Understanding Health Insurance

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What is health insurance?

Most health care in the United States is paid for through health insurance. An individual or family contracts with a health insurance company to help cover their health care costs.

When covered by an insurance policy, the policy owner regularly pays a specific 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.

Most health insurance plans have: Benefits (what the plan pays for), Networks (Healthcare professionals that provide discounted services within health plan), and Costs (These can be premiums, deductibles, co-pays and coinsurance) — Every insurance plan is different, but most health plans have three main parts: benefits, networks, and costs.

While every insurance plan is different, most health care plans have 3 main parts: benefits, networks, and costs.

Benefits are what the plan pays for such as checkups, prescriptions, and medical care.
Networks are groups of doctors, hospitals or other health care providers that have a contract with the insurance company to provide lower-cost services within the health plan. Before you visit a health care provider, ask if they are in-network or out-of-network. Often, out-of-network health care costs will be much higher.
Costs, such as the premium, deductible, copay, and coinsurance, affect what your family pays in health care expenses.

Health insurance costs

Health insurance comes with some basic costs:

A premium is a monthly fee you pay to your insurance company.
A deductible is the yearly amount you pay before the insurance company starts paying its share of the costs.
A copay is a fixed amount you pay at each provider visit or for each prescription filled.
Coinsurance is the percentage you pay for health care services after you meet your deductible.

Costs vary depending on your health plan and what kind of health care or prescription you are getting. To learn more about health insurance costs, read about Common Health Insurance Terms.

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

Private health insurance

You may buy private health insurance individually or through an employer.

You may buy your health insurance directly from the insurer. Or you may buy it through health insurance marketplaces run by your state or federal government. The cost and number of plans vary by state. Find more details on the marketplace by state.

With employer-based coverage, your employer may pay all of the health insurance or part of it. Usually, the employer will provide several health insurance plan options.

Transitional health coverage – COBRA

COBRA stands for Consolidated Omnibus Reconciliation Act.

When you leave your job or reduce your work hours to care for a child, you may still get some coverage through your employer’s group health plan for a limited time.
The employer’s human resources department can give you details on COBRA coverage options and related costs.

Health insurance assistance programs

If you buy insurance through the state or federal marketplaces, a Premium Tax Credit may be available to reduce the cost of insurance premiums. The size of your premium tax credit is based on your income. If you have a lower income, you get a larger credit to cover insurance costs. During enrollment, you can calculate an estimate of the amount of this tax credit. Or, you can get the full amount of the premium tax credit when you file your income tax return. To learn more, visit the eligibility page on the IRS website.
Cost-sharing reductions (CSRs) are programs that help lower the amount you pay for deductibles and co-payments. CSRs may be available through your state or federal marketplace and can reduce your out-of-pocket expenses. The amount will depend upon:
- Your income
- Your insurance plan
- If you meet certain conditions (eligibility)

To qualify for these reductions, you must be enrolled in specific plans.

You can find a Health Insurance Marketplace Calculator and other information about financial help on the Kaiser Family Foundation website.

Public health insurance

Two main types of public insurance programs cover families and children: Medicaid and the Children’s Health Insurance Program (CHIP).

Medicaid

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

Every state gives families with low incomes the option to get 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 BadgerCare. Medicaid in California is known as Medi-Cal.
For Medicaid coverage, enroll any time of year and be covered right away. To find out how to qualify, contact a state Medicaid agency.

Children’s Health Insurance Program (CHIP)

CHIP provides low-cost health insurance to children in families who do not 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.

Questions to ask about health insurance

Will insurance cover my test or procedure?
Do I need a referral from my primary care physician to be covered?
Is the treatment center in my insurance’s network?
How do I file an insurance claim?
How do I file a complaint with my insurance plan?
What will my copayments and other costs be?

Key points about health insurance

Health insurance plans help pay for people’s health care costs.
A person may use either private or public health insurance.
Most health insurance plans have 3 parts: benefits, networks, and costs.
Health plan costs can include premiums, deductibles, copays, and coinsurance.
When choosing a health insurance plan, make sure you know which doctors, hospitals, and medicines are covered under it.
Health insurance assistance programs are available for those who qualify.
Check with your state’s Medicaid or CHIP programs to see if you qualify.