MONDAY, JANUARY 1, 1
How Does Health Insurance Work?
Health insurance essentially protects you from expensive health care expenses. It is said that medical expenditures are high on the list of the leading causes of bankruptcy.
Without health insurance, an unexpected incident causing you serious injury could easily wipe your bank account. It only takes one major mistake for you to end up landing in the emergency room.
Many find the process of looking for health insurance very overwhelming and a bit of a hassle. It can be quite intimidating to compare almost hundreds of options out there in the market. But finding the perfect health insurance will save you from a large chunk of medical costs.
Is Health Insurance a Necessity?
Unless you have no problems paying for high medical bills every time a serious accident or illness comes up, consider it necessary for you to get health insurance.
Why? Because the rich can easily afford expensive medical costs whenever. Whereas for the majority of us, spending almost $20,000 for a surgery on a broken bone would be a nightmare.
Think of it like an impulse buy. If you could not afford to buy a bespoke designer item in a snap, what more if it’s a necessity and a priority such as your health?
Everyone else should not even try to risk medical bankruptcy and must look into health insurance to avoid that.
It’s great to have some form of safety net especially when it comes to your health.
Choosing your Health Insurance Plan
The good news is, you have a vast array of options. But before jumping right in, it is better if you familiarise yourself with the terms commonly heard when we speak of health insurance:
Monthly premiums - these are payments you hand over to your insurance company on a monthly basis, whether you make a claim or not. The higher the premiums you pay monthly, the lower your deductibles.
Deductibles - are a certain fraction of money you need to pay before the insurance company does. They can range from $500 - $10,000 annually. Lower deductibles can be accessible through company-sponsored plans.
Copayments- are a fixed amount charged to you for a certain service such as doctor visits, hospital visits, prescriptions drugs, etc. Copayments start once the deductible has been met. They usually cost $20 for a doctor visit,
Coinsurance - is your share of costs of a medical care service. You can start paying your coinsurance after paying your plan’s deductibles.
What is the reason of insurance companies for charging these costs above? It is to keep you from going to the doctor and to help you avoid risks.
According to ACA (Affordable Care Act), the costs above are to only reach a maximum of $6,600 for individuals or $13,200 for a family. After meeting the maximum, the insurance company covers 100% of expenses.
This can make choosing your insurance a very complicating task.
But in general, people who are healthy opt for lower premiums and high deductibles because the chances of them needing expensive medical care are very low. Hence, needing to pay for a high deductible is a low probability for them.
On the other side of the coin, it would make better sense to choose a high premium, low deductible plan if you have a chronic disease such as diabetes, asthma, arthritis, and so on.
Reliance of the US on Health Insurance for Medical Care
Before World War II, Americans did not have health insurance. The policies that came with this era only had coverage for hospital room and board. After the war ended, the government declared a wage freeze to fight inflation. What this meant for companies, however, is they were not allowed to give raises to exemplary employees. As an alternative incentive, these companies offered benefits, including health insurance.
Fast forward to 1954, the IRS (Internal Revenue Service) decided to make health insurance premiums non-taxable. What this meant for health insurance was it became more valuable than taxable salary on a dollar-basis.
As a result, this tax break served as sort of like a government insurance subsidy for the upper to middle bracket and the rich. According to the Tax Policy Center, the health insurance tax break provided as much as $281 a household on average in the 15% tax bracket. The average benefit is even higher for those in the 25% tax bracket, amounting to as much as $374.
Health Insurance Alternatives
In many other countries, universal health care has already been adopted. This meant that their health care expenses are fully subsidised by the government, like how it also pays for their education.
However, there is a downside to this as well. Subsidised services such as health care can take a long time for example, to see a health care specialist. But the good news with this is that free health care is accessible for everyone, including those belonging in the low bracket.
But seeing that Obamacare relies heavily on insurance companies themselves, the only alternative to health insurance as of now is paying for health care itself.
If people started paying for health care straight out from their own pockets, this can lower the cost of health care overall as they would be haggling for the best deal. Just like how they do with cars, loans can be taken out in order to pay for expensive procedures or surgeries. The people, in turn, would also be mindful of their health as they would want to avoid paying independently for health care as much as possible.
Health care is a basic need. And with rising medical costs, health insurance is becoming more and more of a necessity.
Unfortunately for now, health care access is a dream not everyone can afford. Along with income inequality, there is also health care inequality.
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