How Does Health Insurance In The United States Work?

How Does Health Insurance In The United States Work?

 

In the United States, health care may be rather costly. Depending on the type of treatment delivered, a single doctor's office visit might cost several hundred dollars, while a typical three-day hospital stay can cost tens of thousands of dollars (or even more). Most of us cannot afford to pay such big sums if we become ill or wounded, especially since we have no way of knowing when we will become ill or injured, or how much care we would require. Health insurance can help to bring these expenditures down to more manageable levels.

In most cases, the customer (you) pays an upfront premium to a health insurance company, which allows you to share "risk" with a large number of other individuals (enrollees) who are making comparable payments. Because most individuals are healthy for the majority of the time, the premiums paid to the insurance company may be used to pay the costs of the (relatively) few participants who get ill or wounded. As you might expect, insurance companies have researched risk extensively, and their objective is to collect enough premium to cover the subscribers' medical expenditures. There are several types of health insurance plans available in the United States and many different rules and arrangements regarding care.

Following are three important questions you should ask when making a decision about the health insurance that will work best for you:

Key question #1: Where can I receive care?

Controlling access to physicians is one way health insurance plans keep costs down. Physicians, hospitals, labs, pharmacies, and other institutions are examples of providers. Many insurance companies have agreements with a specific network of providers who have agreed to provide services to plan subscribers at a discounted rate.

If a provider is not in a plan's network, the insurance company may refuse to pay for the service(s) or pay a lower percentage than if the provider was in the network. This implies that if an enrollee seeks treatment outside of the network, they may be responsible for a considerably greater portion of the bill. This is a crucial topic to comprehend., especially if you are not originally from the local Stanford area.

If you have a plan through a parent, for example, and that plan’s network is in your hometown, you may not be able to get the care you need in the Stanford area, or you may incur much higher costs to get that care.

Key question #2: What does the plan cover?

One of the things that the Affordable Care Act has done in the United States is to bring more consistency to insurance plan coverage. Prior to this uniformity, the benefits provided differed greatly from one plan to the next. Prescriptions, for example, were covered by some plans but not by others. In the United States, plans are now required to provide a list of "essential health benefits," which include

Emergency services

Hospitalization

Laboratory tests

Maternity and newborn care

Mental health and substance-abuse treatment

Outpatient care (doctors and other services you receive outside of a hospital)

Pediatric services, including dental and vision care

Prescription drugs

Preventive services (e.g., some immunizations) and management of chronic diseases

Rehabilitation services

For our international population of students who might be considering coverage through a non U.S. based plan, asking the question, "what does the plan cover" is extremely important. 

Key question #3:  How much will it cost?  

It's actually fairly difficult to figure out how much insurance coverage costs. We discussed paying a fee to enroll in a plan in our overview. This is an upfront expense that you are aware of (i.e., you know how much you pay).

Unfortunately, this is not the only expense involved with the treatment you receive under most plans. When you seek medical help, there is usually a fee. Deductibles, coinsurance, and/or copays (see definitions below) indicate the portion of the cost that you pay out of pocket when you receive care. As a general rule, the more you pay in premiums up front, the less you'll spend later when you need medical attention. The lower your premium, the better, the more you will pay when you access care.

The question for our students is, pay (a larger share) now or pay (a larger share) later?

In any case, you will be responsible for the cost of the care you get. We believe it is preferable to pay a higher part of the advance premium in order to reduce costs paid at the time of service as much as feasible. We believe this because we don't want any barriers to care, like as a hefty payment at the time of service, to deter students from seeking treatment. We want students to be able to get medical help whenever they need it.

Important Insurance Terms and Concepts:

• Out-of-pocket expenses: When you get health care, the phrases "out-of-pocket cost" and/or "cost sharing" refer to the part of your medical expenditures that you are responsible for paying. These fees are not included in the monthly premium you pay for treatment.
• Annual deductible: The yearly deductible is the amount you must pay each plan year before the insurance company begins to cover its portion of the costs. If your deductible is $2,000, you will be liable for the first $2,000 in medical expenses each year, after which the insurance company will begin to pay its portion.
• Copayment (or 'Copay'): When you receive care that is subject to a copay, you pay a fixed, upfront amount each time you receive that care. For example, a $30 copay may be required for a doctor's appointment, with the insurance company covering the remainder. Copays are usually cheaper in plans with higher premiums, and vice versa. Copays are rarely used in plans that don't have them. Instead, alternative cost-sharing mechanisms are used.
• Coinsurance: A part of the cost of your medical care is called coinsurance. You may save 20% ($200) on an MRI that costs $1,000. The remaining 80% ($800) will be covered by your insurance carrier. Coinsurance is usually lower in plans with greater premiums.
• Annual out-of-pocket maximum: The annual out-of-pocket maximum is the maximum amount of cost-sharing you'll be liable for in a calendar year. The sum of your deductible, copays, and coinsurance is your coinsurance (but does not include your premiums). Once you reach this threshold, the insurance provider will reimburse 100% of your covered expenses for the balance of the plan year. The out-of-pocket maximum is seldom reached, although it might occur if a large amount of expensive care is required due to a major accident or sickness. Out-of-pocket limitations are often lower in plans with higher premiums.

What is means to be a 'Covered Benefit':

In the insurance sector, the phrases 'covered benefit' and 'covered' are frequently used, although they can be confusing. A 'covered benefit' is a health treatment that is included (i.e., 'covered') in the premium paid by, or on behalf of, the registered patient for a specific health insurance policy. 'Covered' signifies that the insurance company will consider paying a portion of the permitted cost of a health care. This does not imply that the service will be paid in full.

In a plan where 'urgent care' is 'covered,' for example, a copay may be required. The copay is a patient's out-of-pocket expenditure. If the copay is $100, the patient must pay it (typically at the time of service), and the insurance company will then reimburse the remainder of the allowable cost for the urgent care service.

An insurance company may refuse to pay anything toward a 'covered benefit' in particular cases. For example, suppose a patient has not yet met his or her $1,000 yearly deductible and the cost of the covered health care is $400, the patient will need to pay the $400 (often at the time of service). What makes this service 'covered' is that the cost counts toward the annual deductible, so only $600 would remain to be paid by the patient for future services before the insurance company starts to pay its share.