The cost of health care in the United States is expensive and is escalating.
A majority of Americans cannot afford the cost of medicines, physicians’ fees,
or hospitalization without some form of health insurance. Health insurance is a
contract between an insurance company and an individual or group for the payment
of medical care costs. After the individual or group pays a premium to an
insurance company, the insurance company pays for part or all of the medical
costs depending on the type of insurance and benefits provided. The type of
insurance policy purchased greatly influences where you go for health care, who
provides the health care, and what medical procedures can be performed. The
three basic health insurance plans include
a private, fee-for-service plan; a prepaid group plan; and a government-financed
public plan.
Private Fee-For-Service Insurance Plan
Until recently,
private, fee-for-service insurance was the principal form of health insurance
coverage. In this plan an individual pays a monthly premium, usually through an
employer, which ensures health care on a fee-far-service basis. On incurring
medical costs, the patient files a claim to have a portion of these costs paid
by the insurance company. There is usually a deductible, an amount paid by the
patient before being eligible for benefits from the insurance company. For
example, if your expenses are $1000, you may have to pay $200 before the
insurance company will pay the other $800. Usually the lower the deductible, the
higher the premiums will be. After the deductible is met the insurance provider
pays a percentage of the remaining balance.
Typically there are fixed
indemnity benefits, specified amounts that are paid for particular procedures.
If your policy pays $500 for a tonsilectomy and the actual cost was $1000, you
owe the health care provider $500. There are often exclusions, certain services
that are not covered by the policy. Common examples include elective surgery,
dental care, vision care, and coverage for preexisting illnesses and injuries.
Some insurance plans provide options for adding dental and vision care. Other
common options include life insurance, which pays a death benefit, and
disability insurance, which pays for income lost because of the inability to
work as a result of an illness or injury. The more options added to the
insurance plan, the more expensive the insurance will be.
One strategy
insurance companies are using to lower insurance premiums and out-of-pocket
costs to the consumer is the formation of preferred providers organization
(PPO). A PPO is a group of private practitioners who sell their services at
reduced rates to insurance companies. When a patient chooses a provider that is
in that company’s PPO, the insurance company pays a higher percentage of the
fee. When a non-PPO provider is used, a much lower portion of the fee is paid.
A major advantage of a fee-for-service plan is that the patient has options
in selecting health-care providers. Several disadvantages are that patients may
not routinely receive comprehensive, preventive health care; health-care costs
to the patient may be high if unexpected illnesses or injuries occur; and it may
place heavy demands on time in keeping track of medical records, invoices, and
insurance reimbursement forms.
Prepaid Group Insurance
In prepaid group
insurance, health care is provided by a group of physicians organized into a
health maintenance organization (HMO). HMOs are managed health-care plans that
provide a full range of medical services for a prepaid amount of money. For a
fixed monthly fee, usually paid through pay roll deductions by an employer, and
often a small deductible, enrollees receive care from physicians, specialists,
allied health professionals, and educators who are hired or contractually
retained by the HMO. HMOs provide an advantage in that they provide
comprehensive care including preventive care at a lower cost than private
insurance over a long period of coverage. One drawback is that patients are
limited in their choice of providers to those who belong to an HMO.
Government Insurance
In a government insurance plan the government at
the federal, state, or local level pays for the health-care costs of elgible
participants. Two prominent examples of this plan are Medicare and Medicaid.
Medicare is financed by social security taxes and is designed to provide health
care for individuals 65 years of age and older, the blind, the severely
disabled, and those requiring certain treatments such as kidney dialysis.
Medicaid is subsidized by federal and state taxes. It provides limited health
care, generally for individuals who are eligible for benefits and assistance
from two programs: Aid to Families with Dependent Children and Supplementary
Security Income.
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