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medicine, age, health care and people concept – senior woman, man and doctor with clipboard at hospital ward

Health insurance has dominated the news, political, and health care discussions for the past many years. But do you really know what it is or how it works?

In a series of articles, starting with this one, I’ll try to simplify it, explain how it works, suggest how to buy and use it, allay your fears about it and, importantly, discuss what it isn’t. Doubtless, though, you will have remaining questions and new ones will arise. Send those questions to The Insurance Problem Solver (TIPS) for answers and to remove the burden from you.

Health Insurance in General

Simply, health insurance is insurance against the risk of medical expenses incurred by an individual Most people cannot afford to pay the full cost of needed medical care. Therefore, they have health insurance to help defray some of the cost.

In the U.S., health insurance is obtained mainly through and from private insurers. There are some situations where an individual or business can get health insurance through an association or an affinity group (for example, someone owning a barber shop may be able to access health insurance through an association of barbers). Yet even then, the entity that is financially responsible for paying claims should be a licensed insurance company.

We will discuss some of the pitfalls of association-based insurance in a later article. But for now, understand that it is important that association-based health insurance is safe only when financially backed by a licensed health insurance company or when it involves a valid self-insured arrangement. It often takes some digging to unravel what is really financially responsible for the payment of claims, but it is crucial to do so. Because insurance is complex, crooks sometimes invade the health insurance market and establish organizations that appear to offer genuine health insurance, but the protection provided is illusory.

Types of Health Insurance

Broadest

The most comprehensive kind of health insurance is usually called “major medical insurance.” In general, the benefits provided include:

• Hospital expenses: room and board in a semi-private room
• Various hospital charges like laboratory fees, X-rays, and medications
• Surgical expenses such as use of the surgical suite
• Physician’s, surgeon’s, and nursing charges
• Anesthetics
• Therapies of various kinds (physical, speech, etc.)
• Some outpatient services. The nature and extent of them depend upon policy specifics

Even the broadest of major medical policies don’t pay all charges that a hospital or physician charge. We will discuss some of the factors that enter into the amount paid in a later article.

Narrowest

Another version of health insurance, much narrower than major medical insurance, is called “specified expense coverage.” These policies cover specified illnesses that occur while the policy is in force. I have placed them in a category called “narrowest” because they apply only to named illnesses, needs, or conditions. They reimburse the insured for costs incurred in the treatment of those specified illnesses and often, supplies needed by the insured resulting from it. Examples of these kinds of policies are dental coverage, vision coverage, prescription drug coverage, and what used to be commonly called “dread disease coverage.”

Dread disease insurance policies are often sold as individual policy (separate from or in addition to a major medical policy). Perhaps the most well-known of the dread disease policies is a “cancer policy.” The diagnosis or other conditions needed to trigger payment under a dread disease policy may be so restrictive and limited to make it disproportionately costly.

Different
There also exist generic, supplemental policies that pay a per diem benefit. The money can be used for any purpose as long as an illness or accident triggers payment as required by the policy.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]