Health insurance basics

Health insurance basics
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Unless you're a millionaire and can pay for your health care out of pocket, health insurance is a crucial purchase. The time to buy it is before you have an accident, suffer a serious illness or discover you're pregnant.
Individual health insurance doesn't cover health care for medical problems or conditions that start before the date you were issued a policy, although there are now Pre-existing Condition Insurance Plans available from the government. Finding adequate coverage might seem overwhelming, but knowing the basics can help make your search less daunting.
Much of the information below will change in the coming months and years as health reform laws kick in. Here's a health reform timeline of what to expect.


Your employer doesn’t have to provide health insurance
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There are no state or federal laws requiring private employers to offer health benefits to their workers. However, many employers offer health insurance as a way to attract and keep workers. When group health plans are offered, they are then subject to a variety of state mandates about what benefits must be included, unless the employer is self-insured (meaning it pays the claims costs itself, not an insurance company).


Bridging the insurance gap
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The federal COBRA law (Consolidated Omnibus Reconciliation Act) could provide you with a much-needed short-term safety net. COBRA allows workers to keep their group health coverage if they lose their jobs, provided they pay the full premium and a small administrative fee. It applies to those firms with 20 or more workers and generally lasts for 18 months.

Buying continued coverage through COBRA won't be cheap. For more information, see know your COBRA rights.
Another federal law that offers some protection to workers switching group health plans is HIPAA (Health Insurance Portability and Accountability Act). HIPAA imposes limits on the extent to which some group health plans can exclude coverage for pre-existing conditions. For instance, if you've had "creditable" health insurance for 12 straight months, with no lapse in coverage of 63 days or more, a new group health plan cannot exclude your pre-existing conditions. It must cover your medical problems as soon as you enroll in the plan. See the HIPAA law: Your rights to health insurance portability.
Other ways to buy health insurance when you're between group health plans include short-term health insurance and major medical health insurance.
Primer on individual health insurance

Primer on individual health insurance
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If you can't buy group health insurance through work, you may be shopping for a private-market health plan (a.k.a. individual health plan). Unlike group plans, in which the costs and risks associated with health care are spread among many people, individual health policies are "medically underwritten" to take into account your personal health history, occupation, age and gender. Any "pre-existing" condition such as heart disease, diabetes and even pregnancy can nix your chances of acceptance or boost your premiums. Some states require individual health insurers to offer everyone a plan regardless of their health conditions, a mandate known as "guaranteed issue."

No matter what your age, there are several federally sponsored programs to help you if can't afford the premiums for individual health insurance, providing you meet eligibility guidelines.
Medicare: A health insurance program for people age 65 or older, certain younger people with disabilities and people with end-stage renal disease.
Medicaid: A program for the poorest individuals and low-income families with children.
State Children's Health Insurance Program (SCHIP): Plans that provide health care to children whose parents make too much to qualify for Medicaid but earn too little to afford individual health insurance. Some states extend their SCHIP plans to include parents and pregnant women.

Making sense of alphabet soup
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Whether you're buying individual or group health insurance, there are several health plan varieties, including traditional indemnity fee-for-service (FFS) plans, health maintenance organizations (HMOs), point of service (POS) plans and preferred provider organizations (PPOs).
Each plan has its own features to consider before making your choice. HMOs, PPOs and POS plans fall under the umbrella of "managed care" plans, which emphasize cost-effective medical care.

Fee for Service (FFS), also called indemnity
FFS coverage offers flexibility in exchange for higher out-of-pocket expenses, more paperwork and higher premiums.
FFS advantages
You may choose your own doctors and hospitals. There are no networks.
You may visit any specialist without getting permission from a primary care physician (PCP).
Most FFS plans have a cap, which is the most you will have to pay for medical bills in any one year. You reach your cap when all your out-of-pocket expenses (deductibles and co-insurance) total a certain amount. The insurance company then pays 100 percent for anything covered under your policy. The cap amount doesn't include your premium.



How to find an individual health plan
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Your first step in researching health coverage is look at coverage options and price quotes online or to contact an insurance agent in your area.
You should discuss with your agent your own particular health insurance needs. Think carefully about what coverage you must have. Is your doctor in the network? How much will you pay out of pocket for a routine check-up? How much could you pay out-of-pocket if you have a hospitalization? Are well-child visits included? Do you need prescription drug coverage? What about dental coverage too? See tips for buying individual health coverage.