Family Health Insurance
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- Last Updated: Friday, 09 October 2020
Personal health insurance plans can often be expanded to provide coverage for the entire family. If a household is growing, and there’s a need to purchase additional health insurance, there are several important factors to consider before buying a policy or adding family members to an existing policy.
Family Health Insurance Basics
As is the case with many types of insurance, it’s necessary to strike a balance between what a family can afford to buy, and the depth of health care coverage required in an insurance policy. The basic relationship between coverage and cost of insurance is straightforward: the more coverage in the policy, the higher the cost of the insurance.
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Another driver of cost is the demographics of family members being added to an existing policy. A member’s age, gender, and the use of tobacco products are important variables in developing a quote for a new policy.
Health Insurance Policies
There are really only two types of health insurance policies that everyone can buy for their family. The first is called a fee-for-service or indemnity plan, the second is a managed care network, often called a health maintenance organization, or HMO. There are many variations between these two ends of the spectrum, but if these two types of policies are understood, then hybrids such as the point of service or POS plan is easier to understand.
Fee for Service Plans
Fee-for-service plans, also known as indemnity plans, offer policyholders the most flexibility. Unfortunately, that additional flexibility comes at a cost. A fee-for-service plan allows participants to freely choose their medical care providers. Participants usually pay for services at the time they are rendered, and then submit paperwork to their insurance companies to obtain a reimbursement payment.
Indemnity plans may be the better choice if the following statements apply:
- I’m willing to pay more to have complete freedom in choosing doctors and hospitals.
- I travel a lot, or my children live away from home, and we may need to see doctors in other parts of the country.
- I don’t mind filling out health insurance forms or keeping receipts and sending them in so I can be reimbursed for payment.
- I am willing to pay for the extra cost of routine and preventive care such as checkups and vaccinations.
- I don’t want to have to see my primary care physician each time I need to see a specialist. If I need to see a specialist, I might ask my doctor for a recommendation, but I want the freedom to decide whom to go to, and when.
Managed Care or HMOs
Managed care networks or HMOs are the second type of family health insurance offered for purchase. Although the premiums, and out-of-pocket costs, are usually lower with an HMO, policyholders will give up some flexibility. With an HMO plan, participants are limited in their selection of medical providers, and usually pay a nominal fee, called a copayment, at the time health care service is rendered.
An HMO plan may be the better choice if the following statements apply:
- I’d like to try to hold down my insurance costs, even if it means limiting some of my choices.
- I don’t travel a lot, and almost all the care for my family will occur near our home.
- I don’t like filling out forms or keeping receipts. I want most of my health care services covered without a lot of paperwork.
- It’s important that my health plan includes routine and preventive care.
- I don’t mind waiting for services to be scheduled, or waiting for an available appointment with my doctor.
- I don’t mind if I have to work with my primary care doctor for a referral to a specialist. If my doctor doesn’t think I need to see a specialist, then that is fine with me.
Health Insurance Quotations
Once the basics of health care coverage are understood, the next step is to shop around for insurance quotations. When comparing quotes from different companies, or even comparing quotes from the same company for different levels of coverage, there are a couple of things to keep in mind.
The best way to calculate the overall cost of insurance is by using some historical information. For example, the number of annual doctor visits, and types of medical services rendered in a “normal” year can be used to compare policies.
When comparing costs, keep in mind the premiums quoted are not the only out-of-pocket expense incurred. Generally, there are three other variables to consider when choosing a health insurance policy: deductibles, coinsurance payments, and insurance co-payments.
Insurance Deductibles
A patient’s monetary responsibility for medical expenses is referred to as an insurance deductible. These costs usually apply to a fee-for-service health insurance policy, and are paid in-full by the policyholder. Only after a deductible is fully satisfied does the insurance company start to share in the expenses of providing medical services.
Coinsurance Payments
Coinsurance is a second form of shared medical expenses between the policyholder and the insurance company. These payments typically apply when the patient is enrolled in a managed care plan such as a health maintenance organization. Coinsurance is a sharing of medical expenses when the patient goes outside the list of network providers associated with their medical plan, if the plan allows.
For example, if the coinsurance on a plan is 30%, this means the patient is responsible for 30% of the medical costs when treatment is provided outside of the network. Coinsurance is usually applied after a deductible is first satisfied.
Insurance Copayment
Insurance copayment is a small, or nominal, fee that is usually paid at the time medical services are provided under managed medical plans such as health maintenance organizations. Typical copayment amounts are in the range of $15 to $35.
Free or Low Cost Health Insurance
If a family is expanding, and the affordability of health care insurance for the new member is uncertain, the U.S. Department of Health and Human Services sponsors a program known as Insure Kids Now! Through federal funding, every state has a health insurance program that covers infants, children, and teenagers.
The typical low cost or free health insurance coverage under the Insure Kids Now! Plan includes:
- Doctor Visits
- Prescription Medications
- Hospitalization Coverage
Children that do not currently have health insurance are likely to be eligible, even if a parent is employed. Each state will have different eligibility rules. In most states, uninsured children 18 years old and younger whose families earn up to $50,000 a year (family of four in 2020 / 2021) are eligible. Families can call 1-877-KIDS-NOW toll free for more information or visit the Insure Kids Now website to find out if they’re eligible for this important program.
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