Types of Health Insurance Coverage

Instructor: Yuanxin (Amy) Yang Alcocer

Amy has a master's degree in secondary education and has taught math at a public charter high school.

Read this lesson to learn about the different types of health insurance you can purchase. Learn what basic health insurance covers along with what types of extra insurance you can purchase to cover your medical needs.

Health Insurance

Medical bills can get very expensive, especially when you don't have health insurance. Health insurance is insurance that pays some or all of your medical expenses. So, when you go to the doctor or need to stay at a hospital, your health insurance will pay for a portion of the costs. For example, many health insurance policies cover your routine doctor visits, but expect you to pay a co-pay amount. If your co-pay is $25 per visit, that is all you need to pay to see a doctor even if your doctor normally charges $175 per visit. You end up saving $150 per visit by using your health insurance. As you can see, if you didn't have health insurance, your medical costs can easily increase and get out of hand.

Let's meet Sarah. She's in the process of shopping for the right health insurance policy. Let's see what she finds. She's getting her health insurance through her employer, so her health insurance company choice is limited to the ones her employer has chosen.

As she's looking through the choices for health insurance, she notices she can choose between an HMO (health maintenance organization) plan or PPO (preferred provider organization) plan. She reads more about these choices and finds that with an HMO, she can only see doctors inside the HMO network, whereas with a PPO, she can choose any doctor she likes. Sarah chooses the PPO plan since she wants to choose her doctor.

Another choice she needs to make involves the coverage amount. The policies offered through the employer provide different levels of coverage. The lowest level only covers just three doctor visits a year and only pays 50 percent of her medical costs. The highest level allows unlimited medical visits and pays 90 percent of her medical costs. But of course, the higher the level of coverage, the higher the monthly premiums are. Premiums are the payments made to the insurance company for the plan. In other words, they are the cost of the health insurance coverage. Sarah's employer only pays a portion of her monthly premiums, leaving her responsible for the remainder.

This insurance that Sarah is looking at is basic health insurance and covers basic things such as preventive care, hospitalization for surgery and other hospital stays, emergency services, pregnancy and maternity care, prescription drugs, lab services, outpatient care, physical therapy services, and pediatric care if applicable. For Sarah, this covers pretty much all the medical needs she can foresee that she needs.

Extra Insurance

But, she's not done yet. Sarah has additional insurance choices she can choose to add.

Hospital Indemnity Insurance

She can choose to add hospital indemnity insurance. This additional insurance will pay her directly when she needs to be hospitalized. This payment can help her pay for her out-of-pocket expenses resulting from the hospital stay. For example, this insurance may pay her $2,000 for a five-day hospital stay.

Long-Term Care Insurance

Sarah can also purchase long-term care insurance. This insurance will pay a daily amount to cover daily care services such as bathing, dressing, and eating if Sarah needs long-term care services in the future. Unfortunately, if Sarah is currently needing long-term care, then she may not quality for this type of insurance.

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