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Health Insurance

Health insurance comes in many different forms that each have their own restrictions and costs that the patient must incur.

While health insurance has become more vital than ever, the U.S. Census Bureau estimates that over half the country does not have coverage. [©2009, Jupiter Images.]
©2009, Jupiter Images.
While health insurance has become more vital than ever, the U.S. Census Bureau estimates that over half the country does not have coverage.

With health care spending sky-rocketing to over two trillion dollars in 2007, there has perhaps never been a greater need for health insurance. Health insurance is defined as an "agreement" between a business or person and an insurance company in which the insurance company agrees to cover specified services, such as treatments and tests. According to the latest statistics from the U.S. Census Bureau, nearly 50 million Americans do not have health coverage. And while many people obtain health insurance through their employers, over 67 percent have their own health insurance coverage.

Types of Health Insurance

The U.S. Census Bureau classifies health insurance as either government-sponsored or private. Of these two, there are a few plans linked to each type.

Private Health Insurance is provided and paid for, or subsidized, by an employer, or an individual can purchase it. These types of plans include:

  • Employment plans supplied by employers or unions and can cover the employee and family-members of the employee.
  • Own employment plans are for those who are self-employed and cover only the policyholder/employee.
  • Direct-purchase plans are purchased through private insurance companies.

Government Health Insurance plans are paid for and provided by government at the national, state and local level. These include the following options:

  • Medicare covers individuals over 65 years of age as well as disabled individuals under 65.
  • Medicaid is state government-sponsored, offering health insurance to families or individuals in financial need or those with disabilities.
  • State Children's Health Insurance Program (SCHIP), also state government-sponsored, offers health insurance to the children of low-income families not qualifying for Medicaid. Both Medicaid and SCHIP have different names on a state-by-state basis.
  • Military health insurance plans are offered to those in active duty, veterans, disabled veterans and families of these individuals under several programs including CHAMPVA (Civilian Health and Medical Program of the Department of Veterans Affairs), TRICARE/CHAMPUS (Civilian Health and Medical Program of the Uniformed Services) and the Department of Veteran Affairs.
  • Indian Health Service is provided to assist American Indians in Indian Health Service facilities.

Health Insurance Plans

Insurance companies offer several types of health insurance plans, with each plan differing in cost and freedom of choice. The five basic types of health insurance plans are:

  • Traditional
  • HMO (Health Maintenance Organization)
  • PPO (Preferred Provider Organization)
  • POS (Point of Service)
  • Fee for Service or Indemnity

Traditional health insurance offers the most flexibility as far as choosing doctors, specialists and hospitals, though some restrictions may apply. Deductibles must be met before a traditional health insurance plan begins to pay on any claims. Total out-of-pocket expenses may be limited, and a maximum amount of benefits paid over the policyholder's lifetime may be capped. Traditional health insurance is usually the most expensive type of plan.

An HMO covers services provided only by physicians that are members of the plan, called "primary-care givers." Co-payments are required for office visits, hospital stays or specialists.

A PPO plan allows more freedom of choice when it comes to doctors, hospitals and specialists, but co-payments will be higher or the percentage of covered charges lower when a chosen doctor is not a "preferred provider" or is out-of-network.

A Point of Service plan is similar to both an HMO and a PPO, with smaller co-payments made for in-network care while allowing the freedom to choose a doctor out-of-network. Some out-of-network services may be more restricted in a POS than in either an HMO or PPO.

Fee for Service or Indemnity plans allow for total freedom of choice, with claims submitted for each service provided. An annual deductible must be met before any services will be paid by the plan.

Other plans are available, as well. A Health Savings Account (HSA) is used along with a traditional health insurance plan, allowing individuals to use tax-free money deposited into a health account to pay for medical expenses. An Exclusive Provider Organization (EPO) is similar to a PPO, with lower premiums due to lower rates agreed upon by providers, but is much more restrictive in that it does allow members to visit out-of-network doctors or hospitals, though some may offer partial reimbursement for emergencies. A Self-Directed Health Plan combines a PPO with a Self-Directed Account which provides a yearly balance for use on preventive or routine medical services, with any unused portion of the account rolling over into the following year .

Health Insurance Eligibility

Eligibility requirements for health insurance differ according to the type of plan. For coverage under an employment-based health insurance plan, for instance, eligibility is based on the status of employment (usually full-time) as well as completion of a waiting period; the length of which differs according to the employer. Eligibility for individual plans is based on criteria which must pass through a medical underwriting process. This review includes but is not limited to:

  • Health status
  • Medical history
  • Gender
  • Age

Most health insurance companies have some sort of policy pertaining to pre-existing medical conditions, such as diabetes, arthritis or even pregnancy. Some will not provide health insurance to individuals with pre-existing conditions; others will impose a waiting period, usually 12 to 18 months, before medical bills relating to the pre-existing condition will be paid. Pre-existing conditions such as cancer, heart disease and even depression can disqualify a person from receiving health insurance.

Cost of Health Insurance

According to the National Coalition on Health Care (NCHC), the cost of health care and health insurance continues to rise at a rapid rate, with health insurance premiums rising in 2007 at a rate twice that of inflation. An employer-sponsored health insurance plan covering a family costs just over $12,000 per year, and coverage for an individual is $4,400 annually. The cost of the premium paid by the employee has risen significantly over the past several years, up to $3,300 of the $12,100 for family coverage. Premiums for employment-based health insurance plans have risen 100 percent since 2000.

Individual health insurance premiums have also risen. In a 2006/2007 survey by America's Health Insurance Plans (AHIP) Center for Policy and Research, the average single coverage annual premium was just over $2,500 and family coverage nearly $6,000. The cost of health insurance premiums for individual plans is based on several factors, including: age, lifestyle, health status and ZIP code. Thus, an older smoker will pay higher premiums than a younger non-smoker, as an insurance company will view the former as a higher risk.

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