Health Insurance Definition

Health Insurance Definition | healthGDS.com
Today, there are many more kinds of health insurance to choose from than were available just a few years ago. Traditional differences between and among plans may no longer apply. Also, there is an increased emphasis on the role of consumers in managing their own health care and health care finances. There is a focus on providing information on the cost of care and health care quality—at the level of the physician, physician group, and hospital—to help consumers and employers choose among the many options available to them.

This article briefly describes health insurance definition, the different kinds of health insurance plans and the answers of many common questions you may have about health insurance, including:

  • What is health insurance and what does it cover?
  • What is the use of health insurance?
  • What are the benefits of health insurance?
  • How does a health insurance work?

What is Health Insurance Definition?

Health insurance is a type of insurance coverage that covers the cost of an insured individual's medical and surgical expenses. Depending on the type of health insurance coverage, either the insured pays costs out-of-pocket and is then reimbursed, or the insurer makes payments directly to the provider.
In countries without universal health care coverage, such as the USA, Canada, UK, health insurance is commonly included in employer benefit packages and seen as an employment perk.

Why do we need health insurance?

As medical care advances and treatments increase, health care costs also increase. The purpose of health insurance is to help us pay for care. It protects us and our family financially in the event of an unexpected serious illness or injury that could be very expensive. In addition, you are more likely to get routine and preventive care if you have health insurance.

We need health insurance because we cannot predict what our medical bills will be. In some years, your costs may be low. In other years, you may have very high medical expenses. If we have health insurance, we will have peace of mind in knowing that we are protected from most of these costs. You should not wait until you or a family member becomes seriously ill to try to purchase health insurance.

We also know that there is a link between having health insurance and getting better health care. Research shows that people with health insurance are more likely to have a regular doctor and to get care when they need it.

What’s covered in the Health Insurance Marketplace

These essential health insurance benefits include at least the following items and services:

  • Outpatient care—the kind you get without being admitted to a hospital
  • Trips to the emergency room
  • Treatment in the hospital for inpatient care
  • Care before and after your baby is born
  • Mental health and substance use disorder services: This includes behavioral health treatment, counseling, and psychotherapy
  • Your prescription drugs
  • Services and devices to help you recover if you are injured, or have a disability or chronic condition. This includes physical and occupational therapy, speech-language pathology, psychiatric rehabilitation, and more.
  • Your lab tests
  • Preventive services including counseling, screenings, and vaccines to keep you healthy and care for managing a chronic disease.
  • Pediatric services: This includes dental care and vision care for kids
Specific health care benefits may vary by state. Even within the same state, there can be small differences between health insurance plans. When you fill out your application and compare plans, you’ll see the specific health care benefits each plan offers.

How Health Insurance Works

Health insurance helps you manage the high costs of health care. It helps you pay for doctor visits, hospital stays, prescription drugs and preventive care.
You can choose from a variety of health insurance plans that fit your budget and have different levels of coverage depending on your needs.

A health plan example
Let’s say you’ve had a serious accident. Your medical bills are $50,000. Your health insurance plan makes a huge difference in the amount you'll pay. In this example, all care is received in network.

Sample individual or employer health plan
Annual deductible: $5,000
Coinsurance: 20%
Annual out-of-pocket maximum: $6,000

How it works
In this example, you pay the first $5,000 in medical costs (your deductible) before your plan starts paying.
After that, you're responsible for 20 percent of costs until you reach the out-of-pocket-maximum. In other words, you only pay $2 of every $10 in covered expenses until you reach the $6,000 out-of-pocket-maximum.
Your health plan then pays the rest of your in-network covered costs for the year, no matter how high they are.

What you'll pay in this example:
Total $50,000
You pay: $6,000 maximum
Your health plan pays: $44,000

Individual Health Insurance Definition

Individual health insurance is coverage that you purchase on your own, on an individual or family basis, as opposed to obtaining via an employer.
Individual health insurance can be purchased through the exchange, or off-exchange (directly from the health insurance carrier). Brokers and navigators are available in every state to help you enroll. There’s an annual open enrollment window for individual coverage. For 2017 and 2018 coverage, it runs from November 1 to January 31. Outside of open enrollment, you need a qualifying event to trigger a special enrollment period.

Individual health insurance was historically less expensive than group coverage (although employers usually pay a significant portion of the premiums for group coverage). This was because individual plans were medically underwritten in nearly every state prior to 2014, making pre-existing conditions an obstacle to getting coverage. In addition, the level of coverage was traditionally less than what group plans offered (for example, most group plans covered maternity, while individual plans typically excluded this benefit before the ACA mandated it).

All of this changed in 2014 though, when the bulk of the ACA’s reforms took effect. Individual plans became more benefit-rich with the introduction of the ACA’s essential health benefits, and also became guaranteed issue (although enrollment is limited to open enrollment and special enrollment periods). Subsidies are available to help millions of people pay a portion of the premiums, as long as they purchase through the exchanges.

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