Medical insurance, or health insurance, is a type of indemnity insurance that helps pay for some or all of the costs associated with medical care. It is typically offered through employers as part of a benefits package, but can also be purchased directly from insurers or through the government health insurance programs such as Medicare and Medicaid. There are a variety of different types of health insurance plans, each with its own set of rules and regulations. Many plans require that patients pay some of the cost upfront through deductibles and copays, but then the plan pays for most or all of the remaining costs. Preventive care is generally covered at no cost to the patient, while other services may have a nominal charge or copay associated with them.
Most medical insurance plans use some form of managed care to control costs and improve quality of care. This means the plan contracts with a network of providers who agree to provide health care at negotiated rates. Patients are usually encouraged to choose doctors and hospitals within the network, although they can still receive care from out-of-network providers if their plan allows it. The plan may also have a formulary, which is a list of prescription drugs that the plan will cover, usually divided into tiers based on effectiveness, safety, and cost-effectiveness.
In addition, most medical insurance plans have a maximum annual out-of-pocket limit that sets the amount the patient will be responsible for paying during the course of the year. This includes copays, deductibles, and coinsurance (but does not include the monthly premium). Once the yearly out-of-pocket limit is reached, the plan starts to pick up all of the costs. This limit is particularly helpful for catastrophic illnesses that can be very expensive to treat.
Some medical insurance plans have waiting periods before specific treatments are covered. For example, some surgical procedures or experimental treatments may require prior authorization or pre-approval from the health insurance company before they will be covered.
Getting the right type of medical insurance is important to help protect you and your family from high medical bills. The more you know about how your plan works, the better choice you will be able to make.