Understanding Your Health Insurance Policy

A health insurance policy can run the gamut in terms of what it does and does not cover. On one end of the coverage spectrum, there are policies that cover only catastrophic medical events. On the other end, there are policies that cover emergencies as well as routine and preventive care. All but the most basic of policies tend to cover hospital stays and doctor visits, but they vary in the portion of the expenses they cover. Most policies also offer some coverage for prescription meds, although this coverage is one of the more expensive health insurance policy options. You can find basic policy information below, or you can review common health insurance terms to familiarize yourself with insurance options.

Extent of Coverage

A standard healthcare policy will usually pay for sick care and emergencies. Depending on the type of health insurance policy you have, your medical expenses may only be covered if you visit in-network providers and facilities. For example, with an HMO plan, you are restricted to the doctors and hospitals that participate in the plan. Medical insurance policies also vary in their coverage of preventive care. The average policy will not pay for preventive care, although many HMO plans will. Finally, a basic medical insurance policy will not cover prescription medications unless you have prescription benefits included in your plan. If included, this coverage is usually subject to deductibles and co-pays, just as with doctor visits.
How Much Coverage to Buy

Consumers have an endless array of health insurance policy options from which to choose, and selecting the appropriate amount of coverage will depend on how you intend to use the policy and your comfort level with risk. If you want a bare-bones policy that will protect you from financial disaster in the event of a medical emergency, you can purchase catastrophic-only health insurance. This kind of policy will pay for major medical disasters but will not pay for day-to-day medical expenses. On the other hand, if you need to use your health insurance policy often and/or require expensive prescription medications, a more comprehensive POS, PPO, or HMO plan may be a better choice.
Types of Health Insurance Policies

A health insurance policy typically comes in four forms: an indemnity, HMO, POS, or PPO plan. These plans differ primarily in their coverage of preventive care, their use of in-network providers, and the policyholder's degree of financial responsibility. With indemnity plans, policyholders can choose any doctor or hospital and receive the same rate of reimbursement. For HMO, PPO, and POS plans, on the other hand, rates of reimbursement will be higher if policyholders use in-network providers. PPO and indemnity plans tend to allow the most flexibility, but they are also among the most expensive types of health insurance policy options.