What is health insurance?

Everywhere, healthcare is expensive, but especially so in the United States, where we pay more per person per year for healthcare than almost any country of comparable economic standing. One of the keys to navigating the healthcare system is knowing about the health insurance system.

Health insurance, as the name suggests, is a type of insurance. Insurance is a collectivization of poeple who pay into a pool of money every so often (usually monthly) for the right to withdraw from the pool of money in exceptional circumstances. (For health insurance, when you need a medical procedure, need to stay in the hospital, give birth to a baby, or other events; for car insurance, which works the same way, when you get into an accident.) In this case, healthy people who don't need much care pay into the pool so that sick, injured, or disabled people can do the majority of the withdrawal from the pool when they need very expensive, intensive care.

How much you pay every month, for the right to have access to that coverage of the exceptional costs (not by you, but by the pool because it’s way too much for you to handle yourself) is called your “premium,” and it changes based on several factors, like how old you are, if you’re a man or a woman, if you have kids, and, as we’ll see, what kind of plan you choose. Remember: it has been a federal law in the United States, that no insurance company can deny giving you coverage on the grounds that you have a pre-existing medical issue that heightens the risk that you'll cost them more in care than you'll pay them in premiums.

Health insurance allows you to pay much less in those exceptional circumstances, and even for routine visits to the doctor, or for prescriptions you need regularly, because hospitals have a huge number of different prices for the same service. Health insurance companies negotiate with hospitals and other providers for a much better price, both for the companies and for the patients (you) who pay the companies your monthly premiums to be covered by them.

Depending on the type of procedure being done, and why, insurance might not cover almost anything-- and they might refuse to cover anything at all-- if, for example, they think the surgery you’re doing is just to look better, not to resolve a medical issue. As we’ll see later, even if in principle the company would approve, you might not get as big a cost reduction (if any) depending on which insurance companies negotiate with your doctor who did the procedure, or vice versa-- which doctors who do your procedure your insurance company negotiates with for lower prices. 

An in-network doctor is a doctor who has a contract with your health insurance plan. This means that your plan will pay a higher percentage of the cost of your care if you see an in-network doctor. An out-of-network doctor is a doctor who does not have a contract with your health insurance plan. This means that your plan will pay a lower percentage of the cost of your care if you see an out-of-network doctor.

This, even, just scratches the surface. At a hospital that you go to, for example, to give birth to your baby, your OB/GYN might be in-network, but not the team who did your blood work, even though they work at the same hospital and are on the same care team, and the pediatrician who saw your baby in his first few hours just to make sure he was doing well isn’t in the same network as either your OB/GYN or the team who did your blood work.

If you’re uninsured, you pay what is usually the highest price. If you’re insured, but not in-network, you’ll probably still pay a high price, but not quite as high as the uninsured patient, just because you do have insurance. Your best-case scenario (and it’s still likely that this won’t be cheap, even with great insurance) is to be insured and in-network. 

A copay is a fixed amount of money you pay for a covered health care service. You may have to pay a copay for a doctor's visit, prescription drug, or hospital stay. Your copay may be different for different types of services.

These situations, naturally, are very high-stress, and one almost never knows the true price of the care they’re going to receive (or whether the provider will be in- or out-of-network), and the bill only comes days or weeks after discharge, so surprise bills due to the way these networks interact are very common in the US. 

You can get health insurance through your employer, the government, or a private health insurance company. If you are self-employed, you can purchase health insurance on your own through the Health Insurance Marketplace. Generally, you do this during the open enrollment period. Open enrollment is the time of year when you can enroll in or change your health insurance plan. Open enrollment usually takes place every year from November 1st to December 15th.

You usually cannot change your plan outside of this period, unless you go through a significant life event, like getting married or divorced (or the death of a spouse), starting a new job, or having a kid. 

There are many different types of health insurance plans available. Some of the most common types of plans include:

• HMO: A health maintenance organization (HMO) is a type of health insurance plan that requires you to see a primary care doctor for all of your medical needs. Your primary care doctor will then refer you to a specialist if you need one.

• PPO: A preferred provider organization (PPO) is a type of health insurance plan that allows you to see any doctor or hospital that is in your plan's network. You will usually have to pay a higher copay or coinsurance if you see a doctor or hospital that is not in your network.

• POS: A point-of-service (POS) plan is a type of health insurance plan that combines features of HMOs and PPOs. You can see any doctor or hospital, but you will usually have to pay a higher copay or coinsurance if you see a doctor or hospital that is not in your network.

• EPO: An exclusive provider organization (EPO) is a type of health insurance plan that is similar to a PPO, but you will have to get a referral from your primary care doctor to see a specialist.

• HDHP: A high-deductible health plan (HDHP) is a type of health insurance plan that has a high deductible, but lower monthly premiums. You will usually have to pay a lot of money out of pocket before your health insurance plan starts to pay for your medical expenses.

• HSA: A health savings account (HSA) is a tax-advantaged account that you can use to save money for qualified medical expenses. If you have an HDHP, you may be eligible to contribute to an HSA.