If you’re not from the United States, the concept of health insurance can be confusing. You may be from a country where it is normal to pay for medical procedures with cash, or you may be from a country with socialized healthcare where you aren’t required to pay for many medical expenses.
In the United States, none of these things are possible. Medical treatment is far too expensive for most people to pay for on their own, so health insurance is necessary. And since the vast majority of health insurance in the US is privatized, you must pay for at least a portion of it yourself.
This article aims to answer the basic question: How does medical insurance work? And it will do so in a very general manner specific to how health insurance companies work in the United States for those interested in purchasing private health insurance here.
How Does Health Insurance Work?
In order to answer, “how does private health care work?”, we need to first define a few terms you may not be familiar with.
- Premium – A premium is the amount you pay to purchase a medical insurance plan. The premium may be paid monthly, quarterly, semiannually, annually, or for the entire duration of coverage depending upon the insurance policy you purchase.
- Deductible – This is the additional amount the insured person must first pay (beyond the premium) before the insurance company will begin to pay for anything. The deductible may be per injury/illness, per policy period, or per year, all depending on the individual insurance plan.
- Coinsurance – After paying the deductible, the insurance company shares the remainder of the expenses with the insured. This shared cost is called coinsurance. With coinsurance, the insurance pays a certain percentage up to a specified amount. Once that amount is met, the insurance company will increase the amount it pays until the policy maximum is reached.
- Policy maximum – The is the maximum amount of money the insurance company will pay for covered medical expenses. The policy maximum can be within the policy period, the year, lifetime, or per injury/illness, all depending on the specific insurance plan.
- Copay – A predetermined flat fee that the insured pays for healthcare services in addition to what the insurance covers. For example, a plan may require you to pay a $10 copay for any doctor’s visit in addition to any other amounts you or the insurance provider will pay.
Understanding these terms, we can explain the basic steps of purchasing and using an insurance plan.
Step 1: Decide what type of insurance you need
- Visitors Insurance – Short-term medical insurance for visitors to the United States.
- Travel Medical Insurance – Short-term medical insurance for foreign travelers to destinations other than the United States.
- New Immigrant Insurance – Designed for new immigrants to the USA who do not qualify for other health insurance plans.
- International Student Insurance – Health insurance specifically for those studying in the US on an F visa.
- Exchange Visitor Insurance – Health insurance specifically for those visiting the US as part of an exchange program on a J visa.
- Expatriate Health Insurance – Major medical insurance for those living outside their home country for an extended period.
- Marine Crew Health Insurance – Annually renewable major medical insurance for marine crewmembers.
- Missionary Travel Insurance – Short-term travel medical insurance for missionaries and other members of religious groups.
- Missionary Health Insurance – Long-term major medical insurance for career missionaries living abroad for extended periods.
Step 2: Purchase the insurance
The process for purchasing the insurance can depend upon the exact type and specific plan you select. However, you will generally be provided an insurance ID card and other documentation after paying your premium and completing the transaction.
Step 3: How to use medical insurance
The exact process for using your health insurance will vary by plan, but it will generally follow these steps.
- Present your insurance ID card to the healthcare provider at the location of treatment.
- Pay any required copay for the particular facility/procedure as dictated by your insurance plan.
- Receive your treatment.
- From this point, your deductible and coinsurance will take effect. A common scenario may look like this:
Let’s say your procedure costs $1,000, and you have a plan with 80/20 co-insurance and a $200 deductible.
- First, you would be responsible for paying the $200 deductible before the insurance begins to pay anything.
- Once satisfying the deductible, the 80/20 coinsurance means the insurance company will cover 80% of the remaining $800 bill, and you will be responsible for covering 20%.
- Using our example, your total out-of-pocket costs for the $1,000 procedure would be $360, and the insurance company would pay $640.
Please note that this is just one hypothetical example of countless different scenarios. Available premiums, deductibles, and additional benefits will vary greatly depending on the type of insurance, the specific insurance plan, and the age of the insured. It is extremely important to read the insurance plan’s policy documents prior to purchase so you have a complete understanding of how the insurance works.
What Does Health Insurance Cover?
With US health insurance explained, we can go over what it covers. Generally, a major medical insurance plan will cover an array of scenarios possibly including but not limited to:
- Emergency medical care
- Maternity care
- Urgent care visits
- Preexisting conditions
- Prescriptions
- Preventative care/checkups
- Screenings
- Immunizations
- Mental health care
However, it is important to note that many of the travel medical insurance and visitors insurance plans sold on this website have much more limited benefits, as reflected in their lower premiums. For instance, travel medical plans will not typically cover maternity care, preventative care, and preexisting conditions except in limited circumstances.
Instead, travel medical insurance plans offer a variety of benefits exclusive to those who are traveling abroad. These can include:
- Emergency medical coverage in a foreign country
- Medical evacuation/repatriation
- Accidental death and dismemberment
- Return of mortal remains
- Trip interruption coverage
What Does Health Insurance Not Cover?
The situations where health insurance will not provide coverage vary greatly, as each plan will have its own list of exclusions.
Generally, you should not expect any travel medical insurance plan or visitors medical insurance plan to cover:
- Routine care/checkups
- Elective procedures
- Immunizations
- Medical tourism
Please note that many of these exclusions may not exist in major medical insurance plans. Once again, please read the policy documents of any plan prior to purchase so you understand what is and is not covered.
How to Get Health Insurance
How to get health insurance in the United States largely depends on your situation. Most Americans are offered health insurance through their employer. A percentage of their compensation goes towards paying their health insurance premium, with the employer subsidizing a large portion of it.
Others may purchase health insurance through the US government Health Insurance Marketplace, sometimes referred to as ACA coverage or Obamacare. In these situations, the premium they pay can be determined by their income and other factors.
In the case of visitors medical insurance or travel medical insurance, most people purchase coverage through an independent insurance broker like Insubuy.
Frequently Asked Questions
How does health insurance work in simple terms?
Health insurance works like this: You will pay a premium to purchase coverage. When using the insurance, you may pay a copay and a deductible. Once the deductible is satisfied, the insurance company will pay a set percentage with you covering any additional costs.
How much does health insurance cost?
The cost of health insurance covers a massive range depending on a variety of factors including the premium, deductible, benefits, and the insured’s age.
What happens when you have health insurance?
When you have health insurance you have the ability to get medical treatment and other benefits without paying for the full cost of care out of your own pocket, which is unaffordable for most Americans and visitors to the US.
How does a health insurance deductible work?
A health insurance deductible works like this:
- The insurance company will not begin paying for anything until you have paid your deductible over a predefined period. For instance, you may have a $500 deductible for the duration of the policy. You will pay all costs up to $500. After meeting the deductible, the insurance company will pay a set percentage of remaining costs up to the policy maximum. This is known as coinsurance.
Is it worth paying for health insurance?
Wondering “what is the point of health insurance?” especially if you’re just visiting? Trust us. It is absolutely worth paying for health insurance in the United States because it is unlikely that you will be able to afford medical treatment without it. Going without health insurance simply isn’t an option, as a single illness or injury could saddle you with enough debt to bankrupt you.
Don’t take the chance. Purchase health insurance coverage today!
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