What is Health Insurance and Why Do We Need It? My Canadian Pharmacy Guidelines

Posted on May 11, 2017

Health insurance is a kind of insurance that covers the cost of an insured individual’s medical expenses.

Health Insurance

Why do we need health insurance?

  • Medical insurance helps to avoid excessively high medical expenses (to reduce expenses) for medical care in the event of serious problems. No one plans to get sick or get injured, but at some point most people need treatment for trauma or illness, and medical insurance helps pay these costs. By purchasing health insurance, you provide yourself protection in case you need medical care.
  • Insurance helps to reduce the cost of medical care, due to the fact that doctors in the network of the insurance company agree to pre-agreed prices for their services. Even if you have a medical insurance with a high franchise and it does not pay anything until you pay the franchise, the presence of insurance allows you to automatically get a very significant discount (the discount often goes up to 90%).

The main factors that you need to consider when choosing a health insurance plan:

  1. Insurance premium – monthly payments that you pay for using the health insurance plan. The insurance premium must be paid monthly, regardless of whether you applied for medical help this month or not. Typically, the higher the insurance premium is, the lower your non-refundable costs for medical services are.
  2. Type of insurance – HMO, PPO, EPO, POS, Indemnity. What type of plan is the best for you? Most insurance companies offer three types of insurance coverage plans: HMO, PPO, and EPO. Also, there are POS and Indemnity. These plans determine the services, doctors and hospitals you can use.
    Maximum out-of-pocket expenses is the maximum amount that you may need to pay within a year. This is a very important factor!
  3. Doctors in the supply chain. Each health insurance plan concludes contracts with certain doctors and hospitals. The services of doctors and hospitals outside the network of plan providers can cost you much more. Check whether the doctors whose services you are using are a part of the plan providers network. As a rule, the narrower the network is, the cheaper the insurance premium is.
  4. Medicinal form. Read the medicinal form (the list of covered medications) to see if it contains the medicine you are taking and how much you will need to pay for it.
  5. Non-refundable or uncovered expenses. This is the cost of medical care that are not reimbursed by the insurance plan. Non-refundable expenses include deductibles, co-payments, and joint insurance payments:

    • Deductible is how much you need to pay before the insurance coverage begins to work. The health insurance plan pays your bills over this amount. In some plans, a franchise is not provided. The deductible may not apply to all medical services. For example, a franchise is not usually applied to preventive services. Also, a higher deductible is possible when using medical out-of-network facilities. This is a very important factor;
    • Co-payment is a fixed amount that you pay for each visit to a doctor, for a medicine or other service. The balance of the cost is covered by your health insurance plan. For example – $ 40 for a visit to a specialist, or $ 100 for a visit to an emergency center;
    • Joint insurance payments (co-insurance): you pay a certain percentage (for example 20%) of the cost of the service, and the rest is covered by your health insurance plan. The possibility of co-insurance is not provided for in all plans.

More about types of health insurance

  • Health Maintenance Organization (HMO). You are obliged to visit doctors, specialists or medical institutions that have concluded a contract with HMO (except for emergency care). Also, you must choose the primary physician, who should give directions to specialists. HMOs usually have the lowest insurance premiums;
  • Exclusive Provider Organization (EPO). The same thing as HMO, but you do not have to choose the primary physician and receive referrals to specialists. You are obliged to visit doctors, specialists or medical institutions that are a part of the plan’s network;
  • Preferred Provider Organization (PPO). You can be treated both on the network and outside it. In the network, you will get more favorable terms. If you go to a doctor outside the network, most likely you will have to pay extra, and the conditions will be less profitable for you. PPOs generally do not require a referral from a therapist to specialists. As a rule, the network of doctors at PPO is much wider than the network of doctors at HMO or EPO;
  • Point of Service (POS) Plan. Something intermediate between HMO and PPO. You should have a therapist who will give directions. But he can direct you outside the network.

In addition, there is also the so-called Indemnity, which simply pays some percentage of the costs, but such plans are very rare.

What services are covered by health insurance?

The insurance policy covers the covered types of medical services and treatments, as well as the amount of insurance company payments for different types of treatment in different situations. A standard medical policy provides access to preventive services such as vaccinations and physical examinations to support your health. Many plans also cover prescription drugs.

Some types of medical services:

  • Visit to the therapist;
  • Visit to a specialist;
  • Visit to an emergency center;
  • Transportation in the ambulance;
  • Diagnostic institutions;
  • Labs;
  • Ambulatory treatment;
  • Hospitalization;
  • Medicines;
  • Psychiatric care;
  • Others (acupuncture, all sorts of medical durable medical equipment, home care, transport).

How to get health insurance?

  1. Purchasing insurance at work, as a rule, is the most profitable option. Employers receive tax deductions for the provision of health insurance, and therefore almost all do so.
    Plans at work are divided into:

    • Employee Only;
    • Employee + Spouse;
    • Employee + Children (an employee with an unlimited number of children);
    • Employee + Family (worker + spouse + children).
  2. State programs provide insurance for many categories of citizens. Individuals over the age of 65 receive Medicare state insurance. Also, there are other insurance programs for different segments of the population who need support (children, disabled, poor).
  3. Also, you can buy insurance from numerous brokers, or on HealthCare.gov or eHealthInsurance.com