Health Insurance has become extremely confusing. We spoke recently about the many variable of disability insurance and health insurance is equally tricky. On top of all the options, the government has decided to radically change the name of the game and no one is really sure what will be the end result.
Major health problems can wipe out a family’s finances. There are more medical problems than ever before and more highly sophisticated technological solutions to them. And someone has to pay for these multi-million dollar solutions when they are needed.
Many people have health insurance through their employers. If this is your case, then you must take what they give, and hopefully you have good coverage. If not, you always have the option to purchase your own insurance so that you are not beholden to theirs. Some decide to do this even if they feel they have good coverage at work because they know they might not work there forever, and they want to lock in coverage while they know they have good health.
Let’s look at a couple of key terms before we jump into the different types of health insurance…
Co-Payment – This is the amount that you pay every time you go in and see a doctor or buy a prescription. It’s a flat cost that you can expect to pay each time.
Deductible – This is the amount that you must pay before your insurance benefits kick in. Generally a higher deductible will equate to a lower cost policy. It makes sense for most people to have a higher deductible plan so that their monthly premiums are lower. This money can be saved up and then used to meet the high deductible when it is needed. The downside to this is that when most things happen, they will need to be paid out of pocket. This is why H.S.A plans were introduced which work great for this purpose (after you’ve accumulated enough in them to pay the expense).
Maximum Lifetime Benefit – This is the maximum amount that your policy will pay out for your health bills over your (or your family’s) lifetime. Most people never think about this aspect of their plan (or even know what it is), yet it can be critically important. It’s hard to stay on top of what the latest procedures cost, but we know that some of them cost $3,000,000. If you need a $3M procedure, and only have $1M of coverage, what are you going to do? Ideally, you will have an unlimited lifetime maximum, but with health costs the way they are today, $5,000,000 of benefit might be sufficient. Of course, health costs can easily rise in the future making what once seemed sufficient, not enough!
If your current coverage is through work and your company offers you a limited lifetime benefit, you might want to consider buying additional coverage, or replacing your coverage so that you are never put in this position.
Next, we’ll look at the two main types of health insurance as well as the advantages of a Health Savings Account.