How does health insurance work in the USA?

- Why is it needed?

A few months ago, I was having a discussion about health care with a friend. During the discussion, one of the replies that stuck to me was- “In some countries, there is a courtesy to ask people in an accident if they want to call an ambulance depending on the situation”. At first, I was confused. It later hit me that the costs of healthcare in the USA are so expensive that if a person does not have any health insurance then he can go bankrupt because of the treatment costs. A single doctor’s visit may cost up to hundreds of dollars and an average two or three-day hospital stay might cost thousands of dollars. Many of us can't afford this. Health insurance offers a way to reduce these costs to a more reasonable amount.

- How does it work?

The consumer pays an upfront premium to a health insurance company. The upfront premium can be annual/ quarterly/ monthly depending on the plan you choose. It is like a membership you pay to keep your health insurance plan active. In simple words, there are 3 stages of health insurance -

In 1st stage you pay, 2nd stage you pay some and the health insurance company pays some. In the 3rd stage, the insurance pays the remainder.

At the beginning of the year, you pay until your deductible amount is reached. If your deductible amount is $1000 then every time you visit a doctor, you pay for the service until you meet your deductibles. After you reach your deductible amount, the 1st stage is complete. Let's say you have reached your deductible limit of $1000. After the deductible limit is reached, the 2nd stage starts. The next time you visit a doctor, you will be required to pay
1) A certain copay per visit
2) A certain co-insurance per visit from the total costs, and the insurance pays the rest. Now after a few visits, if you reach a certain limit(this is called ‘out of pocket maximum’. The 2nd stage is completed), you won't have to pay for any services. After the out-of-pocket maximum is reached, the 3rd stage begins, the insurance covers 100% of the health care charges that are included in the plan.

- Important questions you should ask before making a decision about health insurance

1. Where can I receive care?
Not all health care centers accept all types of health insurance. Many insurance companies contract with a specified network of providers that have agreed to supply services at a more favorable price. To avail the insurance benefits, you must ensure that the treatment that you receive is covered by the health insurance plan.

If the service provided is not in the plan’s network then the insurance company may not pay for the services or might pay a smaller amount. This means that you will be paying the rest of the amount. So, while buying health insurance, make sure that your health plan can be used at least in the nearby health care centers.

2. What does health insurance cover?
Example - Some plans cover ‘prescriptions’ others don't. Other services you should check are:
Emergency services
Hospitalization
Laboratory tests
Pediatric services( including dental and vision care)
Prescription drugs
Preventive services (for example - some immunizations)
Management of chronic diseases
Mental health and substance abuse treatment
Maternity and newborn care
Outpatient care (other services you receive outside of a hospital)
Rehabilitation services

3. How much will the health insurance cost?
Apart from the premium upfront costs, there is also a typical cost when you access care. These costs include deductibles, coinsurance, and co-pays. These costs have to be paid by the consumer when you receive any type of health care. A general rule is that - the more premium you pay upfront, the less you will pay when you access health care. Dental and ophthalmologists(eye specialists) are not included in most health insurance. You will have to opt for additional insurance for these. For Example - In the San Francisco bay area, the health insurance premium costs around $3,000 per year.

- Important terms to know -

1. Annual deductible:
The amount you pay each year before the insurance company starts paying its share of the costs. Example - If the deductible is $2000 then you would be responsible to pay the 1st $2000 in the health care you receive each year, after which the insurance company would start paying its share.

2. Copayment (popularly known as ‘copay’):
Copay is a fixed upfront amount you pay each time you receive health care. Example - If your plan has a copay of $30, then it means that each time you visit a doctor that accepts your health insurance, you will have to pay $30 upfront. After which the insurance company pays the rest of the charges.

3. Coinsurance:
It is a percentage of the treatment you will have to pay after the deductibles. A deductible is the fixed amount you pay for medical services and prescriptions before your coinsurance kicks in fully. Example - For a medical scan that costs around $1000, you might have to pay 20%($200) as Coinsurance. Your insurance company will pay the rest of the $800.

4. Annual out-of-pocket maximum:
It is the maximum cost in a year for which you will be responsible. It is the total of deductibles, copays, and coinsurance. Note that this does not include an upfront premium. Once you hit this limit, the insurance will cover 100% of the covered costs for the remaining year.

5. Annual coverage limit:
The maximum amount the health insurance company can pay per year.

Every university has a recommended health care plan for international students. Make sure the plan covers the medical treatments you might need in the future. The university would also have a health insurance official to whom the international students may contact upon any queries. Since, in my opinion, the health insurance plan is the most important item on the study abroad checklist, do not hesitate to ask your questions to the university official.

Stay safe and Good luck !!


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