Health insurance covers your medical expenses in the same auto insurance covers the costs of an auto accident. Health insurance also covers preventative care such as yearly check-ups and tests to help prevent illness.
“Private” health insurance refers to any health insurance plan that is not run by the federal or state government. There are many places private insurance can be purchased from, employers, state or federal marketplaces or a private insurance marketplace. One helpful source is the HealthCare.gov Plan Finder tool.
As you begin your insurance search, you’ll find several options to choose from. Private health insurance plans are designed so that medical costs are split between you and the insurer. Deductibles, copayments, and coinsurance are all ways to cost share with the insurance companies.
- Deductibles – a preset amount of money you pay for health care services before your insurance company begins paying. For example, if your insurance plan has a $2000 deductible, you’ll pay for all health care costs until your bills reach $2000 and then your insurance will begin paying.
- Copayments – a fixed amount you pay for health care services. The cost can vary by service type. For example, your plan may include a $30 co-pay to see a doctor and a $10 co-pay to fill prescriptions.
- Coinsurance – your share of the cost of a health care service once you’ve paid your plan’s deductible. For example, you’ve paid $2000 in healthcare costs and met your deductible, now instead of paying the entire amount for services, you share costs with your insurance plan. Your plan may pay 70% and you pay 30%, which is your coinsurance.
Even though costs are shared, health insurance doesn’t always cover 100% of your medical costs. Each plan comes with an out-of-pocket-limit, which means the insurance company will share costs with you until you hit that preset number and then they pay 100% of health care costs.
In addition, if your plan covers more than one person, you may have both an individual and family out-of-pocket maximums which means:
- When the deductible, coinsurance and copays reach the maximum for the individual, your plan will pay 100% of the allowed amount for that person.
- When the amount you’ve paid toward individuals adds up to your family out-of-pocket maximum amount, your plan will pay 100% of the health care services for everyone on the plan. It’s important to note that health care services not included in your plans benefits and monthly payments (premiums) do not go toward your out-of-pocket- max amount.
To fulfill the individual mandate for essential minimum coverage, health insurance plans must meet certain Affordable Care Act standards. There are 10 essential health benefits (EHBs) all on-exchange and off-exchange health plans must include. The ten categories are:
- Ambulatory patient services (outpatient)
- Emergency Services
- Maternity and newborn care
- Mental health and substance use disorder services, including behavioral treatment, counseling, and psychotherapy
- Prescription drugs
- Rehabilitative and habilitative services and devices – services and devices to help people with injuries, disabilities, or chronic conditions gain or recover mental and physical skills
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services – including dental and vision care
Now that you have an idea of what private health insurance is and what it must cover, remember to search for a good balance between the monthly cost and the cost-sharing options when choosing a plan.
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.