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Health insurance works by protecting your assets from the high cost of Medicare. Without it, your life savings could be wiped out entirely with a $ 300,000 medical bill.

It is very complicated and many people feel confused and upset with this process. Here's an explanation of health insurance and how it became the dominant delivery vehicle for health care in America.

Why do you need health insurance?

Health insurance is necessary for Americans to pay for exorbitant health care costs. You generally need it unless you are very rich, over 65, or very poor. The wealthy can even afford the costs of unusual emergency or chronic medical care. People 65 and older generally qualify for Medicare. The extremely poor can sometimes qualify for Medicaid.

Everyone else must buy health insurance or risk medical bankruptcy. Since it is so popular, many people have lost its main purpose. It is like insurance for your car, house or apartment. Your lifetime savings are supposed to protect you from the devastating costs of a major accident, medical emergency, or chronic illness.

However, unlike other insurance, health insurance allows you to get that medical care when you need it. If you don't have car insurance, you can take a bus to have your car repaired. If you break your leg, you won't be able to do it yourself until you have enough time to go to the doctor.

How to choose health insurance

Health insurance companies offer many options. But before selecting a plan, you need to dig into various combinations of deductibles, copays, coinsurance, and premiums.

  1. Monthly charges. Like car or home insurance, you pay that amount even if you don't file a claim. This provides a cash flow for insurance companies to pay for your daily expenses.
  2. And with a discount. This is what you pay before the insurance company contributes a penny. They are annual, which means that it starts again on January 1 of each year.
  3. Joint payment per visit. The usual shared fee could be $ 20 for a doctor visit, $ 50 for a hospital visit, and $ 10 to $ 40 per prescription. You pay 100 percent for the visit until the deduction is met.
  4. Joint insurance. This is a percentage that you pay for procedures, such as surgeries or hospitalizations. If your doctor visits you in the hospital, you may pay a copayment for the visit and coinsurance for the hospital stay.

Why do insurance companies impose deductibles, copays, and coinsurance? They want to prevent you from going to the doctor with every inhalation. They were concerned that if healthcare were 100% free, its costs would increase dramatically. The Affordable Care Act says these out-of-pocket costs cannot exceed the maximum amount set each year. For 2020, it was $ 8,150 for individuals and $ 16,300. After that, the insurance company pays 100 percent.

All of these options make choosing health insurance very difficult. You must be a probability maker about your health.

For example, you might be willing to pay a higher monthly premium for a lower coinsurance rate and / or deductible. This would make sense if you have a chronic illness, such as diabetes, and you know you will see a doctor often.

On the other hand, healthy people may want the lowest possible premium and the highest discount. They are willing to take the opportunity to pay more for health care because they believe the opportunity is small. The lower the deductible, the higher the premium, copayment, or coinsurance. As health care costs rise, more people are opting for more discounted plans just to have their monthly payments close at hand. Obamacare has failed to correct this fundamental flaw in the health insurance system.

Why the United States Relies on Health Insurance to Pay for Health Care

Before World War II, most Americans did not have health insurance. The policies found only cover the cost of room and board in the hospital. After the war, the federal government imposed a wage freeze to curb inflation. But this means that companies cannot give raises to get better employees. Instead, they offered benefits that included health insurance.

In 1954, the Internal Revenue Service made health insurance premiums non-taxable. This generated an extra dollar for health insurance, more than a dollar in taxable wages. The Tax Policy Center estimates that this tax break alone increased America's deficit by $ 273 billion in 2019. But politicians are unlikely to be reelected if they propose to eliminate it.

This is especially true because this tax cut is like offering state insurance support to the upper middle classes and the wealthy. The Center for Tax Policy found that the average eligibility for the health insurance tax credit was approximately $ 254 for a household in the 12 percent tax bracket. But the benefit is $ 347 for those in the 22 percent tax bracket.

Alternatives to health insurance

Many countries have adopted universal health care. This is where the government pays for health care, just as it pays for education and advocacy. It's like expanding Medicare or Medicaid for everyone. When Canadians go to the doctor or hospital, the government assumes most or all of the bill. The downside is that it can take a long time to see a specialist or have a non-emergency operation. On the other hand, you don't have to worry about dying from illness, as you can't afford treatment.

When Hillarycare tried to implement universal health care in America, it was defeated by the medical profession and health insurance companies. Obamacare was initially offered as comprehensive healthcare. But different interest groups and politicians altered this objective.

Access to healthcare today has become part of the American dream. Research has found that the higher your income, the better your health. As a result, income inequality has led to inequality in health care.