Note: Some parts of the Affordable Care Act ("Obamacare") are
being changed or eliminated via government policies and laws. It is likely that some
of the rules and regulations affecting the health insurance marketplace will continue
to change over time. To stay up to date on Obamacare and other health insurance issues,
visit healthcare.gov and the website of
the health commissioner's office in your state.
Premiums, co-pays, deductibles, in-network, out-of-network — welcome to the world
of health insurance. And you thought advanced calculus was confusing.
What Exactly Is Health Insurance?
Health insurance is a plan that people buy in return for coverage on all kinds
of medical care. Most plans cover doctors' appointments, emergency room visits, hospital
stays, and medications.
The idea behind insurance is simple: Medical care can be expensive. Most people
can't pay for it all out of their own pockets. But if a group of people gets together,
and each person pays a fixed amount every month (whether they need medical care at
that time or not), the risk is spread out over the whole group. Each person is protected
from high health care costs because the burden is shared by many.
Do I Really Need It?
You're young, you spend more time in the gym than an Olympic athlete, you rarely
get anything worse than a cold, and your great-grandparents are still kicking at 99.
Why bother spending money on insurance? Aren't the odds pretty good that you'll
never get seriously sick?
We hope so. But every day, thousands of perfectly healthy people break bones, need
stitches, get into car accidents, find out they have illnesses, or are told they need
You may never be one of them. But what if you are? Medical bills from even a minor
car accident can mess up your finances. A major illness can wipe out your family's
savings. Insurance may be expensive, but not having it might cost way more.
Health insurance is now required for everyone in the United States. People
who don't have insurance have to pay penalties that get more expensive each
year. Your parents can keep you on a family plan until you're 26. After that, you'll
have to get health insurance on your own or through your job.
OK, So Maybe I Do Need It. How Can I Get It?
There are many different ways to buy health insurance, and the costs and benefits
vary widely for each one. You'll need to see which options are available to you, given
your health needs, age, and job status. You'll probably have to wade through a lot
of health care buzzwords,
Here are some ways you might get insurance:
Parents' plan. In the United States, kids can stay on their parents'
health insurance plan until age 26. This is true even if you're married, live
somewhere else, and have a job.
COBRA. COBRA is short for the Consolidated Omnibus Budget
Reconciliation Act of 1985. It's designed to protect people from losing their health
insurance by allowing them to continue buying their current health
plan for a limited time. COBRA is designed to protect people from suddenly losing
their health insurance.
Short-term policy. Many insurance companies let you buy short-term,
or "student," insurance policies to bridge the gap between school and your
first job. These plans are similar to COBRA, though they're usually more basic and
Employer plans. This is the way most people in the United States
get their health insurance. It is also usually the least expensive option, since employers
often help pay for part of the insurance. Some employers offer health insurance coverage
on your first day of work. Others may make you work a period of time first (30, 60,
or 90 days).
Individual policy. Buying health insurance on your own might
be a more expensive option than sharing risk with a larger group of people (such as
other students, employees, etc.). You may have to pay more if you're considered a
higher risk — for example, if you do anything that affects your health, like smoking.
The Health Insurance Marketplace. This option allows people who
need to buy health insurance on their own to choose the best insurance to meet
their needs. It's also sometimes called a Health Insurance Exchange.
Subsidized state program. If you're under 19, uninsured, and
your family's income is below a certain level, you might be able to get state
help through a program called SCHIP (State Children's Health Insurance Program). Benefits
vary from state to state so you'll need to check with your state's Department of Health
and Human Services.
Medicaid. Medicaid is sometimes also called "medical assistance."
It's another type of government-funded health insurance that's available only to certain
people, like low-income adults and people with disabilities. Check your state's
Department of Health and Human Development (HHD) program to find out if you are eligible
What If I Have a Health Problem?
If you've been living with an illness, like asthma or diabetes, insurance companies
call that a "pre-existing condition." Insurance companies
are no longer allowed to deny coverage to anyone because of a pre-existing
What Type of Insurance Do I Need?
Each insurance plan is different when it comes to what's covered, what's not, and
how much things cost. Figuring out which one is right for you is a bit of a balancing
act: You want to get the most benefits at the least cost.
Start by looking at all the parts of the plan, not just the price you pay. For
example, a plan with a low monthly
isn't necessarily the cheapest — your co-pay might be very high or you might pay more for your prescriptions.
If you don't have any health problems, that might be OK. But if you see a doctor a
lot or take prescription medications regularly, a more expensive plan that covers
more of the cost to see a doctor or get a prescription may actually turn out to be
You'll also have to look at whether your plan covers things that are important
to you. For example, many plans don't cover things like dental or vision care, counseling
sessions, or alternative therapies like chiropractic or acupuncture.
The three major plans you'll likely have to choose from are: indemnity plans, managed
care plans, or consumer-driven health plans.
Indemnity plans are also called fee-for-service or reimbursement
plans. With this kind of plan you can see any doctor you want any time you want. You
pay the doctor directly and then send your claim to your insurance company. The company
pays you back for part of the total cost. (For example, if your doctor charged $100,
you might get 80%, or $80, back.)
Indemnity plans generally don't pay for preventive care, like annual physical exams.
Because they offer you the most choice, the monthly premium is usually higher than
other types of health plans.
Managed Care Plans
When you get insurance through an employer, it is often through a managed care
plan. With managed care, a health insurance company negotiates a contract with certain
health care providers, hospitals, and labs to provide care for its members at a lower
The four basic types of managed care plans are:
HMO (Health Maintenance Organization). When you join an HMO,
you choose a primary care doctor. This doctor coordinates all your
medical care, from annual physicals to hospitalizations. Although the co-pay for these
services is usually fairly low, the tradeoff is that you can only use doctors and
hospitals who are approved by your plan. Also you can't see any kind of specialist
without a written referral.
PPO (Preferred Provider Organization). A PPO is like an HMO,
only with more flexibility. Instead of choosing a primary care doctor, you can see
any doctor you want. However, if you choose a doctor who participates in your plan,
you will pay less.
POS (Point of Service). With a POS plan, you generally choose
an in-network doctor for most of your care, but you may go outside the network if
you need to see a specialist. If you do go out of network, you may have to pay more.
EPO (Exclusive Provider Organization). An EPO is like a PPO,
only the network of participating doctors is smaller.
Consumer-Driven Health Plan (CDHP)
This type of plan is fairly new. It lets you set aside a certain amount of money
in a special health insurance savings account. You are in charge of how you use this
money to cover your health care costs. However, the deductible
you have to reach is usually higher than in the other types of plans.
It can seem odd buying something that you might never need. So think of health
insurance as an investment in your peace of mind. Since peace of mind means less
stress, you'll start enjoying health rewards right away!