Healthcare in the US is an expensive affair. One visit to the doctor's office can easily cost you a few hundred bucks, and an average three-day stay in a hospital can cost you thousands of dollars quickly, depending on the kind of care provided. Most of us cannot pay such a massive sum of money. Here, health insurance offers a way to reduce such costs to a more reasonable amount. This is where health insurance becomes a lifesaver.
One of the reasons healthcare in the US is so complex is that it is tied to bureaucracy. While most of the world's healthcare facilities are owned mainly by governments and the private business sector, in the U.S, the healthcare system is primarily funded and owned by private nonprofit organizations.
Even then, the US has the highest healthcare expenditure in the world. Even though these expenditures are covered by public payers and federal institutions or State and local governments, they can also be covered by private insurance and individual payments. But on the other hand, unlike most developed nations, the US healthcare system doesn't provide healthcare to its entire population.
Due to the absence of a single national health insurance system, the US primarily relies on employers who voluntarily offer insurance coverage to its employees and dependents. The government also has programs that cover healthcare expenses for the fragile parts of the society like the elderly, disabled, and the poor.
These programs differ from one another, and all have a specific kind of people to whom they are subject. Getting healthcare in the US can be an arduous process. You might think that everything is smooth-sailing once you have money, but things are more complicated.
How does health insurance work?
Health insurance usually works because the consumer pays a premium to a health insurance company. That payment allows you to share 'risk' with many other people making similar payments. Considering that we are not sick most of the time, the premium paid to the insurance company can cover the expenses of the small number of enrollees who get ill or are injured. The insurance companies have studied risks extensively, and their goal is to collect enough premiums to cover the enrollees' medical costs. There are multiple types of health insurance plans available in the US and many different rules and arrangements regarding care.
Where can I receive care?
Health insurance companies control their cost by influencing access to providers. These include physicians, hospitals, laboratories, pharmacies, and other entities. Several insurance companies contract a specified network of people that agree to supply services at a more favorable price. If a provider is not in a plan's network, the insurance company might disagree with paying for the services or a smaller portion than it would for in-network care.
What does the insurance plan cover?
Under the Affordable Care Act, the US has introduced more standardization to insurance plan benefits. Before this act, the benefits offered varied drastically from plan to plan. Some of the features that are present in healthcare insurance are:
- Emergency service
- Lab tests
- Maternity and Newborn care
- Mental Health and substance abuse treatment
- Outpatient care
- Pediatric services
- Prescription drugs
- Preventive services
- Rehabilitation services
How much does healthcare insurance cost?
While understanding these cost divisions might be a tricky issue. Previously in the article, we mentioned paying a premium to enroll in a plan. This is an upfront cost that is transparent to you.
But, for most of the plans, this is not the only associated cost that you pay. Additional charges include deductibles, coinsurance, and copays. It also represents the share you pay out of your pocket when you receive care. It is understood that the more you pay in premium upfront, the less you will pay when you receive care.
What are some of the essential terms and concepts in insurance you should know?
Healthcare insurance in the US is a tricky subject; hence, it's best to be armed with all the knowledge you can gather. Some of the terms that you need to know about the healthcare system in the US are:
- Out-of-pocket expenses: This refers to the portion of medical costs you are responsible for when receiving care. The monthly premium you pay for care is separate from these costs.
- Annual deductible: This is the amount you pay each year before the insurance company starts paying its share of the costs.
- Copayment: This is a fixed, upfront amount you pay each time you receive care when subjected to a copay.
- Coinsurance: This is a percentage of the cost of your medical care. For an MRI that costs $1000, you might pay 20% ($200). Your insurance company will take care of the other $800. Plans with higher premiums tend to have less coinsurance.
- Annual out-of-pocket premium: This is the most cost-sharing you will be responsible for in a year. It is also the total of your deductible, copays, and coinsurance. Once you hit this limit, the insurance company will pick up 100% of your covered costs for the remainder of the plan year.
- Covered benefit: The term covered benefit is almost regularly used in the insurance industry and refers to health services that include the premium for a given healthcare policy. Covered means that some portion of the allowable cost of health service will be considered for payment by the insurance company.