Health Insurance Guide

Health insurance can confuse many people because soo many options and considerations are involved. This guide has been designed to give you a comprehensive understanding of health insurance, from what it is and who needs it to choosing the right plan for you and paying for services.

What Is Health Insurance?

Health insurance, sometimes known as medical insurance, is designed to cover all or part of your medical expenses. Coverage varies significantly between plan types, insurance providers, and individual policies. However, covered medical expenses usually include:

• Doctor’s visits (including sick visits and annual wellness visits)
• Emergency room trips
• Inpatient and outpatient hospital services.
• Prescription medications
• Mental health treatments (but options are often limited)
• Bloodwork and diagnostic imaging
• Rehabilitation like physical therapy or occupational therapy

Some plans may offer additional coverages, like hearing, vision, and dental. However, many plans don’t, and you may need a supplemental or separate policy if you want these types of visits covered. Alternatively, you could search only for specific insurance plans that provide these additional coverages.

Who Needs Health Insurance?

Everyone needs health insurance. Since the Affordable Care Act was passed in 2010, every person must either have medical insurance coverage or pay a penalty. This penalty is most often levied during tax season and can cost uninsured individuals hundreds of dollars or uninsured families thousands of dollars.

Ready to shop for Health Insurance? Start here

How Does Health Insurance Work?

The general idea of how health insurance works is simple. You or your employer choose a health insurance plan and sign legal documents stating you agree to pay a specific rate (known as a premium) each month. In return, your health insurance provider agrees to pay a portion of your medical costs. Of course, to be reimbursed, those medical costs have to be listed under covered services. Anything that isn’t listed likely won’t be covered, and you’ll end up paying out of pocket for those visits, tests, or services.

Where it gets complicated is when you’re trying to figure out what is covered and how your premium, copay, and deductible work.

What Is a Health Insurance Premium?

A health insurance premium is an amount you’ve agreed to pay for your health coverage. You can think of it as a subscription fee. So long as you pay your premium, you’ll continue receiving the health insurance coverage you signed up for. Premiums are generally billed monthly, although a few providers allow you to pay upfront for the year. You’ll have to pay your premium regardless of whether you’ve used your insurance that month.

Although most health insurance policies have premiums, a few don’t. For example, people who qualify for Medicaid because of a low income typically have no premiums. However, when they do, these premiums are very low.

What Is a Health Insurance Copay?

A health insurance copay is the amount you pay for services alongside your provider’s coverage. Copays are usually represented in dollar amounts for specific services.

For example, you may be required to pay $20 each time you visit your primary care physician and $200 each time you visit the hospital’s emergency room. This is just an example, as copay requirements vary by provider and policy. Copays must always be paid at the time of service.

What Is a Health Insurance Deductible?

A health insurance deductible is the amount of annual health-related expenses you agree to pay before your health insurance provider pays for anything. For example, suppose your insurance plan has a $1,000 deductible. In that case, you’ll have to pay 100% of your eligible healthcare expenses up to that amount. Once you’ve spent $1,000, your health insurance provider will begin paying their predetermined portion.

It’s important to understand that only eligible costs count toward your health insurance deductible. Any out-of-pocket expenses don’t count toward this total. For example, let’s say your deductible is $2,000, and you pay $2,500 for a pair of hearing aids, but they aren’t considered an eligible cost. In this situation, you still have $2,000 left on your deductible because your provider wouldn’t have covered those costs anyway. However, if hearing aids were considered an eligible cost, you would have paid $2,000 out of pocket, and your health insurance provider would have contributed toward the last $500.

What Are Out-of-Pocket Expenses?

In health insurance, out-of-pocket expenses are anything that isn’t covered or reimbursed by your health insurance provider. Examples of common out-of-pocket expenses include:

• Your annual deductible
• Copays for any services or prescriptions
• Coinsurance agreements.
• Cost for any services or prescriptions that aren’t covered by your policy

Where Can You Get Health Insurance?

There are a few different ways you can get health insurance. Generally, you may be eligible for three categories of health insurance: group, private, and public health insurance plans.

Group Health Insurance

Group health insurance is also known as employer-provided health insurance. This option is available through certain employers, although current regulations don’t require every company to provide it. If your employer does offer group health insurance, the premiums and deductibles are often lower than private health insurance options (although not always). This is because your employer contributes a certain amount to your plan instead of you footing the entire bill yourself.

Private Health Insurance

Private health insurance is any plan you purchase that isn’t funded by your state or federal government. If you purchase individual or family insurance through a broker or directly from a health insurance company, this is private health insurance. Although these plans often cost more than either group or public health insurance, they’re available to everyone and provide many more options for you.

Public Health Insurance

Public health insurance includes any coverage offered by your state or federal government. To be eligible for these insurance types, you must meet specific criteria. Common examples of public health insurance include:

• Medicare: Medicare is a federal health insurance program available to people over 65. Although this program isn’t income-based, people with little or no income may sometimes qualify for lower premiums. Supplemental vision, dental, hearing, and prescription plans are also provided by Medicare, although they do require higher premiums.
• Medicaid: Medicaid is a state and federally funded program that offers medical insurance for families with little or no resources. To qualify, your household income must be under a certain amount, and you may also have to meet other criteria.
• CHIP: The Children’s Health Insurance Program provides low-cost healthcare for families that earn too much money to qualify for Medicaid but not enough to afford private health insurance.

Ready to shop for Health Insurance? Start here

What Are the Different Types of Health Insurance Plans Available?

There are several different types of health insurance plans available. The most common plans include an HMO, PPO, POS, EPO, and HDHPD.

What Is an HMO Health Plan?

HMO is short for health maintenance organization. This comprehensive health plan allows members to receive medical care from certain hospitals, doctors, and specialists affiliated with the HMO. If you get care from a doctor or hospital that is not in your HMO, you may receive partial or no benefits at all from the insurance company.

What Is a PPO Health Plan?

PPO is short for preferred provider organization. With a PPO, you can use other medical service providers but will pay significantly less if you use hospitals, doctors, and specialists that belong to your plan’s network.

What Is a POS Health Plan?

A POS, or point of service, health plan combines the characteristics of an HMO and a PPO. In exchange for lower medical costs, you receive fewer choices of where you can go or what care you can receive.

What Is an EPO Health Plan?

An EPO health plan is also known as an exclusive provider organization. This type of health insurance only offers coverage in its specified network and doesn’t require referrals if you need specialty care. However, the only out-of-network costs that would be covered are emergencies.

What Is an HDHP Health Plan?

A high-deductible health plan is one where the deductible is significantly higher than for an average policy. If you want a health savings account, you have to be covered by an HDHP. The benefit is that these plans have significantly lower monthly premiums, which may work well for some people. Having a health savings account allows the insured to save for medical costs on their own.

What Is a Health Plan Network?

A health plan network is a group of doctors, hospitals, and other medical providers working under contract for a health insurance provider. This contract stipulates that the provider will grant the policyholder use of their medical services. When you go to a doctor, hospital, or specialist in your health plan network, you’re only responsible for the predetermined deductibles and copays outlined in your insurance agreement.

However, out-of-network providers aren’t always covered by insurance policies. If they are, the amount the insurance provider will pay is significantly less than what they’d pay for in-network coverage. That means you’ll end up paying higher out-of-pocket costs for out-of-network medical services.

Why Does a Health Network Matter?

A health network matters for everyone involved, albeit for different reasons.

• A health network matters for your insurance provider because it lets them offer their policyholders access to various medical services. This helps keep them in business and limits the range of their covered services to specific medical health providers.
• A health network matters for your doctor because it lets them see more patients. Insurance companies often refer their policyholders to in-network doctors in their region.
• For you, a health network means more significant cost savings. So long as you stay within your health plan’s network, you’ll pay less for medical services.

How Much Does Health Insurance Cost?

Health insurance costs vary significantly based on numerous factors. Your location, plan type, age, pre-existing conditions, and how you receive your plan are all cost considerations. For example, someone who qualifies for a state-funded program like Medicaid pays significantly less than someone who has to pay for a private insurance plan.

Why Would Someone Choose a Plan With a Lower Premium?

Someone might choose a lower premium if they don’t mind a higher deductible. In addition, people without chronic health conditions or who rarely use their health insurance may choose this option for lower monthly costs.

Why Would Someone Choose a Plan With a Higher Premium?

Someone might choose a plan with a higher premium because they’re looking for a lower deductible. This may be the best option for someone with chronic health conditions or who regularly takes prescriptions. If you’ll regularly use your health insurance plan, choosing a higher premium and lower deductible may be the best option.

Ready to shop for Health Insurance? Start here

Where Can You Get a Quote for Health Insurance?

You can get a quote for health insurance online, over the phone, or in person. Most major insurance companies offer online quote services that allow you to enroll if you accept their quote. If you’re in a low-income household, you can apply for state or federally funded health insurance programs on your state’s social services or department of health websites.

What Are the Best Options for Affordable Health Insurance?

The best option for finding affordable health insurance is to work for a company or organization that provides group health insurance. Group plans are generally much more affordable than private health insurance plans. If you’re in a low-income household, you should apply for Medicaid or CHIP to see if you qualify for these low-cost health insurance options. If you must purchase a private health insurance plan, the best option is to go through the Health Insurance Marketplace .

Key Takeaways About Health Insurance

Since the Affordable Care Act of 2014, every person must be covered by health insurance or face fines usually levied during tax season. There are many different health insurance plan options, with group insurance through your employer or state and federally funded programs being the most affordable options. For some, paying a higher deductible in exchange for a lower premium is well worth it. For others, paying a lower deductible and higher monthly premiums is the better option.

Find The Best Policy Find The Best Policy Start

Frequently Asked Questions

What is health insurance?

Health insurance is a contract between you and an insurance company in which you pay monthly premiums in exchange for the carrier paying a portion of your medical expenses. Plans typically include cost-sharing (deductible, copay, coinsurance) up to an annual out-of-pocket maximum, after which the plan pays 100 percent. The Affordable Care Act (ACA) requires marketplace plans to cover 10 essential health benefits including preventive care, prescriptions, maternity, mental health, and hospitalization.

Where can I get health insurance?

Four main sources: (1) Employer-provided plans (about 158 million Americans), (2) Healthcare.gov / state-based marketplaces under the Affordable Care Act (about 21 million as of 2024), (3) Medicaid (about 88 million, income-based), (4) Medicare (about 65 million, age 65+ or qualifying disability). You can also buy short-term health plans directly from carriers (limited coverage, not ACA-compliant) and supplemental policies like dental, vision, and hospital indemnity.

How much does health insurance cost?

Average 2024 monthly premium for a marketplace silver plan (before subsidies) is $477 for an individual and $1,437 for a family of four, per Healthcare.gov. However, about 80 percent of marketplace enrollees qualify for premium tax credits that reduce or eliminate the premium. Employer-provided plans average $103/month for individual coverage and $497/month for family coverage in 2024 (employee share, employer pays the rest).

What is the difference between HMO, PPO, EPO, and POS plans?

HMO (Health Maintenance Organization) requires a primary care physician (PCP) and referrals to see specialists; lowest premiums, no out-of-network coverage. PPO (Preferred Provider Organization) lets you see any provider, in-network or out, no referrals needed; highest premiums, broadest flexibility. EPO (Exclusive Provider Organization) is like PPO but no out-of-network coverage at all; middle premium. POS (Point of Service) requires PCP and referrals like HMO but covers out-of-network at reduced rates.

What is a deductible on health insurance?

The deductible is the amount you pay out of pocket for covered services before the health plan starts paying. After meeting the deductible, you typically pay copays or coinsurance (a percentage) until you hit the out-of-pocket maximum. Average 2024 marketplace deductibles: $4,847 for a silver plan, $7,361 for a bronze plan. High-deductible health plans (HDHPs) have deductibles of $1,600+ for individuals or $3,200+ for families and pair with HSAs.

What is an HSA?

A Health Savings Account (HSA) is a tax-advantaged savings account paired with a High-Deductible Health Plan (HDHP). HSA contributions are tax-deductible (up to $4,150 individual / $8,300 family in 2024), grow tax-free, and can be withdrawn tax-free for qualified medical expenses. After age 65, withdrawals for non-medical expenses are taxed like a traditional IRA. HSAs are the most tax-advantaged account available - triple tax-advantaged - and are an excellent retirement vehicle.

When can I enroll in health insurance?

Marketplace open enrollment is November 1 to January 15 in most states (longer in some state-based marketplaces). Outside open enrollment, you need a Qualifying Life Event for a Special Enrollment Period: losing other coverage, marriage/divorce, birth/adoption, moving, income change above/below 150% FPL. Medicaid has continuous enrollment - apply any time. Employer plans have specific enrollment windows. Short-term plans can be purchased any time but are not ACA-compliant.

Are there income-based subsidies for health insurance?

Yes, through the marketplace. The premium tax credit (PTC) reduces premiums for households earning 100% to 400% of the Federal Poverty Level (FPL), with subsidies extending above 400% FPL under the Inflation Reduction Act through 2025. Cost-sharing reductions (CSRs) further reduce deductibles and copays for households earning 100% to 250% FPL who choose silver plans. As of 2024, about 80 percent of marketplace enrollees pay $10 or less per month after subsidies, per CMS.

What are the 10 essential health benefits under the ACA?

The Affordable Care Act requires all marketplace plans (and most employer plans) to cover: (1) ambulatory patient services, (2) emergency services, (3) hospitalization, (4) pregnancy/maternity/newborn care, (5) mental health and substance use disorder, (6) prescription drugs, (7) rehabilitative services and devices, (8) laboratory services, (9) preventive and wellness services and chronic disease management, (10) pediatric services including oral and vision care. Plans cannot impose annual or lifetime limits on these benefits.

Does health insurance cover dental and vision?

Most adult health insurance plans do NOT cover routine dental or vision care - only medically-necessary services (e.g., dental surgery after an accident, vision exam following cataract surgery). The ACA requires pediatric dental and vision in all marketplace plans, but adult dental and vision are separate supplemental coverages. Standalone dental plans average $20 to $50/month; vision plans average $10 to $20/month. Most employer plans offer dental and vision as separate elections.

Can I be denied health insurance for a pre-existing condition?

No. Under the Affordable Care Act, ACA-compliant health plans (marketplace, employer, Medicaid, Medicare) cannot deny coverage, raise premiums, or exclude benefits based on pre-existing conditions. The only exceptions are: (1) short-term limited-duration health plans (NOT ACA-compliant - can deny based on health), (2) grandfathered employer plans purchased before 2010 (rare). For most coverage, the only premium factors allowed are age, location, tobacco use, and family size.

What is the best health insurance plan for me?

The best plan depends on income, health needs, providers, and risk tolerance. For low income (under 250% FPL): a silver marketplace plan with cost-sharing reductions. For predictable monthly expenses: a gold or platinum marketplace plan or employer PPO. For low utilization and tax-advantaged savings: a Bronze marketplace plan or HDHP + HSA. For seniors: Medicare + Medigap or Medicare Advantage. Insurancy can help compare marketplace plans across carriers (BCBS, UnitedHealthcare, Cigna, Aetna, Kaiser, Anthem, Humana) and identify the best total-cost plan for your specific situation.