Health insurance has many coverage options

When it comes to health and disability insurance, there are so many choices — it can be mind-boggling. We feel your pain (no pun intended) and want to help by explaining some coverage options that may be available to you.

Health insurance defined

Let's start with the basics. What is health insurance? Health insurance pays a portion of your medical expenses if you get sick or hurt and need to visit a doctor. In exchange, you pay monthly premiums (payments) to your insurer.

Private insurance: Group vs. individual coverage

Private health insurance can be divided into two main categories: group coverage, which is provided through your employer, and individual coverage, which you purchase on your own.

Group plans usually provide more comprehensive coverage than an individual plan because more premiums are being paid into them. In other words, all the policies from an employer are pooled together, making it cheaper for insurers. Under group plans, you will more likely be covered for maternity care, preventive care, vision, and dental.

Individual plans are generally more expensive than group plans and often provide limited coverage. Although most states have created insurance pools so consumers can purchase coverage at slightly lower costs, the majority of people buy individual policies through the Affordable Care Act (ACA), also known as Obamacare. If you need this type of insurance coverage, check out your options at Healthcare.gov.

Public insurance: Medicaid vs. Medicare

There are also two main government-sponsored forms of insurance that should be noted:

Medicaid is a state-managed program that provides health insurance to those who cannot afford it. Eligibility is based on income.

Medicare is also a state-managed program available to seniors over the age of 65 and disabled adults who receive Social Security benefits.

Variations of health insurance plans

Whether you have group or individual coverage, you usually have a few plan type options to choose from (you should do your research on all the options available). To help get you started, here is a brief explanation of three popular plan types.

HMOs: Health Maintenance Organization (HMO) plans are built around an arrangement with participating providers in a network. If you stay within the network, usually based on where you live, costs are often 100% covered.

PPOs: Preferred Provider Organization (PPO) plans cover a specific hospital or physician network. PPOs will also cover out-of-network costs at a reduced rate. Once you reach your out-of-pocket limit (deductible), which is the max you pay in a plan year for covered services, a PPO provider will usually split the costs with you 80/20 (you pay 20% and your insurer pays 80% of medical expenses).

POS: Point of Service (POS) plans are a hybrid of PPOs and HMOs. POS plans often have reduced coverage for out-of-network medical services. You can usually use an in-network HMO and pay nothing, use an in-network PPO and pay a portion, or see a provider outside of the network and split the costs with your insurer after you have paid your full deductible.

How do you choose which coverage is right for you?

Most consumers base their plan type on the cost of insurance premiums, but you may consider asking yourself the following questions:

  • Are you and your family typically healthy?
  • How much will your deductible be?
  • Do you require coverage for any prescriptions?
  • Are there limits to what the insurer will pay?
  • Are there any policy provisions that increase your deductible?

The answers to these questions will help you decide which coverage option best fits your and your family’s needs.

Another kind of coverage that can complement your health insurance and help protect your wallet in the case of illness and injury is disability insurance.

Disability insurance defined

Disability insurance pays some or all of your salary if you become disabled and are no longer able to do your job. Disability can come from accidents or injuries on the job, or from an illness like cancer or a heart attack. This type of insurance can be purchased on your own or provided by your employer. The two main categories of disability insurance are short-term, which usually covers disabling injuries or illnesses for up to six months, and long-term, which could cover your salary for your entire lifetime.

The cost of disability insurance

Compared with other types of insurances, like life or auto, disability insurance can be expensive. The cost can vary depending on your occupation, health, and lifestyle. If you have a dangerous job (like a stunt person) or a preexisting health condition, you will likely pay higher premiums. However, the peace of mind that comes from knowing you will be able to continue to provide for your family should you become disabled may outweigh the costs.

Insurance can help protect your wallet against the unknown

Nobody can tell what the future will bring, but with health and disability insurance, you know unforeseen medical expenses will be covered. Medical bills are the number one cause of personal bankruptcy. Having health and disability insurance can mean the difference between an illness or injury being a pain or leading to financial ruin. Being prepared starts with being insured. Continue to educate yourself on other ways to financially prepare in case life throws you a curveball by downloading the MoneyLion app or visiting moneylion.com.