In life, there’s always the unknown. No matter how you prepare yourself, you never truly know what’s going to happen until it does. That’s why insurance is such a valuable product: it can help you recover financially when something terrible does occur.
But while most people understand the value of insurance for products and assets, what about for themselves? Health insurance is just as essential, even if you’re young and healthy. So, although it may be tempting to save money on insurance premiums, you could wind up paying a lot more in the long run.
That said, how does insurance work? What types of health insurance are there? We’re here to answer your insurance questions and help you make the right choice for your needs.
Health Insurance for Beginners
The first thing to know about health insurance is the different options available. However, keep in mind that you probably don’t qualify for all of them, so plan accordingly. Broadly speaking, health plans come in these varieties:
- Affordable Care Act (ACA) – The ACA allows individuals to purchase a health plan through the Healthcare Marketplace. You can compare plans and rates side-by-side, and you may even qualify for subsidies depending on your income level.
- Employer-Sponsored Healthcare – Many Americans receive healthcare through their employers. In this case, the employer chooses a plan that everyone in the company pays into. As long as you keep your job, you’re covered, but if you switch jobs or become unemployed, you lose your insurance.
- Medicaid – Medicaid is a government-sponsored healthcare plan designed for seniors, low-income individuals and families, and those with disabilities. To get Medicaid, you must meet strict requirements, and each state sets its own rules.
- Medicare – Like Medicaid, Medicare is a government-sponsored plan, but it’s almost exclusively for adults 65 and older.
- Private Health Plan – If you have sufficient income, you can sign up with a healthcare provider directly, rather than going through your employer or the marketplace.
Realistically, the best insurance option for young adults is employer-sponsored healthcare or an ACA plan through the marketplace. The advantage of getting health insurance through work is that it’s often less expensive than what you might find on your own because employers often pay a large percentage of the premium. Choosing a program from the ACA Healthcare Marketplace may offer more flexibility but you’ll pay more because you’re responsible for the entire premium.
Understanding the Basics of Health Coverage and How It Works
Now that you know where to get your health insurance, how does it work? In the United States, healthcare is a bit complicated, but here’s a rundown of the basics of health coverage that you should know when shopping for a plan.
Provider Options
When looking at different healthcare plans, you may notice acronyms like PPO, HMO, and POS. Each type of plan works slightly differently and comes with associated costs.
- HMO: Health Maintenance Organization. With an HMO, you must find a primary care provider (PCP) and visit clinics or hospitals within the HMO’s network. If you want to see a specialist (like a nutritionist or allergist), you must get a referral from your PCP.
- PPO: Preferred Provider Organizations. PPOs are different from HMOs in that you can see specialists without a referral.
- POS: Point of Service. These plans are like a blend of PPO and HMO insurance. You must use your PCP to get a referral to see a specialist, but there’s more flexibility regarding where you can go. You may also be able to go out of network and receive partial coverage.
Premiums and Deductibles
Regardless of which health plan you choose, you’ll have to pay a monthly premium to maintain coverage. However, once you visit the doctor or hospital, you’re responsible for paying a partial amount, known as the deductible. The higher the deductible, the more you pay out of pocket with each visit.
Typically, when you select your plan at the beginning of the year, you can increase your monthly payments to reduce your deductible or vice versa. So, if you’re young and healthy, it may make more sense to have a higher deductible and pay a smaller amount each month.
Coverage Options
Healthcare plans can pay for doctor’s visits, essential procedures and operations, hospital stays, and prescription medication. Typically, the more you pay in premiums, the less you pay for everything else. If you have chronic conditions that require medications and doctor visits (e.g., asthma, diabetes, etc.), you typically want to pay a higher premium.
Do I Really Need Health Insurance?
Now that we’ve covered health insurance for beginners, here’s the question: do you really need a healthcare plan? The short answer is “yes” because you never know what could happen. You may get injured from an accident or contract a debilitating disease. Even if you’re young and healthy, it’s always possible that you could wind up in a hospital or clinic for some reason and without health insurance, medical bills can be devastating to your wallet. Consider consulting a licensed healthcare broker to ensure you have adequate health coverage.
