Health insurance has been in the news since…well, since health insurance was introduced in the 1850s and greatly expanded after World War II. An affordable option in the past, today’s health insurance can cost people more than their mortgage on a monthly basis, especially for those with chronic afflictions. It became a major focal point when health care reform was approved a few years ago.
In addition to being newsworthy, health insurance can be confusing. High and low deductibles, government sponsored programs and savings accounts all factor in to how a young family spends and saves for their health. One not familiar with many of the acronyms flying about could end up spending more than they first thought for a simple doctor’s visit or a long-term hospital stay. This can wreak havoc with a family’s budget and could lead to deeper financial issues. To help get a handle on some of the terms, here are a few of the more common ones to be come familiar with.
This is short for the Affordable Care Act, the linchpin in health care reform. Also known as Obamacare, the ACA allows non-insured citizens to purchase health insurance through the federal government or a state agency that works in conjunction with the federal side. Programs offered are at the same or lower cost of those programs offered by companies like BlueCross or Aetna. What program you and your young family qualifies for is determined by age as well as salary.
Not a health insurance program per se, the Health Care Savings Account can assist in paying for some of the expenses not covered by a health insurance company. Young families can sign up for this type of savings account through their employer or an outside source. If through an employer, pre-taxed money for the HCSA is transferred directly from a paycheck. Any extra expenses can be paid through this manually or via automatic deduction. Another advantage of an HCSA — it reduces the amount of taxable income that needs to be filed in your annual taxes.
This is the acronym for the High Deductible Health Plan. This is a program with lower premiums for various medical visits and treatments. However, it also has a very large deductible for individuals as well as a family. We’re talking $5,000 or more for individuals and $10,000 or more for a family. This type of plan is good for individuals who are rarely sick and can afford to pay higher up front fees. It does not work for those with lower incomes who may have younger children more susceptible to illness.
HMO & PPO
The two most common acronyms in health insurance. A Health Maintenance Organization (HMO) is one that arranges medical care for their insured. They normally tell the customer what doctors or medicals they can go to for their treatments. A HMO normally requires a referral if the insured needs to visit a specialist. On the other hand, a Preferred Provider Organization (PPO) allows the insured to select any medical professional whether they’re inside or outside of their network. This provides more flexibility to the customer and may allow them to stay with existing doctors and hospitals.