Open enrollment is the short time period each year where you can sign up for a new health insurance plan or change your current health insurance plan. Open enrollment for the Health Insurance Marketplace is November 1 - January 31. Many employee offered health insurance open enrollment periods overlap with this time period. We thought this week would be a great time to start a discussion on health insurance because it’s essential to understand the basics of a health insurance plan in order to pick out the plan that’s best for your budget and your life.
First - why insurance? One theory of economics states that you should get insurance when the probability of loss is low but the size of the loss is high. For young adults, the probability of having significant health costs any given year is fairly low, but those costs could bankrupt you. Also, health insurance is mandatory by law.
Below are the basics of health insurance. Tips to choose the best plan for your budget coming later this week!
Types of health insurance plans:
- Medical Insurance: this insurance covers all of the things related to seeing a doctor including office visits, ER visits, hospital stays, radiology, and prescriptions.
Dental insurance: this insurance if for oral health. It covers routine cleanings, xrays, and oral surgeries. Certain plans also cover orthodontic care.
Vision insurance: this usually covers one eye exam and either a pair of glasses or contacts each year.
All three of these plans will be comprised of the same basic components --
Health insurance premium: this is the cost of the health insurance plan. If you’re purchasing your health insurance plan through your job, your premium will be divided into equal amounts and subtracted from your paycheck each payment cycle. Your health insurance premium is the minimum you will pay for health insurance for the year.
Deductible: In addition to your monthly or bi-weekly premium payment, you will be required to pay your total deductible before your insurance kicks in. Insurance does not pay for any health care costs until your deductible has been met by you.
Co-pay: once your deductible is met, a copay is a set amount that you will be responsible for. A co-pay will vary by service. For example, your insurance plan may require you to pay $25 to see your primary care physician and $30 to see a specialist.
Co-insurance: co-insurance is similar to co-pay except for it is a set percentage. Again, this may vary by service. For example, my dental insurance covers 100% of the cost of routine oral exams and 80% of the cost of oral surgery. This means my co-insurance for a routine oral exam is 0% and my co-insurance for oral surgery is 20%.
Out of pocket maximum: the maximum amount of money you will be required to pay in co-insurance and copays. Once your have met this yearly maximum, 100% of your healthcare expenses will be covered by your insurance. This maximum does not take into account items not covered by your insurance - such as seeing a provider that's out of your network or prescriptions that are deemed "cosmetic."
In general, plans with higher premiums will have lower deductibles and plans with higher deductibles will have lower premiums. More on how to choose a plan that works best for your budget in a few days!