Health insurance helps families pay for clinic visits, medicines, treatments, and hospital stays. This guide shows how health insurance works and what to check when picking a plan.
Most health plans have 3 parts:
Benefits: What the plan pays for, like checkups and medicines
Networks: Doctors and hospitals that work with your plan
Costs: What you pay, such as premiums and copays
Many insurance plans include a pharmacy benefit that helps pay for prescription medicines. Sometimes it is managed by a separate company.
Costs depend on your plan and your child’s care needs. Common costs include premiums, deductibles, copays, coinsurance, and out-of-pocket maximums.
Premium
A premium is the amount you pay each month for health coverage. Plans with lower monthly premiums usually have higher costs when you need care. Plans with higher premiums usually have lower costs when you need care.
Deductible
A deductible is the amount you pay each year before insurance starts paying costs. For example, if the deductible for the plan is $1,000, you must pay $1,000 in health care expenses during the plan year before the insurance company begins covering its share.
Some plans have separate medical and pharmacy deductibles.
Most plans cover preventive care at 100%, without requiring you to meet the yearly deductible. Preventive care includes yearly checkups, cancer screenings, and vaccinations. Check your plan to confirm what preventive services it covers.
Copay
A copay or copayment is the fixed amount paid for each visit to a care provider or for each prescription filled. Not all plans require copays. Copays may vary for primary care visits, specialty visits, or type of prescription.
Preventive services such as primary care provider visits usually do not require a copay. In many plans, copays do not count toward the deductible, but some plans do apply them.
Coinsurance
Coinsurance is the percentage you pay for medical expenses after meeting your deductible. An insurance company pays part of care expenses. You are responsible for the remaining amount. For example, if an MRI costs $1,000, the insurance company may cover 80% or $800. You are responsible for paying the remaining 20%, or $200, after the deductible is met.
Out-of-pocket maximum
The out-of-pocket maximum is the most you must pay a year for covered medical expenses. It may be calculated separately for individual and family insurance coverages. The out-of-pocket maximum does not include premiums.
After the out-of-pocket maximum amount, the insurance company will cover 100% of the covered medical expenses for the rest of the plan year. The out-of-pocket maximums may be the same or different for medical and prescription drug coverage depending on the insurance plan.
Private health insurance options
Families can get health insurance through private plans or through public programs like Medicaid and CHIP.
You can buy private health insurance on your own or through your job. Your employer may pay part of the cost.
You can buy health insurance directly from the insurer or through health insurance marketplaces run by your state or the 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 for all the health insurance or part of it. Usually, the employer will provide several health insurance plan options.
In-network providers
Many insurance companies have a network of preferred providers. The network is a group of doctors, hospitals, pharmacies, and other health care providers that the insurance company works with to provide services according to an agreed-upon contract. These are called in-network providers. Many plans base the cost of services on whether a provider is in the network. It usually costs less to use an in-network provider.
Out-of-network providers
Providers who are not part of the network are called out-of-network providers. Out-of-network providers may cost more or may not be covered at all. For example, an in-network MRI might be 80% covered, while out-of-network may only be 40%. The annual deductible may also be higher for out-of-network services.
Plan documents
These documents include Summary Plan Descriptions (SPDs), Evidence of Coverage (EOC), or Summary of Benefits Coverage (SBC)
The plan documents tell the family about the benefits they are entitled to under the insurance plan and provide rules on how to use the plan.
To receive coverage, the family must follow any plan rules. Every insurance plan has its own rules, such as getting a referral from the primary care physician to see a specialist or approval from your insurance company.
Review your own plan documents to understand the specific rules of your policy.
Transitional health coverage – COBRA
COBRA stands for Consolidated Omnibus Budget Reconciliation Act. If you leave your job or reduce your work hours to care for a child, you may still get coverage through your employer’s group health plan for a limited time. Ask your employer’s human resources department for details.
COBRA coverage can be costly because you pay the full premium plus a small administrative fee. COBRA typically lasts 18–36 months, depending on the situation.
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If you buy insurance through the state or federal marketplace, you may qualify for financial help that lowers your costs:
Premium tax credit: Lowers your monthly premium based on income. If you have a lower income, you get a larger credit to cover insurance costs. During enrollment, you can estimate this tax credit amount. 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): Lower what you pay for deductibles and copays if you meet certain conditions. CSRs may be available through your state or federal marketplace. The amount will depend upon:
Your income
Your insurance plan
If you meet certain conditions (eligibility)
You can use online calculators to estimate savings or ask a marketplace representative for help during enrollment.
Medicaid and CHIP: Public health insurance for kids
There are 2 main types of public insurance programs that cover families and children: Medicaid and the Children’s Health Insurance Program (CHIP). If your child is seriously ill, ask your hospital’s social worker about Medicaid or CHIP. These programs often help families with high medical costs. Eligibility for Medicaid and CHIP depends on income, family size, and state rules.
Medicaid
Medicaid is a government health insurance program for people with low incomes. It covers children, some adults, pregnant people, older adults, and people with disabilities.
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 at 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.
Will my health insurance cover this test or procedure?
Will my medicines be covered?
Do I need a referral from my primary care physician to be covered?
Is the treatment center in my insurance’s network?
Is my child’s medicine on the plan’s preferred drug list?
How do I file an insurance claim?
How do I file a complaint with my insurance plan?
What will my copays and other costs be?
Key points about health insurance
Health insurance helps pay for doctor visits, medicines, and treatments. Plans can be private or public. Most plans include benefits, networks, and costs.
Sometimes medicines are obtained through a separate Pharmacy Benefit Manager (PBM) insurance plan.
A person may use either private or public health insurance.
Most health insurance plans have 3 parts: benefits, networks, and costs.
When choosing a health insurance plan, make sure you know which doctors, hospitals, and medicines are covered under it.
Always check which doctors and hospitals are in your plan’s network before scheduling care.
Pharmacy insurance, or prescription drug coverage, is health insurance that helps cover the cost of medicines. Learn about health plan benefits for medications.
Cancer patients and survivors face special health care needs. In most states, children become legal adults at age 18 and must make decisions regarding health insurance.
