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Health insurance plays a vital role in keeping you healthy by covering preventive services and picking up part of the costs for other types of healthcare.
Everyone can benefit from health insurance that helps offset medical costs, which can add up quickly. Health insurance can make these expenses more manageable.
Key Takeaways
- Health insurance pays for a portion of covered healthcare services.
- Health plans usually have provider networks of doctors and hospitals that have contracts with the insurance company.
- The type of health plan dictates whether it pays for out-of-network care and whether you need referrals to see specialists.
- People often get health insurance through their employer, but they can also buy coverage through the marketplace or directly from an insurance company.
How Does It Work?
You typically pay a premium for health insurance coverage that may be deducted from your paycheck if you have an employer-sponsored plan or you may pay directly to the insurance company.
Health plans usually have provider networks, which are doctors and facilities that contract with the health insurance company. These contracts dictate what the insurer pays the provider for services and may include other provisions like requiring providers to meet certain quality metrics.
Before buying coverage, you should check with your providers to make sure they’re considered in-network in the plan. If not, you may pay more or all of the costs when you receive care, depending on the health plan.
After your visit, the doctor’s office submits a claim to the insurance company. The insurer reviews the services and decides what is covered and what it owes. It also considers your deductible, coinsurance and may factor in your out-of-pocket maximum. The company then sends you an explanation of benefits (EOB), which lists the services you received, how much the plan covered and what you owe the provider.
The doctor’s office then sends you a final bill with instructions on how to pay.
Health Insurance Cost Terms to Know
Health insurance has multiple types of costs.
What Does Health Insurance Cover?
Health insurance covers doctor visits, hospitalizations, emergencies, prescriptions and other medical-associated costs.
The Affordable Care Act requires health plans in the marketplace to cover at a minimum the 10 essential health benefits:
- Ambulatory/outpatient care
- Emergency care
- Hospitalizations
- Laboratory services
- Mental health and substance use services
- Pediatric services
- Pregnancy, maternity and newborn care
- Prescription drugs
- Prevention and wellness services
- Rehab and habilitative services
The health insurance marketplace, often called Obamacare, lets people compare health plans offered in their area. The ACA law created the marketplace.
Depending on where you live either the federal government or state government runs the marketplace. Regardless of how the marketplace is offered in your state, you enter your information into the marketplace tool and it tells you the plans available in your area and costs associated with each plan.
You also provide your family size and family income to see if you qualify for premium tax credits. Those subsidies may reduce the cost of coverage depending on what your family makes. The ACA marketplace is the only health insurance plan that offers these premium tax credits.
Types of Health Insurance
Health insurance plans differ by benefit design, which dictates whether you can get out-of-network care and if you need referrals to see specialists. Having the flexibility to get out-of-network care and not needing referrals typically costs more. Here are four types of health insurance benefit design.
Note: HMOs and EPOs may cover emergency out-of-network care.
How Much Does Health Insurance Cost?
The average cost of an unsubsidized ACA health insurance marketplace plan is $590 a month. Health insurance costs vary based on multiple factors, including your age, the type of health plan and the metal tier.
People with employer-sponsored health insurance coverage contribute $114 monthly on average in health insurance premiums, according to KFF’s 2024 Employer Health Benefits Survey. Employer-based plans are typically significantly cheaper than unsubsidized ACA plans, though they offer similar coverage.
Work-based plans are cheaper because businesses usually pay over half of premium costs. For instance, businesses pay more than $600 a month in premiums per employee, compared to $114 monthly, according to KFF.
How Do I Get Health Insurance?
How to get health insurance depends on what coverage is available to you.
- An employer: Most Americans get health insurance through group health insurance from their employer. The benefits of an employer-sponsored plan is that it’s often cheaper than other ways to get coverage. The downsides are that you lose coverage when you leave the job and the company limits your health insurance plan options.
- ACA marketplace: You can buy coverage through the marketplace, which can be costly unless you qualify for premium tax credits, based on household income. Self-employed health insurance is also available through the marketplace.
- Directly from insurance companies: Insurers may offer health plans outside of the ACA marketplace. These plans may be cheaper since they might not cover as much as ACA plans.
- COBRA: COBRA insurance is available for people who recently lost employment or their work-based health insurance. Though COBRA lets you keep your former coverage, the employer doesn’t have to contribute to coverage, so it’s much more expensive than an employer plan.
- Medicaid: You can get affordable comprehensive coverage if you qualify for Medicaid. Income requirements differ by state.
- Short-term health insurance: Short-term health insurance offers low-cost coverage, but with limited benefits. Short-term plans often don’t cover prescription drugs, maternity services and mental healthcare and include coverage maximums. These are only available for three months with the option to add a fourth month and some states don’t even allow short-term coverage.
- Catastrophic health insurance: Catastrophic health insurance offered through the ACA marketplace is only available to people under 30 and those facing severe financial problems, including homelessness. These plans have low premiums but very high deductibles, which means you’ll pay more when you need care.
Featured Health Insurance Partners
When Do I Get Health Insurance?
You can buy health insurance during open enrollment. If you’re buying coverage from the Affordable Care Act marketplace, open enrollment is November 1 to December 31.
During that time, you can purchase new coverage or change your existing coverage. Otherwise, you can’t change your health coverage in the marketplace unless you have a qualifying life event for health insurance, which kicks off a special enrollment period. These life events include losing your employer-sponsored coverage, moving to a new state, getting married and having a child.
If you have health coverage through an employer, you’ll want to know when the business has its open enrollment. It varies by company. They have similar rules about qualifying life events, so you’re able to buy coverage outside of open enrollment only for limited reasons.
Meanwhile, Medicaid and the Children’s Health Insurance Program (CHIP) don’t have open enrollment periods. You can get that coverage at any time in the year if you qualify.
What Is Health Insurance Frequently Asked Questions (FAQs)
Where is it required to have health insurance?
Most states don’t say that health insurance is a legal requirement.
Only people in California, Massachusetts, New Jersey, Rhode Island, Vermont and Washington D.C., must show proof of health insurance on their state income tax return. Most of these states will charge you a tax penalty if you don’t have health insurance.
A high-deductible health plan (HDHP) is a plan with a deductible of at least $1,650 for an individual or $3,300 for a family. These plans can be any type (HMO, PPO, etc.). Only the deductible dictates whether it’s an HDHP or not.
HDHPs typically have a lower premium than plans with a lower deductible, but you also have to pay more out of pocket when you get care because of the higher deductible. An HDHP also makes you eligible for a health savings account (HSA), which lets you save pretax money for qualifying medical expenses. You take the HSA with you if you change jobs or health plans and unused funds roll over into the next year. That’s unlike a flexible spending account (FSA), which doesn’t usually let you roll over into the next year. That’s just one of the differences between an FSA vs. HSA.
What is private health insurance?
Private health insurance is coverage that’s offered by health insurance companies like Blue Cross Blue Shield and UnitedHealthcare. Most Americans get their health insurance this way.
Private plans may be offered through employers as part of an employee benefits package, through the ACA marketplace or directly from a private health insurer. This is the alternative to public health insurance, including Medicare.
