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Health Insurance 101

Like auto insurance covers your car if you are involved in an accident, health insurance covers you if you get injured or sick. Health insurance also covers preventive care – that is, doctors’ visits and tests before you get sick.

Health Insurance 101 Basics

Health insurance does not always cover 100% of your expenses. It’s intended to share costs with you up until a certain point, known as the out-of-pocket limit. After hitting the out-of-pocket limit, health insurance will pay 100% of your health care costs.

There are some ways that health insurance companies might share costs with you, and they make up major features of your health insurance plan that you require to be aware of: your deductible, your copayment, your coinsurance, and your out-of-pocket limit.

All health insurance plans require to cover the 10 essential benefits. In addition to the 10 essential benefits, health insurance plans must meet specific affordability standards and other rules that differ on a state-by-state basis, for them to be included on a government-run health insurance exchange. Off-exchange plans, so-called since they are not sold on government-run exchanges, must also cover the 10 essential benefits and meet certain federal standards to be considered qualifying health coverage. These consumer protections closed loopholes that resulted in financial difficulties for policyholders in the past.

Through 2018, as outlined in the Affordable Care Act (the ACA, also called Obamacare), all Americans required to have qualifying health coverage, which was known as the individual mandate. If they did not, they had to pay a fee on their federal tax return. The tax fee was computed in one of two ways, and you would have paid whatever was higher:

1. 2.5% of your domestic income or
2. $695 per adult and $347.50 per kid under 18

As of 2019, the individual mandate was suspended. There is no longer any fine for not having health insurance. Nevertheless, if you are filing back taxes for a tax year before 2019, you may still require to file Form 1095 to prove you had coverage.

Purchasing Health Insurance?

Literally, everybody should purchase health insurance since medical expenses are too high to cover out of pocket. Medical bills are a top cause of consumer debt and related financial challenges (e.g., bankruptcy and home foreclosure).

If you are purchasing health insurance and you fit into one of the following groups, we’ve listed a few additional considerations for when you’re buying health insurance.

If You’re Purchasing for a Family

You should also be aware that your plan may have a family deductible and self-funded health insurance 101 deductibles for every family member. Individual deductibles are lower as compared to the family deductible. After an individual hits their individual deductible, their health insurance plan kicks in just for them. But after the family deductible is attained, health insurance kicks in for every member of the family, irrespective of whether or not an individual has reached their deductible.

If You’re a Student

You can stay on your parent’s health insurance plan until you’re 26 years old, so no requirement to purchase health insurance if your parents are willing to let you stay on their program. Also, you can also check your university for healthcare insurance plans, which may be cheaper. This is an especially good choice if you’re going to college out of state, as your parent’s plan’s network may not work in your state.

If You’re Self-Employed

If you just employed yourself after leaving a full-time W-2 work, you can utilize COBRA to continue your previous employer’s coverage until you’re able to find another plan. If it is not open enrollment, you should also be eligible for a special enrollment period to shop on the marketplace.

Ensure your premiums are affordable, as your monthly income may be variable. Your healthcare insurance premiums are also tax-deductible sometimes, so don’t forget that come tax time. If you travel often, you may need to purchase a plan that allows you to see out-of-network providers, such as a PPO or POS plan.

Resources and References:

• The Affordable Care Act
• Off-exchange Health Plans
• COBRA Insurance Coverage