Your assets are protected by health insurance against the high expense of medical care. However, if you don't grasp health insurance essentials like what a deductible is, when copays apply, and how coinsurance works, it might be confusing. We'll go over these points in more detail below, as well as why health insurance is so important, no matter how confusing it may appear.
Why You Need Health Insurance
Americans require health insurance to cover the high expense of healthcare. Unless you can afford to pay for healthcare on your own or obtain government aid, you will almost certainly require it. Even severe emergency or chronic medical care can be afforded by the exceedingly rich. Medicare is normally available to anyone over the age of 65. 1 Medicaid may be available to low-income people and families. 2
Everyone else must either buy health insurance or risk going bankrupt due to medical expenses. Many individuals have lost sight of its core purpose as a result of its widespread use. It's similar to having vehicle, house, or apartment insurance. Its purpose is to shield your life savings from the devastation that a tragic accident, medical emergency, or chronic sickness might cause.
Unlike other types of insurance, health insurance allows you to receive medical treatment whenever you need it. You can use the bus until you can afford to get your car fixed if you don't have auto insurance. If you break your leg, you won't be able to splint it until you save enough money to see a doctor.
How to Choose Health Insurance
Health insurance providers offer a wide range of possibilities, but you must first sort through numerous combinations of deductibles, copays, coinsurance, and premiums before deciding on a plan.
1. Premiums are paid on a monthly basis. You pay this, much like auto or homeowners insurance, even if you never make a claim. This provides the necessary cash flow for insurance businesses to meet their day-to-day obligations.
2. The deductible is the amount that must be paid. That's the amount you pay before the insurance company kicks in. It's an annual amount, so if your plan is calendar-year, you'll have to start anew on January 1 of each year. Plans that renew at different times of the year may not reset the deductible period according to the calendar year.
3. Each appointment requires a payment. A copay for a doctor's appointment can be $20, $50 for a hospital visit, and $10 to $40 for each prescription. Until your deductible is met, you are responsible for the whole cost of the visit.
4. Coinsurance. This is the percentage you spend for things like surgery and hospital stays. You may be charged a copayment for the visit and coinsurance for the stay if your doctor sees you in the hospital.
Why are deductibles, copays, and coinsurance charged by insurance companies? They urge you to avoid going to the doctor every time you get a sniffle. Healthcare expenditures would increase if it were completely free. The Affordable Care Act stipulates that these out-of-pocket expenditures for Marketplace plans cannot exceed a yearly maximum amount. Individuals received $8,550 in 2021, while families received $17,100. Individuals will pay $8,700 in 2022, while families will pay $17,400. Following that, the insurance company pays in full.
All of these factors combine to make choosing health insurance extremely difficult. You must be a gambler when it comes to your own health. You may be willing to pay a larger monthly premium in exchange for a smaller coinsurance percentage and/or deductible, for example. If you have a chronic illness, such as diabetes, and know you'll be visiting the doctor regularly, this makes sense.
People who are in good health, on the other hand, may want the lowest feasible premium and a higher deductible. They are prepared to spend a higher price for healthcare because they feel the danger is low. The greater the premium, copay, or coinsurance, the lower the deductible. More consumers have chosen higher-deductible plans to make their monthly premiums affordable as healthcare expenses have risen. Obamacare has failed to address this fundamental issue in the health-care system.
Why America Relies on Health Insurance to Pay for Medical Care
Prior to World War II, the majority of Americans lacked health insurance. The existing plans only covered the costs of hospital room and board. The federal government imposed a pay freeze after the war to combat inflation, but this meant that businesses couldn't grant raises to attract the best staff. Instead, they provided perks like as health insurance.
Health insurance premiums were ruled non-taxable by the Internal Revenue Service in 1954.
As a result, an extra dollar of health insurance was worth more than a dollar of taxable pay. According to the Tax Policy Center, this tax cut alone raised the federal deficit by $273 billion in 2019, yet legislators who propose repealing it are unlikely to be re-elected.
This tax benefit is akin to giving upper-middle-class and rich people with a government insurance subsidy. According to the Tax Policy Center, the average benefit of the health insurance tax cut for a hypothetical worker in the 12 percent tax band was $254, but $347 for those in the 22 percent tax bracket.
Alternatives to Health Insurance
In many nations, universal healthcare has been implemented. That is where the government, like it does for education and defense, pays for healthcare. It's the equivalent of universalizing Medicare or Medicaid. When Canadians visit a doctor or a hospital, the government pays for the majority or all of the expense. The disadvantage is that seeing a specialist or receiving a non-emergency surgery may take a lengthy time. On the other hand, no one needs to be concerned about dying from an illness due to a lack of financial resources.
The medical profession and health insurance firms blocked Hillarycare's attempt to provide universal healthcare in the United States. Obamacare was introduced with the intention of providing universal healthcare, but that objective was later modified due to pressure from various interest groups and politicians.
Healthcare has become a pillar of the modern American Dream. According to studies, the bigger your money is, the better your health is on average. As a result, income disparities have led to disparities in healthcare.
Frequently Asked Questions (FAQs)
How much does health insurance cost?
In 2020, the average yearly health-care expense for a single employee was $1,440. An employee's median contribution for family coverage was $5,700.
What is open enrollment for health insurance?
Health insurance, unlike other goods, cannot be purchased or swapped whenever you want to adjust your coverage. The "open enrollment period" is the sole opportunity for most consumers to modify their insurance coverage. If you don't take advantage of open enrollment, you'll have to wait until a qualifying life event to alter your health insurance coverage.
