First-Timers Guide To Health Insurance (With Examples)

If it’s your first time looking for health insurance, there’s a lot of terms you’ve probably never heard of. Luckily, you’re already taking the right steps to figure out everything you need to know about health insurance. This article will show you the basics of health insurance, and even give you examples to further explain everything. Here, you’ll find examples for everything you need to know about:

  • What a deductible is
  • What a premium is
  • How much health insurance you should buy
  • How much should you expect to pay for health insurance
  • Some more essential information on 2020’s open enrollment period

Open enrollment is only a little while away, and you only have a short time to find the perfect plan for you. If you get confused about anything, don’t be afraid to give Quote Purple a call and our partners can walk you through everything you don’t understand.

Also Read: The Ultimate Guide To Health Insurance 

What’s A Deductible 

A deductible is a set amount you pay before your insurance starts to cover your expenses. Plans with lower monthly premiums have higher deductibles. These types of plans are great for people who don’t access health care that often, but need coverage for emergencies and regular check-ups.

After you’ve paid off your deductible amount, you’ll only have to pay your copay or coinsurance while insurance covers everything else. Most plans will pay for certain services before you’ve paid off your deductible, including:

  • Regular checkups 
  • Disease management
  • Preventative services

Be sure to check your plan to know what other services are covered before you need to pay your deductible. It’s important to note that some prescriptions require you meet your deductible amount before your insurance covers the rest. Family plans often have both an individual and family deductible included in their coverage plan. 

For Example…

You buy an individual plan with a $2,000 deductible. Since you only use insurance for regular check ups, most of your services are covered by insurance throughout most of the year. However, you get in a water-skiing accident one summer day and break your arm. 

At the hospital, you’re given a $5,000 bill. You have to pay the entire $2,000 deductible before the rest of your emergency visit is covered. That $2,000 goes towards your bill, and insurance helps you pay for the rest.

Upon leaving, your doctor gives you a couple prescriptions to help with pain and infection management. The pain prescription has a $100 deductible you need to pay before insurance covers the rest. So the first time you fill that prescription, it’s completely out-of-pocket. However, your other prescription doesn’t have a deductible and is mostly covered when you get it.    

What’s A Premium 

Your premium is the monthly bill you pay for your insurance. You must pay your premium in order for your coverage to start. Keep in mind that you have other costs like copays, coinsurance, and deductibles to account for. All these things contribute to the total cost of your insurance. Having a plan with a higher premium is better if you have a chronic condition, or need to see a specialist. 

After you’ve enrolled in your plan, you’ll pay your first premium directly to your insurance company. Every insurance company is different, but most providers allow you to pay online or directly through your Marketplace account. 

For Example…

You normally have a clear-cut plan, you have a higher deductible, but a low monthly premium because you’re in perfect health. One day, you’re diagnosed with type one diabetes, and begin to need more out of your health insurance. 

The monthly premium on your old plan is $70, which covers about 60% of all your medical costs after your $2,000 deductible. However, insulin alone costs you $500 a month. On top of your equipment, specialists visits, and tests, you’ll need more than just 60% coverage. 

Altogether, monthly costs to maintain your diabetes is around $1,000. So you opt for a plan with a lower deductible and higher premiums. Your premium is now $200 a month, with only a $1000 deductible. This plan covers 80% of your medical expenses.

Over the course of the year, you’d collectively have $12,000 worth of medical expenses for your diabetes. With your old plan, you’d pay a total of $7,600 in both out-of-pocket and premium expenses. With your new higher premium plan, you’d only pay $5,800 in total. You’d save around 25% more in medical expenses with a higher premium plan.     

Also Read: A Guide For Recently Diagnosed Diabetes

How Much Health Insurance Should You Buy

Now that you understand the basic costs of your health insurance, it’s time to calculate how much insurance you’ll need. Start by making a list of all your prescriptions and doctors. If you have other dependents or family members that need coverage, consider their needs as well. 

If you find neither you or your dependents access care, you’ll likely be able to get away with a low-premium plan. The more care you need, the higher in coverage you’ll need. This means higher premiums, but lower out-of-pocket costs.

For Example…

If we look at our earlier example, Plan A had a total premium cost of $840 a year plus the $2,000 deductible. This means the total yearly cost for Plan A is around $2,840. 

Plan B had $2,400 in yearly premium expenses plus the $1,000 deductible. The yearly cost of Plan B would be $5,800. 

Now take the combined costs of all your prescriptions, doctors visits, and other medical expenses. Calculate how much you’d spend out-of-pocket with Plan A’s coverage (60%) and with Plan B’s coverage (80%). Add these amounts to each plan’s yearly costs. This will show you which kind of plan is better suited for you. 

Also Read: Step-By-Step Guide To Prepare For Open Enrollment 2021

How Much Should You Expect To Pay In Health Insurance

There are hundreds of plans available to you, all with different coverage options. When being quoted for health insurance, your insurance company will look at your:

  • Age and sex
  • Smoking habits
  • Type of plan and coverage
  • Where you live
  • How much you make

Check your state laws to see how your health insurance will be affected. You can get quotes for free during open enrollment on the Marketplace from November 1 to December 15, or you can call Quote Purple at any time for a free quote from one of our partners.

If you have health insurance through your job, take a look at some of the plans they offer. If you don’t have coverage through your job, you can always call Quote Purple to find more quotes. Remember to always compare quotes before you buy, and check out the Marketplace to find even more savings and plans. 

Also Read: Pros and Cons: Should You Ditch Your Employer’s Health Insurance?

More Information On 2020’s Open Enrollment Period

A lot has changed in 2020, and some of those changes have to do with your health insurance and open enrollment. Stay up-to-date on all the latest changes in our article below. 

Also Read: Open Enrollment 2021: Changes You Need To Know About 

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