Health Insurance Why do people get health insurance? What are the types of health insurance, and how are they different? How would you pick a health insurance policy?

What is health insurance? Why do you need it? Health insurance is coverage that pays for medical and surgical expenses of the policyholder. It can either reimburse (pay back later) for expenses paid from illness or injury or pay the doctor(s) directly. In the United States, the average person spends $8,000 per person, per year, on medical expenses. Most people today get their health insurance through their employer, but usually split or cover most of the cost of the insurance. The portion paid by the employee is taken from their paycheck. With new federal regulations, if you get health insurance through your parents’ plan, you can have the option of coverage until age 26.

Remember, all insurance measures your risk versus a pool of policyholders. Risk Factors: Health Insurance Pre-existing condition: a health problem that existed before your health insurance coverage became effective. It can be harder to get coverage, or at a reasonable price, if you have a pre-existing condition. Premiums are based on these factors. People with a higher probability of more health risks pay higher insurance premiums. Age Gender Height & Weight (Body Mass Index) Family History Personal habits (smoking…) Occupation Where you live (environment) Previously uninsured

COPAYMENT vs. COINSURANCE:: What’s the difference? Coinsurance: amount you are required to pay for medical care in some health plans after you have met the deductible. Expressed as a percentage; ex: 70/30. The insurance company will pay 70% of the claim, and you pay 30% Copayments: a way of sharing medical costs. You pay a flat fee every time you receive a medical service (like seeing a doctor). The insurance pays the rest. Maximum out-of-pocket (OOP): The most money you will be required to pay each year for deductibles, coinsurance, and copayments (in addition to premiums)

Example Scenarios Co-payment: A store clerk has an individual health insurance plan with a $20 co-payment for in-network doctor visits. She goes to her in-network doctor twice yearly. How much can she expect to pay for health care for the year? Her premiums plus $40 in co-pays plus any costs for prescriptions or other non-covered services. Co-insurance: You had an appendectomy, which cost $10,000. If your co-insurance is 80/20 after a $1,200 deductible, how much additional money do you owe? 10,000-1,200=$8,800 $8,800 x 0.8 = $7,040 (insurance) $8,800 x 0.2 = $1,760 (you)

Health Insurance Type 1: HMO Health Management Organization (HMO): Insurance plan with healthcare services provided by a specific network of doctors, hospitals, and other providers. HMOs and PPOs (next slide) are managed care, which means they manage the cost and use of limited resources: No service except emergency care outside of the network Require you to work with a primary care physician (PCP), a doctor who directs your overall healthcare.

Health Insurance Type 2 & 3: PPO & POS Preferred Provider Organization (PPO): Insurance plan with healthcare services as “open access” (you choose any doctor, any time in a large network). Has a deductible, coinsurance and an office visit co-pay No primary care physician required Point of Service (POS): Insurance plan that combines elements of an HMO and a PPO (“an HMO with an out of network benefit”) Requires use of a Primary Care Physician (PCP), but can choose other doctors (“point of service”) Requires a service area (no care, except emergency, outside of service area) Note that most plans provide for a preventive care visit. These are doctors visits meant to help keep people healthy, like regular physicals or exams.

Other Options for Health Insurance Health Savings Account (HSA): Sold along with an insurance plan with a high deductible rate. Allows people to set aside money for medical expenses now or later. Indemnity Plan (“Fee for Service”): One of the earliest types of health insurance. The individual pays a pre-determined percentage of the cost of health care services they choose, and the insurance company pays the other percentage. Indemnity=money paid as compensation for an action