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Understanding Health Insurance

Most health care in the United States is paid for through health insurance.

Health insurance is for an individual or family. When covered by an insurance policy, the policy owner regularly pays a designated amount, or premium, to a health insurance company. In return, the insurer agrees to pay a pre-arranged portion of the cost when health care is needed.

While every insurance plan is different, most health plans have three main parts: benefits, networks, and costs.

  • Benefits are simply what the plan pays for such as checkups, prescriptions and medical care.
  • Networks are a group of doctors, hospitals or other health care providers who are contracted to provide discounted services within the health plan. 
  • Costs, such as premiums, deductibles, co-pays and coinsurance, affect what your family pays in health care expenses. 

An individual or family may be covered through a private or public insurance program.

Private Insurance

Private health insurance may be purchased individually or through an employer.  

  1. Health insurance may be bought directly from the insurer or through state and federally operated health insurance marketplaces. The cost and number of plans available vary from state to state. Find additional details on the marketplace by state.

    Employer-based coverage – Health insurance may be paid for or partly paid for by an employer. Typically, an employer will provide multiple plan options. There are 4 different types of health insurance plans.

    • Preferred Provider Organization (PPO) – Offers health services through a network of providers and facilities not limited by a referral through a primary care physician
    • Health Maintenance Organization (HMO) – Offers health services through a network of providers and facilities with care coordinated through a primary care physician
    • High Deductible Health Plan (HDHP) – Offers health services through a network where the subscriber pays out-of-pocket for medical expenses up to the deductible amount prior to insurance paying
  2. COBRA stands for Consolidated Omnibus Reconciliation Act.
    • When leaving a job or reducing work hours to care for a child, coverage may be available through an employer’s group health plan for a limited period of time.
    • The employer’s human resources department can provide details on COBRA coverage options and related cost.

Assistance Programs

  • If buying insurance through the state or federal marketplaces, assistance may be available that helps lower the cost of premiums paid to the insurance company called a Premium Tax Credit. The size of your premium tax credit is based on an income scale. If you have a lower income, you will receive a larger credit to help cover the cost of the insurance. During enrollment, you can compute an estimated credit that is paid to your insurance company to lower what you pay for your monthly premium. Or, you can get all of the benefit of the premium tax credit when you file your tax return. To learn more, visit the eligibility page on the IRS website.
  • Depending on income and insurance plan, eligible cost sharing reductions (CSRs) may be available through the state or federal marketplace by reducing out-of-pocket expenses. CSRs are a program to lower the amount paid for deductibles and co-payments. To qualify for these reductions, you must be enrolled in specific plans.
  • A Health Insurance Marketplace Calculator and additional information about financial assistance may be found on the Henry J Kaiser Foundation website.

Public Insurance

Two primary types of public insurance programs cover families and children.

  1. Medicaid is a government health insurance program for people with low incomes. It covers children, elderly, disabled and other eligible people who receive federal income payments.

    • Every state provides families with low incomes with the option to secure free or low-cost public health insurance.
    • Each state has a different name and income requirement for its Medicaid program. For example, in Wisconsin, Medicaid is known as Badger Care. Medicaid in California is known as Medi-Cal.
    • For Medicaid coverage, enroll any time of year and receive coverage immediately. To determine qualifications, contact a state Medicaid agency.
  2. CHIP provides low-cost health insurance coverage to children in families that earn too much money to qualify for Medicaid.

    • Each state has a different name and income requirement for its CHIP. For example, in Rhode Island, the Children’s Health Insurance Program is known as RIte Care. In New York, it is known as Child Health Plus.
    • Apply for coverage through CHIP any time of year.


Reviewed: June 2018

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