Medical insurance is an agreement between a health insurer and an insured individual or family that provides coverage for some or all of the policyholder’s healthcare costs in exchange for premium payments. There are several different types of healthcare insurance available, and the cost to the consumer varies depending on the scope of coverage, the deductible, and the amount of copays or coinsurance.
Traditionally, medical insurance was only offered through an employer or purchased individually as a private plan. The Affordable Care Act (ACA) has expanded the availability of healthcare coverage by making it available to individuals through the ACA Marketplace and by prohibiting health insurers from denying coverage to patients with preexisting conditions or imposing lifetime or annual benefit maximums on major medical plans.
The ACA has also made it easier for individuals to access affordable healthcare insurance by creating a website where consumers can compare and shop for individual and family plans that meet their needs. In addition, the ACA has mandated that all non-grandfathered and non-grandmothered individual and small-group major medical health insurance plans cover at least 10 essential health benefits, without having to cap those out-of-pocket expenses in any way (except for co-pays or deductibles).
A deductible is an amount that the policyholder must pay towards the cost of their care before the health insurance begins to pay. After the deductible is met, most healthcare insurance policies will have some form of coinsurance, where the policyholder pays a percentage of the cost of their care while the health insurer covers the rest. Oftentimes, there is an out-of-pocket maximum on coinsurance, which means that once the policyholder reaches a certain amount in out-of-pocket expenses, they will no longer have to pay any more in that particular category of healthcare.
Other forms of healthcare coverage include fixed-indemnity plans, which provide a set amount for each covered service, and catastrophic plans, which offer a high ceiling on out-of-pocket costs. In addition, there are several hybrid healthcare insurance options available that combine a deductible with a fixed-indemnity or catastrophic plan. These healthcare insurance options are often considered to be more budget-friendly because they have a lower monthly premium, but their downside is that they can leave the policyholder with large out-of-pocket expenses for care if they don’t meet their deductible.
The different types of healthcare insurance are regulated by both state and federal agencies. For example, Medicare and all self-insured group health coverage are governed at the federal level while individual/family and small-group healthcare insurance is regulated by the states. There are also a number of unregulated healthcare insurance products available, such as direct primary care and health care sharing ministry plans, that are designed to be used as supplemental coverage rather than as stand-alone coverage.