The healthcare system in the United States is complicated. Insurance vocabulary can be difficult to understand, and many factors affect the monthly cost of your policy. If you’re confused by so many insurance options, remember you’re not alone. If you’re overwhelmed by the cost and complexity of choosing health insurance, we’re here to help.
With this complete guide, you will be able to familiarize yourself with the health insurance system in the US. In this way, you will feel comfortable comparing plans and prices until you find the insurance option that is best for you and your family.
The US health system
In the United States, there are public, private, and group health insurance. The public ones are only for low-income, special needs, or elderly citizens who qualify for government medical assistance. Private insurance is eligible for government subsidies, on a sliding scale based on your income. While group plans must be purchased through your employer or another organization.
Before deciding which type of insurance is best for your needs, it’s important to understand the most common terms in the industry. This will allow you to compare the plans that are available and choose the one that suits you best.
What is a cousin?
When people think about the cost of their health insurance, they usually mean the premium. This is the payment you make each month to keep your policy current.
Lower premium plans generally offer less coverage. If you have recurring medical expenses, a higher premium may cover a higher percentage of your health costs.
What is a deductible?
Your insurance deductible is the maximum amount you must pay to the insurer before your benefits will be covered by the insurance company. For example, if your plan has a $500 annual deductible and each doctor visit costs $100; your insurance may begin to cover your medical expenses after five doctor visits.
Deductibles vary from insurance to insurance. Some cover the cost of certain services or drugs regardless of your deductible. Others pay nothing until you have met your deductible.
What is copay?
Each time you receive medical care, you must pay a fixed amount for these services. This is known as the copay.
Some policies offer copays for routine services, no matter what your deductible is. For example, if your insurance has a deductible that only applies to medical emergencies, your doctor visits may have a $20 copay even if you haven’t met the deductible.
With other plans, you must pay the full cost of medical services until you meet the deductible. Once you meet the deductible, you are eligible for copays.
What is coinsurance?
Coinsurance is similar to copay, but instead of paying a fixed amount, you pay a percentage of the service received. If you have 20% coinsurance and need a surgery that costs $5,000, you will have to pay $1,000 and insurance covers the other 80% (or $4,000).
What is the maximum out-of-pocket limit?
The maximum amount a person must pay before insurance begins to cover all of their medical expenses is known as the out-of-pocket limit. Expenses eligible for this limit include:
The following expenses do not qualify for the maximum out-of-pocket limit:
- monthly premiums;
- services that are not covered by the plan;
- out-of-network services;
- Costs above the amount allowed by the plan.
Factors that influence the price of health insurance in the United States
The cost of your premium depends on many factors. According to HealthCare.gov, these are some of the components that affect the monthly price of your insurance:
State and federal laws
The Affordable Care Act (ACA) is a federal law that requires everyone in the United States to have health insurance or pay a penalty. State laws determine the maximum amount an insurance company can charge for its services.
The price of your health insurance varies depending on how you get it. It’s usually cheaper to join a group plan through your employer than it is to buy private insurance on your own.
Size of your company
If you work for a large company, your health insurance may be cheaper. By having more employees, large companies can negotiate lower insurance prices than small companies.
The ACA guarantees access to health insurance at affordable prices. The sliding scale established by this law uses your income level to offer subsidies to people who need it.
State of residence
Your premium costs vary depending on the state you live in and state laws regarding health insurance.
County of residence
Health insurance is offered in each county. However, there are some that only offer one, while others have access to more options. This affects the price you pay for your health insurance.
Housing in rural or urban area
Medical costs and the number of options available vary between urban and rural areas. For this reason, insurance tends to be cheaper in larger cities.
Type of medical plan
The Health Insurance Marketplace offers the following four levels of coverage. Here are the types of plans in order of cost, from cheapest to most expensive:
Group plans through your employer are also priced differently. These costs vary depending on the deductibles, copayments, and coinsurance that you are willing to pay.
Medicaid and Medicare
Medicaid and Medicare are the health insurance plans offered by the United States government.
Medicaid uses federal and state funds to provide health insurance to low-income US citizens. Eligibility requirements vary from state to state and depend on your income and family size. You may also qualify if you are expecting a baby, are over the age of 65, or have a disability.
Medicare is government health insurance exclusively for people over 65 or under 65 with disabilities.
How much does employer health insurance cost in the United States?
According to Investopedia, the average cost of health insurance for a family of four in 2020 was $21,342. However, employers absorbed 73% of this cost and employees paid the difference. This means that a family of four paid approximately $5,762 for their health insurance.
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