Health insurance is an essential in the modern world. Eventually, you or your family will encounter a health crisis that will necessitate medical intervention, and unless you are inordinately wealthy, you will probably need insurance to help pay for it. So, you should understand what health insurance is and its relevance to your life. 

Basic Concepts

There are some foundational concepts that you should understand when you start looking for a health plan:

• Insurance is a financial protection plan in which you pay into, in return for a payout of a certain amount when a covered situation arises.  In the case of health insurance, this may include medical, dental or pharmaceutical needs.
• A health insurance policy details how much you must pay and what kind of coverage is offered.
• A health insurance premium is the amount you must pay to the insurer on a monthly basis to maintain that protection coverage.
• The deductible is the total annual out-of-pocket amount you must pay before the insurer begins paying out.
• A co-payment is a small, fixed out-of-pocket expense you must pay for certain medical services when they are obtained.
• Co-insurance is a percentage of the bill you must pay before your insurer pays.
• Some policies require deductibles, co-payments and co-insurance, while others only require one or two.
• An out-of-pocket maximum is the total amount you are required to pay—including deductible and co-insurance—at which point, your insurance will start paying your provider.

Advanced Concepts

In addition to the fundamentals of health insurance, you should also understand some more complex concepts:

• Provider networks are physicians, hospitals and pharmacies that are contracted with your insurance company to offer services and products at a discount.  If you are able, you should try to stay within your provider network to take advantage of your insurance.
• If you go outside of your provider network, your insurer doesn’t get a discount from that health care provider.  To prevent this, your insurer will likely make you pay more in out-of-pocket costs like a higher co-insurance. 
• Some health plans require a pre-authorization for some services which means you must get permission from your insurer beforehand.  If your policy requires pre-authorization, your insurer may refuse to pay if you aren’t authorized to obtain the service.
• Most policies require that you file a claim to reimburse the health care provider that served you. Most providers will do this for you, but you must provide them with up-to-date health insurance information.  That is why you should carry your health insurance card on your person at all times.
• High deductible health plans require a much higher out-of-pocket expense but typically offer much lower monthly premiums.  These are often ideal plans for younger policyholders with less risk of health issues. 

Ways to Save Money on Health Insurance

Health insurance isn’t a luxury that you should go without, but it also shouldn’t break the bank.  Here are some important ways to keep your health insurance costs low:

• Take advantage of tax breaks, like those available through the Affordable Care Act. You may be able to save hundreds of dollars each month, if you sign up through health insurance marketplaces available through your state or the federal government.
• Choose a health plan that is right for you and your family.  If you do not suffer from lingering health issues, a high deductible health plan with low monthly premiums may help you save money.  On the other hand, if you see a physician often, a low deductible plan with higher premiums may lower your out-of-pocket expenses.
• Determine if your employer-sponsored health plan has wellness incentives.  Many employer plans reward enrollees that don’t smoke, maintain a healthy weight or regularly exercise.  By making minor changes in your lifestyle, you may be able to save a lot on health insurance.
• Invest in a health savings account.  This is a tax-free fund that you can place thousands of dollars into each year.  If you have a high deductible health plan, these funds can often be used to cover those high out-of-pocket costs.

Why You Should Always Have Health Insurance

For many people, there is always the question “Do I really need health insurance?” If you are healthy, it may seem like an unnecessary expense, but there are some very good reasons why health coverage should always be maintained:

• No one expects to get ill or injured, but such an incident can create an enormous debt that could take years or decades to repay.  The average three day hospital stay costs almost $30,000 and even a simple injury like a broken leg may cost almost $7,500.  More serious health issues like cancer may generate hundreds of thousands of dollars of debt.
• Financial insolvency can be devastating. The number one cause of bankruptcies in the U.S. is medical bills—that involves almost 1.7 million people. Additionally, it is estimated that almost 56 million other Americans will struggle with paying medical debts.
• Since the passage of the Affordable Care Act, Americans who make a certain level of income and are without health insurance have been financially penalized. In 2017, if you have an income greater than 138% of the federal poverty line and you are not insured for the majority of the year, then you must pay $695 per adult or 2.5% of your annual income, whichever is greater.
• If you are not insured, then you must pay for every visit to your physician.  This contributes to greater health risks over your lifetime. Without preventive health care, you have a much higher risk of illness.  You are less likely to seek out medical care that could identify serious health conditions early, and you are less likely to follow physician’s instructions like drug dosages or rehabilitation, which can compromise your long-term health.

Ultimately, health insurance is a wise investment for the simple reason that you can’t overestimate the value of your health.  A few dollars well-spent on timely medical care may not only help you save money in the long run, but may add years to your life.