Basic Facts About Health Insurance

Health insurance is basically protection against financial loss from illness or injury of the person insured. Does this sound like something you need, or can you live without it? The question is not always an easy one, and the answer depends upon whom you ask.

Like other forms of insurance, health insurance doesn't really become an issue until you need it. Automobile insurance doesn't do you any good until you get into a car accident (or get pulled over and asked for your proof of insurance). Life insurance doesn't do you any good until you die. And health insurance doesn't do you any good until you need medical assistance.

But, if you believe in Murphy's Law -- that whatever can go wrong will go wrong -- then you probably should consider getting health insurance.

Insurance the American Way

Health insurance coverage varies greatly between policies, but basically, it is a type of insurance that pays a pre-negotiated percentage of the expenses for a policy holder's covered medical treatments.

In some countries, health insurance is not offered by private companies as it is in the United States. In England, France, Canada, Sweden and Norway, for example, the doctors and hospitals are reimbursed by the government.

3 Types of Health Insurance

In the United States, there are 3 basic types of health insurance:

1) Self-Insured/Uninsured. Under this category are people who have no insurance, and people who have health insurance but are responsible for paying 100% of the insurance premium. This group is estimated to comprise at least 30% of the US population.

2) Managed Care Plans. Managed Care Plans fall into 3 categories. All are essentially networks offering services from specific providers at contracted prices:

a) Health Maintenance Organizations (HMO) are plans in which members pay a fixed monthly fee, regardless of how much medical care they need in a given month. HMOs provide medical services ranging from office visits to hospitalization and surgery, and usually require that you stay within the network when you need services from physicians and hospitals.

b) Preferred Provider Organizations (PPO) are groups of doctors and hospitals that provide medical services only to members. PPO members typically pay for services as they are provided, and the PPO sponsor reimburses them for the cost of the treatment. In most cases, the healthcare providers and the PPO sponsor negotiate the price for each type of service in advance.

c) Point of Service (POS) plans are less common than the other 2. This is a type of managed healthcare system in which you pay no deductible and usually only a minimal co-payment when you use a healthcare provider within your network. You also must choose a primary care physician who is responsible for all referrals within the POS network. If you choose to go outside of the network for healthcare, you will be subject to excess charges or deductibles.

3) Indemnity Plans allow participants to seek medical assistance whenever and wherever they need it. Participants can visit any doctor or specialist, as often as they feel necessary. There are no restrictions when it comes to seeking medical help, but this is by far the most expensive type of health insurance plan.

Which of these types of health insurance is best for you will depend on your personal situation. Choosing health insurance coverage is a time-consuming task, but an educated choice will make the effort worthwhile.