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How Does Health Insurance Work?

Health insurance helps in protecting you from the high costs of healthcare. It helps you pay for doctor visits, hospital stays, prescription drugs, and essential preventive care.

You can select a variety of health insurance plans with different coverage levels to fit your requirements and budget.

A Health Plan Example

Let’s say you have had a severe accident. Your medical bills sum to $50,000. Health insurance may make a big difference in the amount you’ll pay. In this case, all the care you receive is from doctors and hospitals in your plan network.

Your Costs in this Case

• Yearly deductible: $5,000
• Coinsurance: 20%
• Yearly out-of-pocket maximum: $6,000

How it Works

1. In this case, you pay the first $5,000 (your deductible) before your healthcare Insurance plan starts to pay.
2. After you pay the deductible, you pay 20 percent of your individual health insurance plan costs until you reach your maximum out-of-pocket amount ($6,000). That means you only pay $2 out of each $10 for covered services until you’ve paid $6,000.
3. After you’ve paid $6,000, your health plan pays the rest of the cost for covered services you receive in the network.

Total Amount You’d Pay In this Case:

• Bill for services: $50,000
• You pay: $6,000
• Your plan pays: $44,000

Health Insurance Definitions

Coinsurance: The percent of the cost you pay for covered services. For instance, you pay 20 percent of the cost for a doctor’s office visit or hospital stay. Your individual healthcare insurance plan pays the other 80 percent. Not all health insurance plans include coinsurance.

Copay: A small, flat fee that you pay for some covered care at the time of service. Some plans do not need a copay.

Covered costs: Comprises of medical tests, office visits, treatments, supplies, medications, and services that your individual health insurance plan covers.
Deductible: The amount you pay for health care every year before your plan starts to pay.

Formulary: A list of drugs your health insurance covers. If you fill a prescription for a drug that your plan does not cover, you’ll pay the full cost. This expense will not count toward your deductible or out-of-pocket maximum. How to understand prescription drug benefits.

Network: The hospitals, doctors, pharmacies, and healthcare specialists sign a contract with a health plan to provide care or prescription drugs for its members. These are also referred to as participating or in-network providers. To get the most coverage from companies that offer individual health insurance plans, you receive care from providers in your health plan network and pharmacies in your plan’s pharmacy network. Insurers or pharmacies in one network may not be in another network. Some insurance policies have a focused network. A focused network means that only specific providers or pharmacies participate in the plan’s provider or pharmacy networks.

Out-of-pocket maximum: The most you could pay every year for covered services you receive in the network.

Premium: The monthly amount you pay for your health insurance. Generally, a lower premium comes with a higher deductible and out-of-pocket maximum.

Call for your Quote T

Stop waiting around! The right insurance provider is out there and we’re going to make sure you’re covered for the foreseeable future. Accidents can happen any time whether it’s day, night, workdays, or holidays. Insurance is the best way to prepare for the unpredictable, and a great way to secure your peace of mind. Give us a call today or fill out the form for a quote – you’ll be glad you did!

Resources and References:

• How to Choose Health Insurance
• Coinsurance
• Formulary Definition