Affordable Health Insurance
Do I need it? What kinds are there?
Major Medical
Major Medical plans are usually the most well-rounded health plan that you can purchase. They cover virtually all medical expenses such has hospital expenses, physician and surgeon expenses, nursing care, prescription drugs, diagnostics, lab work, x-rays, medical supplies, child immunizations, and more under one single policy.
These plans are characterized by deductibles and co-insurance cost-sharing and can be tailored to meet expense and coverage needs. This allows the insured to absorb some of the cost of health care in order to keep the monthly premium down and helps the insurance provider avoid small claims while allowing them to still cover the large expenses. It is important to know what is considered a "covered charge" in your major medical plan and what is not covered. Certain experimental or high-risk surgeries or treatments may not be covered at all. Also many of these policies do not cover self-employed people while they are working for wage or profit. Make sure you understand this fact and ask the insurance agent or company to show you in their policy where it guarantees you on-the-job coverage.
Example: Susan has a complete major medical expense plan with a deductible of $2,500. She suffers a heart attack and has to undergo surgery. She is hospitalized for a few days before being released and her total bill comes out to $60,000. She would be responsible for the first $2,500 and then the insurance provided would pay the remaining $57,500. Susan's total out-of-pocket expense is $2,500 for the year.
Indemnity
An indemnity plan is a policy that pays up to an amount equal to the loss. These policies pay a flat fee for certain covered expenses outlined in the agreement. These expenses often include doctor office visits, wellness visits, infant wellness, x-rays, hospital admission, surgery, emergency room, ambulance, physical therapy, and hospice care with a set yearly limit on each individual expense. These plans give the policyholder the freedom to visit any doctor of their choosing without having to be a part of a network.
This type of plan typically does not have a deductible and pays out first-dollar coverage for covered expenses, but at limited levels. It is very important to understand the benefits that are covered in this type of plan – read your policy cover to cover.
Example: Danny has an indemnity plan that pays up to $80 per doctor office visit, up to $100 for a yearly wellness visit, and up to $75 for an x-ray, plus many other benefits. He goes to the doctor and has an x-ray done in the same day. The doctor office visit costs $72 and the x-ray costs $85. Since the doctor's office benefit is up to $80, he would be reimbursed the actual price of the visit since it did not exceed the cost. The x-ray benefit would pay out the first $75 leaving Danny responsible for the extra $10 of that $85 x-ray.
Supplemental Benefits
Some companies offer supplemental illness and accident insurance that can be used as a stand-alone policy, or used to fill the gaps in a high deductible major medical health plan. These plans are often low in cost compared to a major medical health plan or indemnity plan and offer very specific structured benefits that only pay out in certain cases. One of the most common supplemental plans is accident and critical illness policies. These plans allow the consumer to take a higher deductible on their health plan to reduce the monthly premium, but still limit their maximum out-of-pocket exposure for major illness or accident/injury. The idea is that the consumer willingly accepts the risk of covering small expenses themselves, but is able to lower their monthly premium significantly and pay off the higher deductible because of these added benefits.
Example: John selects a high-deductible major medical health plan in order to keep his expenses down. His yearly deductible is $7,500 which lowers his monthly premium by $150/mo as opposed to taking a $2,500 deductible. However, John also pairs his high deductible plan with a $7,500 critical illness and accident policy. This means that if John were to suffer from a major illness such as heart attack, stroke, kidney failure, cancer, and more – or suffer from any accident, he would receive a cash benefit of $7,500 which he could use to completely pay off his hospital deductible. This would reduce his deductible to $0 for the purposes of life threatening illness or accidents.
Why Do I Need a health Plan?
The concept of health insurance is the sharing of risk. Policyholders enter into an agreement with an insurance provider in order to obtain coverage for health risks, at a predictable monthly fee. Some people think of health insurance as a gamble, and prefer not to pay monthly for something that they "will never use". This could not be farther from the truth. According to the Center for Disease Control and Prevention, there were over 2,400,000 deaths in the U.S. in the year 2007. Of these deaths, the 10 leading causes of death were broken down as follows:
Number of deaths for leading causes of death:
- Heart disease: 616,067
- Cancer: 562,875
- Stroke (cerebrovascular diseases): 135,952
- Chronic lower respiratory diseases: 127,924
- Accidents (unintentional injuries): 123,706
- Alzheimer's disease: 74,632
- Diabetes: 71,382
- Influenza and Pneumonia: 52,717
- Nephritis, nephrotic syndrome, and nephrosis: 46,448
- Septicemia: 34,828
According to these numbers, over 62% of all deaths in the U.S are illness or accident related, with heart disease and cancer accounting for more than 49% of these deaths! In other words, you are more statistically likely to die from an illness or accident than old age.
Hospital bills for a major illness or accident will bankrupt you. This is not an opinion – this is fact. As of 2007, 62% of all bankruptcies in the U.S were health related. These people had large medical bills that they were not able to pay. The lack of insurance can cause one to lose their savings, their home, their business, their kids' college fund – in short, one major illness can ruin the lives of an entire family.
To properly understand insurance, and why it is in anyone's best interest to carry a policy, you must have the mindset of Cost vs. Out-of-Pocket Exposure. Without insurance, your exposure to medical bills is unlimited! If there is a health problem which you may or may not have any control over, you are stuck with the medical bills weather you have the money to pay them or not. Not only that, statistics show that you are more likely than not to eventually die from a health problem – and with health problems come bills. Health insurance limits your exposure by providing a set out-of-pocket limit that is both predictable and affordable. It is important for anyone with insurance to fully understand the covered expenses in their policy as well as the policy's limits.
Insurance policies sometimes have benefit limit maximums that can very easily be overlooked until it's time for a claim to be paid out. It is strongly urged to read your policy from cover to cover or contact your agent for assistance. If a policy is priced lower than every other plan, but the benefits are the same, consider that a red flag for any buyer. Insurance prices are regulated by law, so a cheaper policy will have fewer benefits even if it is not evident on the surface. Again, be completely familiar with your benefits.
