% of the costs of medical services.

Self-funded employer-sponsored plans are governed by the Employee Retirement Income Security Act (ERISA). They are not required to cover essential health benefits, such as hospitalization and preventive care. You may also qualify for Medicaid coverage. In addition, you can purchase individual health insurance on the federal or state exchange.

Major medical healthcare plans with effective dates after January 2014 are governed by the Affordable Care Act. In addition to the ACA, they must meet other requirements. Depending on the plan, you may be able to find them in your state’s marketplace or through a broker.

A preferred provider organization plan, or PPO, is an alternative to an HMO. PPOs offer a large network of in-network providers. Members can choose out-of-network specialists, and they are generally covered for some services, such as emergency rooms and hospitalizations. But they must also meet the insurance company’s out-of-pocket maximum.

Health maintenance organization plans are the cheapest, and they only cover medical services that the insured’s family physician has referred them for. Those with chronic conditions may require more frequent doctor visits and costly hospital stays.

Catastrophic health insurance plans are for people who have not yet reached the age limit for standard health insurance. Those who are under 30 are likely to find a high-deductible catastrophic plan. After the deductible is met, the plan will pay for most surgical, emergency department, and preventive care expenses.

Choosing the right health insurance isn’t always easy. Your policy should be based on your needs and your budget. However, you should also consider the type of medical services you need. Using an online search tool, you can find out if a particular plan is affordable and whether or not it provides a good deal of coverage. And if you’re in a hurry, you can always ask your provider for a summary of benefits.

Finally, you’ll want to understand the differences between the different health insurance plans. There are a number of regional competitors, and you should know what to look for. Regardless of your insurance needs, a health care plan that’s tailored to you will help you avoid excessive out-of-pocket fees and keep your medical costs under control.