Medical Insurance for Teens - Part 1
by Kashvi Mahesh
Introduction
Health insurance ranks as one of the most significant yet misinterpreted financial mechanisms at the disposal of an individual and a family. In the case of teenagers, having knowledge about health insurance means much more than just gaining information about an important topic; instead, it becomes an integral part of financial education. Knowing your rights and obligations regarding health insurance can be a determining factor in paying for healthcare services without running into financial troubles.
As stated by the Kaiser Family Foundation (2023), almost 3.7 million American teenagers have no health insurance coverage; additionally, millions of teenagers are underinsured. That is why the current paper, which constitutes part one of a two-part article, aims to discuss such issues related to health insurance as its definition, major terms, types of insurance coverage available, and significance for the future of any teenager.
Financial literacy means more than knowing how to save money or balance a budget. It means being equipped to make informed decisions about healthcare — a financial obligation that will follow you throughout your life. The earlier teens understand how health insurance works, the better prepared they will be for adulthood.
Understanding Health Insurance Basics
What Is Health Insurance?
Health insurance is a contract between an individual (or their family) and an insurance company. In exchange for regular payments — called premiums — the insurance company agrees to cover a portion of your healthcare costs. These costs may include doctor visits, hospitalisations, prescription medications, mental health services, and preventive care.
Without insurance, a single emergency room visit can cost thousands of dollars. With insurance, much of that cost is shared between you and your insurer. The goal is to protect individuals from catastrophic healthcare expenses while ensuring access to routine medical care.
Important Terms that Every Teen Needs to Know
Understanding insurance requires understanding its language. Below are some terms you should be aware of:
Premium: This is the payment made monthly for coverage by an insurance policy, irrespective of whether you seek medical attention.
Deductible: This refers to the amount you have to pay out of pocket before your insurance starts contributing towards your healthcare expenses. So, if you have a deductible of $1,000, this means you have to pay for the first $1,000 yourself.
Co-payment: The set fee that you pay for receiving a particular service after satisfying the deductible, say $25 when visiting a doctor.
Co-insurance: This is the portion of the bill that you share after settling the deductible. It is usually indicated as a percentage. So, if you have 20% co-insurance, paying $500 would mean paying $100.
Out-of-Pocket Maximum: The maximum amount you will be responsible for paying out of pocket for covered services in a year. Once you reach this cap, all your covered services will be covered by your health insurance company at 100%.
Network: A set of physicians, hospitals, and other healthcare providers who have committed themselves to offering their services at lower prices to the customers of the insurance company.
Explanation of Benefits (EOB): A letter from the insurance company sent following a health service detailing your charges, covered amounts, and balance due.
Coverage Options for Teenagers
Remain on a Parent's Plan
The Affordable Care Act (ACA) stipulates that young people in the US will be able to continue being covered under their parents' health insurance plan until they reach age 26, regardless of whether or not they are still residing with their parents, have tied the knot, or have become financially independent (HealthCare.gov, 2023). Remaining covered by an employer-sponsored plan is likely the most economical way for you to obtain health care since these plans tend to offer better benefits than individual health plans.
First, determine which insurance plan your parents have and what its exact conditions are.
Medicaid and CHIP
If their family income is low, then Medicaid and the Children's Health Insurance Program (CHIP) offer affordable and sometimes even free healthcare to eligible children and teenagers. The CHIP insures those children whose family income is not sufficient enough to receive Medicaid benefits but at the same time not enough to purchase private insurance.
In 2023, CHIP provides coverage to around 7.2 million children in the United States (Centers for Medicare & Medicaid Services, 2023). Age limits may differ depending on the particular state, but generally, the majority of states provide coverage to teenagers who have not reached the age of 19.
School and University Health Plans
A majority of colleges and universities provide health insurance coverage to their students, offering a reasonably-priced option for those not included under the health care coverage of their parents or who are away from their family residence. The health insurance coverage provided by such schools is based on the health requirements of students and provides benefits within the campus health center.
Health Insurance
How Health Insurance is a Financial Topic
Medical expenses represent the leading factor in the declaration of bankruptcy by individuals in America. According to a study conducted by Himmelstein et al. in 2019 and featured in the American Journal of Public Health, 66.5% of all cases of bankruptcy in the nation were related to health concerns due to either the cost of healthcare or illness-causing absence from work.
It is important for teenagers to adopt the right attitude towards health insurance at their age since this will protect them against dire financial consequences in the future. Financial literacy in this regard entails knowing that monthly premiums represent a worthwhile investment in one's financial security.
What to Compare Between Health Insurance Plans
In reviewing health insurance plans, here are some things to look for:
Yearly Cost: Combine the cost of your monthly premium (×12) with the deductible and co-pay costs you expect to incur. A relatively inexpensive premium will be accompanied by an extraordinarily expensive deductible.
Access to Doctors and Hospitals: Make sure the plan allows access to your choice of doctors and local hospitals.
Coverage of Prescription Drugs: If you regularly take prescription medications, ensure that they are on the plan’s formulary (list of covered drugs).
Coverage of Mental Illness: The Mental Health Parity and Addiction Equity Act mandates coverage for mental illness benefits equal to the insurer’s medical benefits coverage. Verify that this is true for all the plans you are considering.
Covered Preventative Care: Almost all health insurance plans comply with the Affordable Care Act and cover preventative care free of charge.
Interpreting Your Explanation of Benefits Statement
Following every visit, you will receive an Explanation of Benefits statement (EOB). Most teenagers and young people tend to disregard these because they mistake them for marketing junk mail. However, one of the best financial practices you can cultivate is to review your EOB statements. This enables you to identify billing discrepancies (which happen frequently), comprehend what your health insurance provider paid, and confirm whether there are any overpayments. If you unexpectedly receive a bill, compare it against your EOB before settling it.
Conclusion
Getting acquainted with what health insurance is, how to interpret its terminology, and the various choices open to you as a teenager are among the initial steps towards being financially savvy about healthcare insurance. All the jargon and concepts mentioned in this article are the basic elements required for all your insurance decisions in the future.
Bibliography
Centers for Medicare & Medicaid Services. (2023). Children's Health Insurance Program (CHIP) enrollment data. U.S. Department of Health and Human Services. https://www.medicaid.gov/chip
HealthCare.gov. (2023). Coverage for young adults. U.S. Centers for Medicare & Medicaid Services. https://www.healthcare.gov/young-adults/
Himmelstein, D. U., Lawless, R. M., Thorne, D., Foohey, P., & Woolhandler, S. (2019). Medical bankruptcy: Still common despite the Affordable Care Act. American Journal of Public Health, 109(3), 431–433. https://doi.org/10.2105/AJPH.2018.304901
Kaiser Family Foundation. (2023). Key facts about the uninsured population. KFF. https://www.kff.org/uninsured/issue-brief/key-facts-about-the-uninsured-population/
U.S. Department of Health and Human Services. (2023). Understanding the Affordable Care Act.HHS.gov. https://www.hhs.gov/healthcare/about-the-aca/index.html
U.S. Department of Labor. (2023). The Mental Health Parity and Addiction Equity Act. Employee Benefits Security Administration. https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/mental-health-parity
