Health Insurance Really Is Important, and Here’s Why
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Health insurance helps to reduce medical costs, making health care more affordable and thus more accessible.
Having health insurance also facilitates access to care, resulting in lower death rates and better health care outcomes. On a basic level, health insurance can mean the difference between sickness and health or even life and death.
The Institute of Medicine estimated in 2002 that a lack of health insurance led to 18,000 deaths per year, making it the sixth leading cause of death among people 25 to 64.
Benefits of health insurance and why it's important
- Helps pay for medical bills and prescription drugs.
- Helps you avoid large medical debt.
- Provides a cap on the most you could spend on health care each year.
- Contributes to a longer, healthier life.
- Connects you to a regular source of care.
- Helps in the detection and management of illnesses and diseases.
- Reduces financial concerns about medical costs.
- Eases health concerns about not having access to care.
- Eliminates stigmas associated with being uninsured.
Financial benefits of health insurance
One of the primary functions of health insurance is to make health care more affordable while protecting us from the financial repercussions of accidents and unexpected illnesses that can easily add up to thousands and thousands of dollars.
Healthy people and young adults may feel they don’t need health insurance, believing it is an expense they can forgo because they are rarely sick and have never spent a day in the hospital. But accidents and illnesses can happen to any of us at any time. Without health insurance, we are responsible for covering all of our medical costs, putting us at severe financial risk.
For example, a broken leg resulting from an unexpected fall can cost nearly $8,000 in health care expenses. Without insurance, you are responsible for that entire amount. But with a good insurance policy, you may only have to pay 20% of that cost, about $1,600.
The impact of having health insurance is even greater for more severe illnesses because it helps you avoid large medical debts and protects your financial assets.
A three-day hospital stay can cost more than $30,000 — costs that are untenable without the aid of health insurance to cover at least some of the costs. A cancer diagnosis can lead to hundreds of thousands of dollars in costs, resulting in financial ruin if we lack insurance.
In these major health situations, a health insurance plan’s out-of-pocket maximum will limit how much you spend on health care costs for the year. After your spending reaches this limit, the insurance plan will cover 100% of your costs for covered health services, no matter how much your medical bills total. You’ll still have to pay the monthly cost of the plan though.
Most insurance plans also provide prescription drug coverage, making prescriptions affordable and accessible for millions of people.
This plays a critical role in the care and management of chronic conditions and illnesses. More than 45% of the U.S. population relies on prescription drugs to manage illnesses and arrest disease progression, which helps to prevent costly medical complications, including hospitalizations.
But without health insurance, the cost of many prescriptions would be exorbitant — financially out of reach for millions of Americans.
Health benefits of having insurance
Health insurance links people to a regular source of care, giving them access to an infrastructure and a network of providers who are able to work with patients in delivering comprehensive, continuous and coordinated health care services.
Ultimately, people can live longer, healthier lives because of access to ongoing care. Most health care plans offer preventive services, providing many vaccinations and screenings at no cost, thus preventing illnesses and ensuing complications.
Health insurance also covers preexisting conditions. This means if you have a diagnosis before you enroll, you’ll still qualify for health benefits. With health insurance, it is much easier for both the patient and provider to focus on prevention and wellness as well as the management of acute and chronic illnesses, leading to better health outcomes and lower costs.
By the same token, a lack of health insurance has a reverse effect, leading to more sickness, higher costs and even death.
Health insurance provides peace of mind
Having health insurance can also reduce your stress. It creates a peace-of-mind effect, helping to alleviate fears about accumulating large medical debts.
At the same time, health insurance provides reassurances that you will have ready access to comprehensive care, eliminating fears of being shut out of the health care system. Health insurance also gives us a feeling that we are part of the health care system and that we are, in effect, taking care of ourselves by having a regular source of care that we can turn to.
There are other, less obvious but important benefits of having health care. Having health insurance, for example, results in less paperwork for the insured individual. Health plans keep medical records on their patients, documenting their current treatments and medical histories. As a result, the patient may not have to spend time filling out paperwork at the point of service. It is also easier to bill patients for services when they have insurance, eliminating time spent filling out financial forms.
Health insurance can also purge stigmas of being uninsured. People without insurance may feel marginalized or stigmatized. They may believe, for instance, that their lack of insurance is some type of failing on their part, a message to society that they cannot afford health insurance or they are irresponsible by not having it. As a consequence, they may be less likely to seek care and treatment until their condition or illness has progressed to a critical stage.
Conversely, insured individuals are much more likely to engage with the health care system, turning to their physicians for acute care needs as well as routine care such as annual physicals and screenings.
Costs to expect after signing up for health insurance
- Monthly premiums: Once you enroll in a plan, your premium is the amount you pay every month for your health insurance plan. The average cost of health insurance is about $600 per month for an individual enrolled in a benchmark plan under the Affordable Care Act (ACA). Your costs may be lower if you qualify for ACA subsidies or employer contributions to employer-based plans.
- Medical costs before your deductible: Your insurance plan’s deductible is the amount you pay for health care out of pocket before insurance coverage kicks in. For example, if you have a deductible of $2,000, you must first pay the $2,000 in medical bills in full before your insurance coverage starts.
- Copays and coinsurance for medical care after your deductible: After the insurance plan’s benefits kick in, the coinsurance or copay is the amount you pay every time you see a physician or fill a prescription. For example, your plan could have a $40 copay every time you see your physician, a $10 copay for each filled prescription or 20% coinsurance for hospitalization.
- Medical costs won’t be more than the plan’s out-of-pocket maximum: Your insurance plan caps how much you pay for health care with a benefit called the out-of-pocket maximum. After your spending reaches this amount, the insurance company assumes 100% of your medical costs, protecting you from limitless expenses. For 2025 ACA plans, the out-of-pocket limit can’t be higher than $9,200 for an individual and $18,400 for a family.
Downsides of health insurance and what to watch out for
High costs
- Plans can be expensive.
- Your medical costs are not eliminated.
- Some plans carry high deductibles.
Coverage restrictions
- Many plans limit your coverage to certain doctors and facilities.
- You can choose between plans, but you can’t choose what plans cover.
- You could sometimes have waiting periods for the care of preexisting conditions.
- Most health insurance will not cover elective procedures or new treatments.
Health insurance, while important, is not a panacea. It presents its own set of challenges and drawbacks.
For example, health insurance can be expensive, often stretching budgets to a breaking point with high monthly costs.
And even with the best insurance plans, you are responsible for for paying for some medical expenses including deductibles, copays and coinsurance.
There could be some years when you need little or no care, but you are still required to pay monthly premiums and other health-related expenses. In these cases, you may find yourself paying for coverage that you don’t use or need.
Plus, health insurance can have coverage restrictions and limitations. This can sometimes create gaps in care that undermine your treatment, making it important to read the fine print.
Increasingly, health plans are relying on more restrictive provider networks to control both utilization of services and costs, resulting in limited provider choices for the consumer.
Health insurance can come up short in other ways as well. Plans can impose a waiting period of 12 months before treating some preexisting conditions. Job-based plans can impose a waiting period of 18 months on some preexisting conditions for a late enrollee (an employee who has enrolled in a plan after the initial enrollment period).
In some instances, consumers may have little or no power when negotiating with health plans. For example, the policies determine which services are provided, which ones are covered and how much the insurance will pay. The insurance companies can also have an advantage during the appeals process if a claim is denied. And most health insurance will not cover elective procedures, brand-new technologies or off-label drug use — prescriptions used for a disease or condition the drug is not approved to treat.
Be cautious of short-term insurance plans
Some insurance companies tout the benefits of short-term plans, saying they are less-expensive alternatives for the uninsured. But these plans are not long-term solutions.
Short-term plans, unlike other insurance policies, do not have to adhere to the consumer-protection requirements of the Affordable Care Act (ACA). They are not required to cover preexisting conditions, and they can deny coverage altogether based on medical conditions. And because most plans have a very high deductible, most enrollees can still have high expenses for their medical care.
As the name suggests, short-term plans are best for temporary coverage, usually providing coverage for a year or less, bridging gaps in coverage. They are typically used for protection against catastrophic events until longer-term insurance takes effect or can be found.
How to find health insurance
Fortunately, there are relatively inexpensive and comprehensive insurance options available.
1. Employer plans
If you are employed, one of the first places to look for insurance is through your employer. Most people in the United States obtain health insurance through employer-based plans, which are relatively inexpensive because employers contribute to the cost of the plans.
2. Parents
Young adults under the age of 26 have the option of staying on their parents’ insurance plans in most states until shortly after their 26th birthday. Though eight states allow young adults to stay on even further.
3. Medicaid
The Medicaid program provides comprehensive health insurance to adults and families who have very low incomes, making it the best program for low-income health insurance. There is little or no cost for Medicaid, but beneficiaries are required to meet certain income and eligibility requirements to qualify.
About 7 million uninsured people could qualify for Medicaid or CHIP, but don’t apply, meaning they have no financial protection against medical costs.
4. CHIP
The Children’s Health Insurance Program (CHIP) is a program that provides comprehensive health care coverage to children only, under the age of 19 in most states. CHIP recipients typically earn too much to qualify for Medicaid but there are similar eligibility requirements which vary from state to state.
5. Health insurance marketplace
About 10 million people who are uninsured could qualify for health insurance marketplace subsidies to make the cost of a plan more affordable.
ACA marketplace plans are federally regulated and subsidized. To qualify, people are just required to sign up for a plan during an open enrollment period. While plans can be expensive, with the cheapest costing between $300 and $400 per month, most people seeking ACA plans qualify for subsidies to help defray the cost of premiums, deductibles and copays.
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Frequently asked questions
Is it worth it to buy insurance?
Having health insurance is a wise investment in your own health care, an investment that helps to keep you and your family healthy while making it easier to meet medical expenses. Being uninsured has been considered a leading cause of death among adults. So it is always a good idea to have insurance.
Why is health insurance so expensive?
Health insurance costs are driven, in large part, by costs of managing long-term medical conditions, the costs of caring for an aging population and the expense of new medicines, procedures and technologies. There also has been a trend toward consolidation in the insurance industry, resulting in fewer companies, reduced competition and ultimately higher health insurance prices.
What are the pros and cons of health insurance?
Health insurance carries both advantages and disadvantages. But the advantages far outweigh the disadvantages. Health insurance makes health care more affordable and more accessible, thus helping us stay healthy and ultimately live longer lives. However, health insurance can be expensive, you’ll still have some costs for medical care and plans can have coverage restrictions.
Editorial note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.