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Health Insurance 101

There is a ton to learn about health insurance and most people need an intro course. Here’s the good news: you don’t have to learn everything – unlike a college exam, you can turn to a professional and ask for assistance. (That’s where BenefitsCafe.com comes in – just contact us if you get stuck, 800-746-0045.)

What is Health Insurance?

Basically, health insurance is a method of financing your medical care. The health insurance companies (and managed care HMO companies) do the financing by:

1. Enrolling millions of people into their plans;
2. Collecting billions of dollars from millions of people; and then
3. Paying out that money to doctors, hospitals and other medical providers for the care of their members.

In California, health insurance companies pay doctors and hospitals more than 85 cents out for every 1 dollar they collect. The other 15 cents of the dollar goes to enrolling people, paying claims, negotiating lower costs with medical providers, sending member ID cards, and on and on.

Besides enrolling people, collecting money and paying it out, what else do health insurance companies do?

One of the biggest benefits of having health insurance is that you are able to pay reduced fees for medical services. The insurance companies negotiate on behalf of their members with doctors, hospitals, labs and other medical specialists to get the lowest costs possible. The insurance companies are also concerned that the quality of care is the highest. They have doctors on their staff who work with the medical providers to ensure high quality care. Think about it. The insurance companies see how millions of people are treated for very similar diseases and accidents. This data base enables them to work with providers to encourage best practices. The discounts for medical services and the protection of a huge insurance company working for you is an enormous benefit of having health insurance. Watch this short video on “provider networks.”

Why do you need health insurance?

No one knows if you’ll get really sick or injured. We hope not. But, if something really bad happens, like you dive into a swimming pool and break your back; or you get a rare form of cancer; the cost of immediate, top-quality medical care could easily be hundreds of thousands of dollars or more. No one can afford that. So, by paying a little bit each month to an insurance company, you will have the security of knowing that if something really bad happens that an insurance company will be there to help out.

Focus on these 4 things when selecting a plan

1. How much you pay when you see a doctor – this is the “Dr. Copay” – it could be $20, or 40% after a deductible. Know how much you pay when you see a doctor.
   
   
2. How much you pay when you go into the hospital – this could be before or after a deductible, there could be a charge per day or per admission.
   
   
3. How much is the maximum you will have to pay if you have a catastrophe – this is the “out-of-pocket limit” (you’ll see it abbreviated as “OOP” – think Oops, I really hurt myself.) This is the maximum YOU pay. Generally the insurance company pays 100 percent of expenses after this amount – with some exceptions. Watch the short video on “Key benefits.”
   
   
4. How much you pay for prescription medicine – miracle drugs keep people out of the hospital and they can be very expensive. You should understand how you much you are expected to pay for these things with each medical plan you are considering. Watch the short video on “Prescription Medicine.”

Final Advice

Don’t get overwhelmed with the weird terms and many selections. We have articles – and even videos - to help you understand what you’re buying. Specifically, see this article and chart to help you compare plans. Also, to put you at ease, read this article on where to start when selecting a health plan. If you’re ready, get a personalized California health insurance quote.

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