How Health Insurance Works & Alternative Options
How Health Insurance Works & Alternative Options
Enrolling in a health insurance plan is a way to stay healthy and protect yourself from catastrophic medical bills. As the cost of traditional health insurance rises, it becomes unaffordable for many people. As a result, people often go uninsured and have to pay full price for health care or not seek the care they need.
Health care coverage is expensive and navigating the health insurance market is difficult. Fortunately, Mira offers an alternative option for affordable and accessible health care services through membership plans. With options as low as $45 per month, you can put your health first. Sign up today to get started.
How Health Insurance Works
Health insurance works by helping you get access to coverage for health services in exchange for a monthly fee, known as a premium. You pay the premium each month and your health insurance company pays for a portion of your medical care expenses, depending on your service contract or the health plan that you choose.
Risk Pool in Health Insurance
Health insurance companies create a pool of premiums from healthy and sick enrollees to cover the expenses incurred by all. By opting into a plan, you are opting into a group of members called the “risk pool”. Healthier people typically have lower medical costs, while older and sicker people have higher medical costs, which effectively distributes the financial risk amongst all members of the plan. Generally, the larger the risk pool, the lower the premium because the cost of the healthy members offsets the costs of the less healthy.
Health Insurance May Require In-Network Providers
Another way health insurance companies are able to keep costs low to consumers is by establishing relationships with providers and adding them to their “network”. Providers include doctors, hospitals, pharmacies, and other health-related service providers. These providers who are considered “in-network” have a contract with the insurance company to provide care and prescription drugs at a lower price than retail.
Health insurance is most beneficial because the companies are able to negotiate reasonable fees for services on behalf of all their members, keeping other costs lower. Using doctors that are “out-of-network” may mean that you’re responsible for a larger portion of your medical expenses.
What You Pay With Your Health Insurance
There are a number of items that you’ll be responsible for under your health plan. The total amount you pay out of your own pocket will depend on a number of things that could change depending on what health plan you’re paying for. These items include the deductible you agree to and the copays your health plan requires. Let’s look at each item individually which could increase your total out-of-pocket costs.
The premium is the monthly fee you pay depending on your chosen plan. Plans have a metal assigned to them as an indicator of coverage level. The different options are bronze, silver, gold, and platinum with bronze having the lowest monthly premium and platinum having the highest.
Health Insurance Deductible
There is a specific amount you must pay towards your health care costs even before your insurance company begins paying- this is called a deductible. Many plans have very high deductibles, up to $7,000 for an individual, which can make health care services unaffordable.
Copays For Health Services
There are two cost-sharing features of health insurance plans to reduce the cost of healthcare once you reach your deductible: copays and coinsurance. Copays are a small, predetermined fee at the time of service depending on the type of service. For an in-network routine doctor’s visit, this is around $20, and for a visit to the emergency room, this is around $250.
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Coinsurance on Your Health Plan
Coinsurance is a percentage, usually, 20%, which you are expected to pay while the insurance company pays the other portion of covered services until you reach your out-of-pocket (OOP) maximum.
Out-of-pocket Maximum For Your Health Insurance Plan
The out-of-pocket (OOP) maximum is the most you’ll be required to pay in a single plan year. Once you reach your OOP maximum, your health insurance company assumes 100% of health-related costs for the rest of the year, but this can be as high as $8,000. Even though health insurance works for some peoples’ budgets, many individuals would benefit from an alternative option, such as Mira.
The Health Insurance System
Without health insurance, you run the risk of not getting the health care you need due to cost. Medical bills contribute to the majority of bankruptcies in America, so the health insurance system aims to limit the risk of expensive medical care. The healthcare insurance system intends to help people access the resources they need at an affordable price to ensure that everyone can live a healthy life. Unfortunately, the system isn’t working to help enough people.
The problem is the current options are impractical for millions of Americans; 73.7% of uninsured persons cite cost as the main barrier to health insurance. In 2019, the average annual cost of a health insurance plan was $20,576 and continues to rise, which is another reason we need alternative options. Put simply, many people are forced to go into extreme medical debt or forego the care they need.
Affordable Care Act
In 2010 President Obama passed the Affordable Care Act (ACA), known as Obamacare, to extend health insurance coverage to millions of Americans who were previously uninsured. Under this law, health insurance companies cannot refuse to cover you or charge you a higher premium because you have a “pre-existing condition” such as cancer, diabetes, or another chronic health condition. The ACA also requires all insurance companies to cover essential health benefits, which services include:
- Prescription drugs
- Outpatient services
- Emergency services
- Maternity and newborn care
- Mental health and substance use disorder treatment
- Rehabilitation services
- Laboratory tests
- Preventive care
- Pediatric services
What Health Insurance Covers
Health insurance can cover a number of health services. The actual coverage is going to depend on your health plan and the insurance company that you’re getting your insurance from. There are a number of rules and laws in place that dictate what you can get covered for and when, so it’s important to know what you’ll be covered for before you agree to pay for a plan. Let’s look at the various things you could be covered for.
Oftentimes people choose to skip their annual check-up or screening due to the cost, but this can lead to worse health outcomes later down the line. Health insurance works to provide accessible preventive care services to enrollees now so they can avoid chronic diseases later. This includes check-ups, routine screening, and vaccinations.
Immediate Medical & Surgical Care
Health insurance plans cover most health-related services, including emergency visits, laboratory tests, outpatient care, rehabilitation, prescription drugs, and more, but typically do not cover alternative medicine or cosmetic surgery.
The retail price of prescription drugs is often much higher without health insurance or some type of access to coverage. Health insurance companies negotiate lower prices for their enrollees, passing the discounts on to you when you go to a pharmacy to get your medications.
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Types of Health Insurance
Health insurance doesn’t drastically change by how you receive a plan, but it does change by the type of plan that you choose. Below, we look at each type of health insurance based on how you may qualify and where you may get access to health insurance.
Employer-Sponsored Health Insurance
The most common way to obtain health insurance in the U.S. is through a group health insurance plan, most commonly known as employer-sponsored health insurance. Large employers, typically with more than 50 full-time employees, provide group insurance plans which vary in costs, benefits, and insurance companies. An advantage of this type of plan is that the employer often splits the price of the premium with the employee.
Employer-sponsored health insurance works because a large proportion of eligible employees enroll, creating a risk pool. In addition to basic services most plans provide prescription drug coverage, and some offer supplemental dental care coverage, but it is often separate from the basic plan. Family members can be added to the plan for an additional cost.
Medicare is a federal health insurance program for individuals over 65 years old and some younger individuals with disabilities. Eligibility is determined by federal regulations and covers hospital stays, preventive services, and prescription drugs. Many low-income individuals that have reached retirement age will be able to get access to Medicare coverage for free, or for a negligible cost.
Medicare is a state-run program for eligible low-income adults and other vulnerable populations such as pregnant women and children. Typically all of your services are covered when you have Medicaid, for free. The requirements vary by state but you often have to have what your state determines to be an income that is at or below the poverty level in order to be eligible. Services for children under the CHIP program have less strenuous requirements so that children can get access to the care that they need.
Individual Health Insurance
Any individual can go to the marketplace and attempt to get health insurance coverage. This is typically going to be more expensive than an employer-sponsored plan with the same coverage because you won’t have an employer who is making any contributions to your health coverage. You can get access to tax discounts through the Affordable Care Act (ACA) and actually use the government’s website to search for health plans, which could bring the costs down to a more affordable range for your situation.
Alternative Options to Health Insurance
Alternative options might be either great additions to an actual health insurance plan or they might be a great replacement. What’s best for you will depend on your situation, what you can afford, and what type of health services you need. Let’s look at some of the best alternative solutions for health insurance.
Health Savings Account (HSA): Individuals can make pre-tax contributions to an HSA and won’t have to pay taxes if the money is used for medical expenses. This is an option for those who have enough income to store some away for future use or are enrolled in a plan through their employer.
Primary Care Membership Plans: These plans allow members to seek care from independent primary care physicians or practices at a monthly flat rate. This includes blood tests and doctor visits with no copay. People usually choose this as a supplement to another healthcare insurance plan that covers emergency medical services.
Cost-sharing Programs: This concept is very similar to the risk pool as with premiums but is usually through an organization or religious group. The group negotiates with providers directly on behalf of all members.
Discount Cards: There are various discount cards with a membership fee or low monthly fee to help consumers access various services at a low cost. These are often used as a supplement to plans with a high deductible to reduce OOP costs.
Mira: Mira offers access to a variety of urgent care, lab testing, and up to 80% discounts on prescriptions through its membership program. Mira works best for anyone who is uninsured or underinsured and can be a great solution for a low membership fee of $45 per month.
Why You Need Health Insurance
Everyone needs health insurance, period. Some years you may need more medical care, some years you may need less, but health insurance works to protect you from paying the full cost whenever you might need it. Let’s look at the two main reasons that most people use health insurance.
- In the event of a serious injury or chronic medical condition, the cost of surgery or treatment may be unaffordable. The price for healthcare with insurance coverage is a fraction of the price without. One trip to the emergency room can cost up to $3,000 without insurance, and this is not something you can plan for.
- It is essential to have health insurance in case of an emergency, but also to get access to affordable preventive care services and prescription medications to avoid long-term negative health outcomes. Even when you are healthy, obtaining health insurance is an investment into your health and financial stability.
Healthcare coverage is expensive and navigating the health insurance market is difficult. Some employers are not able to provide insurance packages at affordable rates, and small businesses are often not able to provide insurance at all. In this economy, you need a better way to ensure the health of you and your family without excessive copays, deductibles, and out-of-pocket costs.
Mira offers an affordable alternative to traditional health insurance for any type of person: full-time employees, part-time employees, contractors, and those who are unemployed. Memberships start at $45 per month and get you access to urgent care services, lab testing, and huge savings on prescriptions. Sign up today and get started on your path to affordable health coverage.
Alexis Bryan MPH, is a recent graduate of Columbia’s Mailman School of Public Health. She is passionate about increasing access to care to improve health outcomes. Outside of work, she loves to travel, read, and pay too much attention to her plants.