It can be expensive — sometimes very expensive — to get sick. A typical hospital stay can cost many thousands of dollars a day, and a visit to the doctor more than $100. And that’s without tests and medication. Those numbers illustrate why health insurance is so important to a sound financial future: Without it, every penny you’ve saved could be eaten up by a serious illness.
Staying Insured
If your employer provides health insurance, most of the legwork is handled for you. Generally, you choose from a limited number of plans, and your premium, or cost, is deducted from your salary. But if you arrange for coverage yourself, you face the double responsibility of finding the best plan you can afford and keeping up the payments. If you pay late, or miss a payment, your insurance might be cancelled. Not only would you have to start your search again, but you might be left without coverage when you need it.
It’s also important not to let your insurance lapse when you change jobs or retire.You may be able to keep your old insurance on a temporary basis, either until you’re eligible for coverage at your new job or old enough to qualify for Medicare – health care insurance the government provides for people over 65.
What Insurance covers
Most health insurance covers hospital care and medical treatment, including visits to doctors, medical tests and similar expenses. There’s typically a deductible – a dollar amount you have to pay before the insurance kicks in. Generally speaking, there’s one deductible level for an individual — $300 is typical — and a higher one if the policy covers an entire family.
Once you’ve spent more than the deductible amount, the insurance company begins to pay. A typical arrangement is for the insurer to cover most of your hospital costs and 70% to 80% of your medical bills, while you’re responsible for the rest — which is referred to as a co-payment, a euphemism for your share of the bill.
The 80% Solution
The critical question about 80% coverage is 80% of what. If it’s 80% of the bill you submit, you’re fine. But if it’s 80% of the fee the insurer allows for a particular type of treatment, you may find yourself paying a big share of the bill despite your insurance. The amount allowed by the insurance company may be out of line with current charges, or unrealistically low for the particular part of the country you live in — like a $36 insurance payment on a $150 bill.
Insurers often offer better coverage if you use doctors and labs that have agreed to accept what the insurer pays. When you use those participating providers, you pay only a small fee — often $10 — at the time of your visit, and the company takes care of the rest of the bill. However, you have to find a doctor you like who is willing to take you as a patient under the plan.
Group vs. Individual Plans
Many people get health insurance through their employer, as part of a group insurance policy negotiated with an insurance company or health care organization. Employers who provide health insurance currently pay, on average, between half and two-thirds of the cost, but that percentage is plummeting. More and more workers are asked to pick up the lion’s share of insurance costs. If your job doesn’t provide coverage, your alternatives are buying an individual policy or joining a managed health care plan.
Group Plans
- Plan is generally cheaper than comparable coverage for an individual.
- Plan may allow you to choose from a range of coverage options known as a flexible benefit plan. The list may include dental coverage, prescription drugs, life insurance, and other health services, as well as basic hospital and medical plans.
- You're Automatically eligible for coverage and can't be dropped or charged more if you get sick.
Group Plans
- Insurance payments may be much lower than actual expenses.
- The group can drop the plan or substitute a less generous one.
- The cost of your insurance may increase dramatically.
- You may have to use participating doctores to receive full coverage.
- You have few legal protections since plans aren't regulated by state laws.
Individual Plans
- Price increases are monitored by state insurance regulators.
- If your policy is guaranteed renewable, your coverage can't be dropped even if you get sick.
- You don't pay for coverage you don't need just because it's part of the group plan.
Individual Plans
- The premiums are generally expensive, sometimes prohibitively.
- The screening process is often highly selective, making it difficult to get insurance if you have any medical problems.
- The policy can limit maximum benefits, so that people with serious health problems run out of coverage.