Health insurance is a contract between an individual and an insurer. The insurer agrees to pay for a set of health services and supplies that the insurer has determined to be medically necessary, necessary for treating a specific illness or injury, or beneficial to overall health. It is designed to protect customers from the financial consequences of not receiving care. It does so by pooling the risks of many insured people to spread potential losses across all participants.
Health insurance can help improve access to care by reducing out-of-pocket costs such as copayments and deductibles for services covered by the policy. This is particularly important for those with chronic health conditions, who often experience high medical expenses but face limited choices in where, how much, or how often they can get medical treatments.
Here are the different types of health insurance and why you need one.
Types of Health Insurance
1. PPO networks
PPO is a type of health insurance that offers a wide range of benefits to you and your family. It’s designed for people with high medical needs, such as those requiring regular hospitalization or chronic conditions like diabetes.
PPO networks plans typically cover more services than HMOs and other types of plans, but they also cost more than other types of insurance. You generally must choose a PPO if the provider network has at least 50 percent of the hospitals in the area covered by the plan. Some plans cover 100 percent of all hospitals in the state, while others offer coverage from only certain major hospitals within their network.
2. HMO networks
HMOs are designed for people with lower healthcare needs. They often require patients to see a primary care physician before deciding whether they need specialty care, such as surgery or a hip replacement. While HMOs do not provide full hospitalization benefits like those found in PPOs, they still offer some benefits, like prescription drug coverage without copayments or deductibles and coinsurance requirements for specialists’ visits and procedures.
3. Exclusive provider organizations (EPOs)
These are the most common form of health insurance in America. EPOs offer their members a network of doctors and hospitals in their area and pay providers a fixed rate per service.
EPOs are generally cheaper than other types of insurance because they don’t cover as many services or have deductibles or coinsurance. However, the quality of care may vary from provider to provider in an EPO network.
The primary benefit of an EPO is that it provides you with access to doctors and hospitals near your home or work. If you’re not confident about your ability to choose the right doctor for your condition, an EPO can be a good option for you.
4. Point-of-service (POS)
Point-of-service (POS) plans are the most common type of health insurance in the United States. They are sold by private insurance companies and are usually purchased through a private health insurance exchange. A POS plan is a health plan that allows patients to see a provider without first searching for a doctor or specialist, which can take several weeks. The patient visits a local hospital or clinic, and if they need to be seen by someone else, the provider is notified so they can be contacted about their visit.
POS plans typically have lower monthly premiums than many other types of health insurance, but they also have limited coverage options and higher deductibles.
5. High-deductible health plans (HDHPs)
High-deductible health plans (HDHPs) have lower monthly premiums than traditional health insurance but higher deductibles. They are similar to other types of health insurance, such as major medical coverage, except that HDHPs have lower monthly premiums and typically require the enrollee to pay more out of pocket for health care services. The primary benefit of an HDHP is that it does not require employees to pay for any portion of the cost of their medical expenses. This type of coverage is usually combined with an HSA-qualified high-deductible health plan (HDHP).
Why Do You Need a Health Insurance Plan?
1. Cost saving
Health insurance plans cover a significant portion of your medical costs. They typically cover 100 percent of your health care costs, subject to certain limits. If you take advantage of the coverage, pay your premiums on time, and comply with the terms and conditions of the plan, you can reduce or eliminate out-of-pocket expenses like deductibles and copayments.
2. Preventative care
Employees who receive health insurance coverage through their employers have access to preventive care services, such as cancer screenings and gynecological exams, without paying for them out of pocket. This is because insurers pay for such services on behalf of employees, who the insurer then reimburses for their share of the costs.
3. Lower employee turnover and absenteeism
Employers benefit from lower levels of employee turnover and absenteeism if they offer health insurance coverage to their employees through an employer-sponsored plan rather than through a self-funded plan each employee pays for separately. Employees may find it difficult to afford high deductibles or out-of-pocket maximums if they have high healthcare costs or chronic conditions requiring frequent visits to the doctor’s office or hospital emergency room.
4. Access to quality medical services
Health insurance provides access to quality medical services, including emergency care and hospitalization. If you have a pre-existing condition, health insurance can provide financial protection against the cost of treatment.
5. Protecting your family from financial ruin:
Your family can experience financial crises if you get sick or injured at work or in an accident on the job. An employer may be liable for paying for lost wages and medical expenses if an employee gets hurt on the job or becomes ill due to unsafe working conditions or exposure to toxic chemicals on the job site.
Key Takeaway
Health insurance is a type of insurance that provides financial protection for a person against financial loss resulting from illness, injury, or health issues. Health insurance can help pay for the cost of medical care and prescription drugs. It may cover other services such as preventative care, prescription drugs, and mental health services.
