Several years ago, I was in-between jobs and I wasn’t comfortable going without health insurance... what if I got hit by a bus? So I used some savings to pay for my old job’s health plan under COBRA. In the end, I only had to pay the premium on my own for two months – and I didn’t get hit by a bus.I remember being handed a giant packet of paper when I got my first “real” job, and the health plan documents were completely intimidating. I tried to read it carefully and make sense of it all, but mostly, I hoped to stay healthy so I wouldn’t need to dive any deeper into what seemed a complicated mess.
I was lucky that my head-in-the-sand attitude didn’t cause me any big problems – but I don’t recommend that approach! Your health and financial future are too important for a “hope for the best” method.
If you’re still in school or younger than 23, there’s a good chance you’re covered under your parents health insurance plan. But that doesn’t let you off the hook – it’s still important for you to understand how insurance works so you're ready when the time comes.
Let’s start with some definitions. When you think about insurance plans, you probably think of the benefits package your employer offers, right?
- Group plans spread risk (and costs) out over a larger group of people, and this can mean more affordable coverage for you.
- An insurance policy spells out the rules for your coverage plan. The insurer charges a premium to cover the costs of offering an insurance plan. Some employers pay the entire premium for you; others might pass on all or part of the cost to you, usually taking a certain dollar amount of your paycheck.
- A deductible is the amount of money you need to pay on your own before your insurance kicks in and starts paying for things. Often, a lower deductible means a higher premium.
- Your policy might require a co-pay – that is, once you reach the deductible, they’ll pay a certain percentage (often 80%) and the other 20% is your co-payment.
Okay, now that we've cleared that up, let's take a look at the types of plans that are out there.