Jose Luis Pelaez Inc / Getty Images You may obtain a traditional health insurance plan through your employer or by purchasing it independently from an insurance provider. In some cases, it is more cost-effective to buy your insurance policy through the Marketplace established as part of the Affordable Care Act. Each state has different offerings. You may also be required to pay coinsurance on certain medical expenses, such as tests or hospital stays. Coinsurance is the percentage of the bill you are responsible for paying—in addition to the copayment for the procedure. For example, if you have 80/20 coinsurance, the insurance company will pay 80% of the cost, and you will be responsible for the other 20%. Coinsurance applies after you have reached any deductible set by your insurance policy. Choosing a health insurance plan is a crucial factor in the process. Don’t just spring for the cheapest plan you can find. That could cost you more in the long run in copays and coinsurance. Be sure to do your research and choose the best plan for you. If you have a health condition that requires you to visit the doctor often, or if you are simply more accident-prone, you may want to increase your coverage. Be sure to research pre-existing conditions when shopping for a health insurance policy. Denying coverage based on pre-existing conditions is now prohibited by law, except for grandfathered plans. It is important to understand how much a procedure could cost you. For example, if you ever need to undergo surgery and stay in the hospital overnight, you would have to pay your hospital copayment amount, your deductible if you have not already met it, and then your coinsurance amount on the remaining balance. If you’re not sure how your insurance policy works, call and talk to a representative at your insurance agency to learn the estimated costs of the procedures beforehand, so you can budget for this cost. Planning ahead and doing the research before any major medical procedures or tests could potentially save you a lot of money in the long run.
Example of a Traditional Health Insurance Plan
Suppose that an employee has enrolled in health insurance through their employer. As a result, a monthly premium of $200 per month is deducted from the employee’s wages each pay period. The particular health care plan has a $500 annual deductible, which is the amount the employee must pay before the health insurance policy covers any medical expenses. Once the deductible has been exhausted, the insurance kicks in, covering 100% of the employee’s medical costs. However, a copay of $20 for each doctor visit is required. If the employee had $2,000 in medical costs in January, the employee would owe the $500 deductible, and the insurance would cover the remaining $1,500 in medical expenses. The employee would also be required to pay a $20 copay for each doctor visit. Going forward, the employee would not be required to pay the $500 deductible until the start of the next year.
Types of Health Insurance
There are several different types of health insurance plans:
Employer-Sponsored Plan
In this instance, you obtain insurance through your employer, who typically can provide a group discount.
Self-Employed Plan
This is when you buy individual health insurance from an insurance company or through the state.
COBRA Plan
If you become unemployed, this is an option to purchase the same plan your employer offers by paying the full premium for 18 months after a dismissal or layoff. It is typically the most expensive option. COBRA stands for Consolidated Omnibus Budget Reconciliation Act.
Alternatives to Traditional Health Insurance Plans
Self-insurance is the alternative to a traditional health insurance plan. In this case, you are forgoing a formal health insurance plan and paying your way as circumstances arise. Those who elect to self-insure are typically healthy. One of the benefits of a traditional health insurance plan is that it is fairly easy to predict your costs. This type of plan also does not require you to pay as much upfront. That might be a good option if a high-deductible health plan and a Health Savings Account (HSA) seem daunting and would cause you to avoid seeing your doctor. Some people prefer a high-deductible plan, because once they meet their deductible, then they no longer need to cover any additional medical expenses. If you know that you will always meet your deductible, you might consider that option instead of traditional health insurance. Updated by Rachel Morgan Cautero.
