Health Insurance Basics: Why Do We Need Health Insurance?

A health insurance policy covers you in the case of health-related conditions such as a disease or an illness.  It pays the medical expenses you incurred if you were a victim of an accident.  The insurance company makes your financial risks manageable by paying an agreed sum of money to the concerned person.  It protects people from the risk of financial loss caused by the exorbitant cost of medical care, and caters for both long-term and short-term illnesses.  The skyrocketing price of hospitalization for medical care could put you and your family at risk from bankruptcy if you lack health insurance.  The health insurance policy is an agreement by your insurance company to cover the cost of benefits covered in your policy. 

In the United States, many people get health insurance through their employers, and often through managed care plans that contract with health care providers and facilities to provide health care at reduced costs to its employees.  You can buy your own health insurance but it may cost you more.  Government health insurance, Medicare and Medicaid, is available to individuals who meet certain criteria. 

The health insurance marketplace can confuse people with ‘insurance jargon’ like deductibles and co-pays.  Less than a quarter of insurance policyholders are familiar with the insurance terminology.  Consumers take short-cuts when they get overwhelmed leading to wrong choice of insurance, or they may not purchase health insurance at all.  Understanding the information is important so that it is not dismissed as unimportant.  A consumer-friendly health insurance market with a simplified application process will increase the number of health insurance purchasers.

Rising Insurance Premiums

Due to rising cost of health insurance, it is out of reach for millions of families and businesses across the country.  The cost of health insurance has increased by an astounding 131 percent over the last 10 years.  President Obama passed the Affordable Care Act in March 2010 to provide affordable care to Americans.  With the passage of the law, several changes have come into effect for Americans looking to purchase health insurance.  The law will benefit millions of Americans and provide insurance for pre-existing conditions.  For the third year in a row, the health insurance companies are recording profits with ever-increasing insurance premiums.  Beginning September 1, 2011, rate increases by insurers in all states will undergo independent review by experts to justify the increase is warranted.  This process of rate review requires health insurance companies to justify the increase per year.  The Department of Health and Human Services’ (HHS) recent regulation will bring scrutiny and transparency to the insurance market through rate review, better information for consumers, and provide support and resources to states to conduct reviews. 

Uninsured Unable To Pay Hospital Bills

Approximately 50 million Americans are uninsured, and most of them have very little savings.  A new report shows that very few uninsured families can afford to pay more than 12 percent of their medical bills.  “One of the most enduring myths in American health care is that people without health insurance can get care with little or no problem.  Nothing could be farther from the truth,” said HHS Secretary Kathleen Sebelius. “The result is families going without care – or facing health care bills they can’t hope to pay.  When the uninsured cannot afford the care they receive, that cost must be absorbed by other payers.  This is why expanding access to affordable health insurance under the Affordable Care Act is so important.”  Under the new law, businesses and families get additional benefits, some of which include: 

• Up to 4 million small businesses are eligible for tax credits to help them provide insurance benefits to their workers.  The first phase of this provision provides a credit worth up to 35% of the employer’s contribution to the employees’ health insurance.  Small non-profit organizations may receive up to a 25% credit.
• Under the new law, young adults can stay on their parent’s plan until they turn 26 years old.
• Pre-Existing Condition Insurance Plan:  The Affordable Care Act creates a new program called the Pre-Existing Condition Insurance Plan (PCIP).  Under this plan, you are eligible for health insurance if you have been previously denied coverage by insurance companies due to a pre-existing condition.  With this program, you can get coverage until 2014, after which you have access to affordable health insurance choices through a new competitive marketplace called an Insurance Exchange.  The exchange cannot discriminate you based on a pre-existing medical condition.

You can get additional information regarding everything you want to know about health insurance here.