Health insurance is one of your most important needs. Without it, one serious illness or accident could wipe you out financially.

You can't predict what your medical bills will be. In a good year, your costs may be low. But if you become ill, your bills could be very high. If you have insurance, many of your costs are covered by a third-party, not by you. A third-party could be an insurance company or, in some cases, your employer.

So, how do you get health insurance?  Most people get health insurance at work or are covered because a family member has coverage at work.  This is called group coverage.  It is the least expensive and is often paid all or in part by the employer.

If your employer does not offer health insurance, you're unemployed, or you're self-employed, you can purchase an individual policy.  Individual plans may not offer benefits as broad as those in group plans.

There are different types of health insurance coverage: Fee-For-Service (or Traditional Health Insurance) and Managed Care which includes Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), Point of Service (POS), and Independent Practice Arrangement (IPA).

It can be hard to understand each type and compare one to another.  Take the time to read through your policy to understand how it works and what it does or doesn't cover.

In Fee-For-Service plans, you visit any doctor or hospital you want, and your insurance pays for it. You'll pay a monthly fee, called a premium.  Then, when you need medical services, before the insurance kicks in, you'll pay a deductible, say $200 per person, each year.  You may also need to pay a percent of the bill, say 20%, called co-insurance.  And many plans have a cap, say $5000, on how much you'll have to pay in out-of-pocket expenses and deductibles in any given year, then the insurance company will pay the entire bill. 

Health Maintenance Organizations (HMOs) are pre-paid insurance plans.  You pay a monthly premium and in turn your HMO provides medical care for you and your family, including doctor visits, hospital stays, emergency care, surgery, lab tests, x-rays, and therapy.  Usually you are assigned to a primary care doctor who controls your access to specialists and other treatments. 

With HMOs, your choices of doctors or hospitals are limited to participants in the HMO, because you have to go to the ones that work for and get paid directly by your HMO.  You usually have to pay a co-payment or small fee, say $5 for each doctor's visit or prescription.  Some kinds of medical care are not covered, such as dental work and cosmetic surgery. 

Your total medical costs will likely be lower and more predictable in an HMO than with Fee-For-Service insurance.

Preferred Provider Organizations (PPOs) are like a combination of Fee-For-Service and HMOs.  The insurance company has struck a deal with certain doctors and hospitals (referred to as preferred or network providers), and gives you a discount if you use them.  For example, if you use one of the doctors on their list, your insurance might pay 100%.  If you go to one not on the list, the insurance will only pay 80%.  Usually there is a small co-payment for each visit. For some services, you may have to pay a deductible and coinsurance.

Point-of-Service (POS) plans have primary care physicians who coordinate patient care; and in most cases, PPO plans do not. If you use a doctor outside the plan, you pay extra. 

Independent Practice Arrangement (IPA) means you can go to doctors who have agreed to charge certain prices set by the insurance company.
 

Your health insurance should match the way you use medical care.  For example, does it cover alternative medicine like chiropractors or acupuncture?  Does it cover preventive care, well-baby care, immunizations, and mammograms? 

Check out the point where benefits end, too.  Some insurance policies will only pay so much per person per year, or so much per disease or injury.  Although a million dollars sounds like a lot of money, it is not hard to run up that amount in medical bills if you have a disease like cancer. 

What happens if you or your family member leaves the job? You will lose your group coverage, but it may be possible to keep the same policy, and you will have to pay for it yourself. Through a Federal program called COBRA, your policy could be extended 18 months, but it will likely cost you more than group coverage for the same, or less, protection. 

Our government covers one in four Americans through Medicare or Medicaid.  Medicare is for those over 65 years of age or those with certain disabilities, and Medicaid is for low income persons. 

About 15% or 43 million Americans without health insurance.  Over one-third of those without insurance make over $50,000 per year, but still will not buy it.  Health insurance especially for those over 50 years or those who have certain health problems can be very expensive, even over $10,000 per year. 

It is a mistake to go without some kind of health insurance.  If you have a major medical problem, you can quickly go through your savings and everything you own.  One of the top reasons people go bankrupt is because of big medical bills.

If you have to buy your own insurance, try to find a group plan.  College alumni associations, professional and trade organizations, Chambers of Commerce, and some religious organizations offer insurance plans.  Some states have help for self-employed and other uninsured people.  Check with your state insurance department for details.

If you purchase individual coverage, buy a policy that will cover major expenses and pay them to the highest maximum level. Save money on premiums, if necessary, by taking large deductibles and paying more costs out-of-pocket.

Some people can only afford major medical coverage.  You may have to pay everything yourself up to a $5000 or more deductible before your insurance kicks in, but in case of a real catastrophe, you'll be covered. 

When considering health insurance, your goal should be to insure yourself and your family against the most serious and financially disastrous losses that can result from an illness or accident. If you are offered health benefits at work, carefully review the plan to make sure the one you select fits your needs.  

See what you learned.

Check out "Rest Assured: Insurance Concepts"