Health is perhaps the most talked about subject today, with more people increasingly striving for good health. However, with chronic stress, inability to access health care, and other concerns, maintaining good health is no longer simple. Chronic conditions, such as diabetes and heart disease, are on the rise, which results in increased healthcare expenses. Increased costs of healthcare often lead to many people not getting proper and adequate healthcare services. Under these circumstances, it has become very important to ensure that healthcare is both equitable and affordable. One such initiative taken by the government is the provision of health insurance or medical insurance to people. Medical insurance is a necessity in the U.S., as it helps people protect themselves against financial losses that may occur if a person or dependent needs extensive medical care.
What is medical insurance and why do we need it?
Medical insurance or health insurance is broadly defined as a program that pays for all medical expenditure such that it covers all costs related to the treatment procured by an individual. However, the catch here is that only people who have bought such insurance policies or are covered by various social insurance programs or government funded social welfare programs can benefit. In other words, you are protected from all future medical expenses that you may or may not incur. According to a census, nearly 85% of the Americans have medical insurance, out of which 60% have access to such insurance through their employers, while only 9% purchase such plans directly.
Understanding the concept of medical insurance brings us to the question of its need. Why do we need medical insurance and for what purposes?
- To gain protection from future financial losses
- To gain access to affordable preventive care and prescription medications
- To lessen the burden of huge medical bills
History of Medical Insurance
Having established the need for medical insurance, it is important to understand the history of medical insurance and also the factors that influenced its growth. It is pertinent to note that way back in the 1800s, small companies started forming their own associations that looked into the medical needs of its employees, based on a payment made by the employee every month. Group health insurance was first started way back in 1875 by Montgomery Ward & Co., which then slowly picked up momentum.
However, the actual rise of medical insurance was seen much later after 1911, when Britain passed the National Health Insurance Act. Group prepayment for hospital coverage began in Dallas, Texas but was later popularized by the Blue Cross scheme, which added medical expenses to its existing group insurance scheme. The main problem with the earlier medical insurance plans was that it was great for small medical expenses but was inadequate for serious medical concerns, disability and long term hospitalization. However, the growth and popularity of medical insurance allowed it to cover a wider range of medical problems.
Growth of medical insurance over the years was influenced by various factors, namely
- Increase in population leading to increase in demand for insurance
- Rising costs of medical aid and care
- Rising demand for medical care
- Expanding economy led to various changes in the average American home, which in turn led to emphasis on insurance
- Collective bargaining and increased awareness of consumers
- Enactment of legislations protecting the rights of various classes with respect to health care
- Lastly, the tax benefits accruing to the people who get insurance
Different Types of Medical Insurance
There are different types of medical insurance plans available today for all to choose from. Most plans cover all kinds of illnesses and cater to specific requirements of individuals. Popular among medical insurance plans include:
- Health Maintenance Organization (HMO)
These are prepaid health plans, where you have to pay a monthly premium, and in return get access to total medical care for all your family members, including visits, hospitalization, emergency care, medicines, tests and all such incidental expenses. The best part of HMO is that it gives preventive care equal importance as it does to actual treatment of diseases. On the other hand, the main problem is that the HMO will choose a primary physician for you from its list of service providers, who will be your point of reference for all medical conditions, giving you limited freedom to choose independently.
- Fee for Service Plans
This is the traditional medical insurance plan where the insurance company pays for any services or treatment rendered by a healthcare service provider. Under such plans, you pay a premium to the insurance company, either annually or monthly, and based on the amount you pay, the extent of insurance is decided. Once you have acquired medical attention, you, or in some cases the doctor, can file a claim for getting paid for all expenses, including hospitalization and medicines. It is important to note that such plans pay only a certain amount of the expenses incurred while some part of it has to be paid by you. Similarly, there is a cap on the amount of medical bills that you can produce in a year. Additionally, if you are claiming payment for medicines, you will have to produce necessary bills.
- Preferred Provider Organization Plans (PPO)
This is the perfect blend of both fee for service plans and HMO, where you have the freedom of choosing from the network as well as choosing out of it and getting paid for all your expenses. However, when you choose out of the network, it is important to note that you might end up paying a larger chunk of the medical bills yourself.
- Point of Service Plans(POS)
This plan is similar to the HMO in that it has a network of healthcare service providers who can be contacted for any medical need and the payment will be done by the insurance company. The main point of difference, however, is that you can also opt for outside treatment and yet get reimbursed for your expenses, which was not possible in HMO.
What are the essential elements of a good medical insurance plan?
Given the myriad options that are available in the market today, choosing a good medical insurance plan can be quite a daunting task. However, the following simple rules will help in choosing the best plan:
- The first aspect that needs to be understood before choosing a medical insurance plan is your requirement. It is has to be noted that health insurance involves money and while all insurance plans are good, some give more than others, but at the same time cost more. Understanding your needs and requirements would help you choose the best one in terms of both benefits as well as cost. Factors like
- How comprehensive is the policy?
- Is appointing a primary care physician acceptable to you?
- Are you comfortable with the limitations of the policy?
- Do you want to file claims yourself or would like the service provider to do it
- How convenient do you expect your healthcare to be?
- The second aspect to be considered is the benefits being offered by your chosen plan. It is essential that you pay for what you get and do not end up paying more and getting less. Important benefits include:
- Doctor visit and examination
- Prescription drugs
- Care by specialists
- Specific care like vision, dental, mental health, gynecological assistance and treatment.
- Chiropractic and other similar physiotherapy treatments
- Preventive and experimental treatment
- Screenings and other tests
A good health plan provides at lesat the above benefits.
- The third aspect is cost. Cost of medical insurance plays a very important role in the final decision making. It is important that you pay for what you get. The amount of deductibles paid by you along with the copayment and other charges should be included in the overall cost of health insurance. Limits on payments and coverage of services are also very important factors that determine cost of insurance and must be taken into consideration before final decision.
All other similar questions should be answered well before choosing your plan.
Some additional aspects to consider:
- Location of healthcare services needs to be taken into consideration before opting for any insurance plan. Convenience and ease of access are the most important aspects to ensure proper medical care.
- Services offered by each plan along with the various limitations on services should be considered before making the final choice. It is important that you invest in an insurance plan that covers all possible diseases and medical situations.
- Last but not the least, it is important to compare various plans and their features before deciding on the final one. This will give you an overall view of what is available in the market and enable you to choose wisely.