Health insurance is an insurance that covers the whole or a part of the risk of a person incurring medical expenses, spreading the risk over numerous persons. By estimating the overall risk of health risk and health system expenses over the risk pool, an insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to provide the money to pay for the health care benefits specified in the insurance agreement. The benefit is administered by a central organization such as a government agency, private business, or not-for-profit entity.
A health insurance policy is:
A deductible is what you pay annually for health services before your insurance company pays its share. For instance, if you have a deductible of $1,000, your insurance plan might not start covering its share of your bills until you’ve paid $1,000 for healthcare in a given year. However, plans often cover the cost of things like preventive care doctor’s visits even before you’ve paid your full deductible amount.
If you have a high deductible health plan (HDHP), you’re paying a larger deductible than most people. You’ll be paying more out-of-pocket and your insurance won’t cover much until your deductible has been paid in full. In exchange, your premiums won’t be as high and you will likely qualify for a health savings account that lets you save pre-tax dollars for covering medical expenses.
A health savings account (HSA) allows individuals to put in up to $3,350 (or $4,350 if you’re at least 55) in pre-tax dollars to be used for medical expenses. Your contributions lower your tax bill, and if you use the money for qualified medical costs your withdrawals will be tax-free.
Your premium is what you’ll pay the insurance company for the privilege of having an active insurance plan. Most people pay theirs every month, but your payments might be due once a quarter or once a year.
The copayment (or copay) is the amount you owe each time you receive certain types of medical care. Copays can vary depending on the kind of service you’re getting. For example, you may have to pay a $30 copay for each visit to your GP and $60 for each visit to a specialist.
With a firm understanding of what the various healthcare buzzwords mean, you should be able to find a plan that meets your needs and fits within your budget. When shopping for health insurance, you’ll generally face a trade-off between high coverage and low cost.