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Health Insurance Explained

In simple terms, health insurance is an agreement between you and a health insurance company. When you enroll in a health plan, the insurance company agrees to pay for certain health care services, like preventive care and other covered medical services. Having health insurance means you can better manage your health and live your life to the fullest. 

How Do Health Insurance Plans Work?

Once you’ve applied for individually purchased non-Medicare health care coverage and made your first month’s payment, you’re issued a health plan policy with a date that indicates when your coverage will start. Each month, you pay a premium, which is a monthly bill for your health plan. While you’re responsible for your premium, you may qualify for help from the government to pay part of your premium. This financial assistance is called an advanced premium tax credit or subsidy. The government will send the subsidy directly to the health insurance company, which lowers the cost of your monthly payment.

Most plans have a deductible, which is how much you need to pay out of your pocket each year before your health plan begins to pay its share. The deductible may apply to all covered services, or it may only apply to selective covered services, depending on your plan. Your plan may start covering a primary care doctor visit right away while an inpatient stay to the hospital may only be covered after you pay the amount of the deductible. You also may have to pay part of the cost for some covered services even if you meet your deductible. This is called your cost share and can include things like copayments or copays (which are flat fees that you may pay for covered health services) or coinsurance (which is a percentage of a covered medical bill). Most health plans will have a network, or a list of doctors, hospitals and other health care providers that you can choose from. These are called in-network health care providers. Going to these providers when you need care will generally save you the most money. If you go to a provider that is not in your plan’s network, you may have to pay more.

Some plans, such as HMO plans, only cover services by in-network providers. Other plans, like an EPO, require that you use exclusive providers for certain covered services, such as prescription drugs or medical equipment. Learn more about the different types of health care plans.

Your plan will have an annual out-of-pocket maximum, which is the most you’ll pay each year for services covered by your health insurance plan. After you’ve paid this amount, your insurance pays 100% of covered medical expenses for the rest of the calendar year. 

Health insurance plans can also come with perks that come at no extra cost to you, like health and wellness rewards programs and discounts for services and products.

What Does Health Insurance Cover?

What your health insurance plan covers is determined by the plan you select. Each health insurance plan is different and offers different types of coverage. And even if you have coverage for certain services, you may still have some out-of-pocket costs. For instance, you may need to meet your deductible before your coverage kicks in, you may have a copay or coinsurance, and you may need to see an in-network provider to be covered.

While this doesn't cover all health plans, here are some examples of benefits a health insurance plan may cover:

  • Preventive services (like some immunizations)
  • Programs to help manage ongoing health conditions
  • Non-preventive services like visits to specialists and diagnostic tests and screenings
  • Vaccinations (like the flu shot or COVID-19 vaccination)
  • Mental and behavioral health services
  • Maternity care
  • Hospitalization
  • Emergency room services
  • Lab work
  • Prescription drugs

What Does Health Insurance Not Cover?

What’s not covered is also based on the plan you purchase. Some plans may offer a wider range of coverage than others. 

However, here’s a list of common services that are often not covered under health insurance plans:

  • Cosmetic surgeries
  • Elective procedures
  • Beauty treatments
  • Off-label prescriptions
  • Unapproved medical care
  • Experimental treatments
When shopping for health insurance plans, you’ll want to ask questions about coverage to ensure a plan meets your needs. If you already have a health plan, you should be able to access your Summary of Benefits Coverage (SBC), which shows what care and services are covered by your plan and what’s not.

Why Should You Get Health Insurance?

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  • Medical care can be expensive. Not having health insurance means that one unexpected illness or accident could leave you with hefty medical bills to manage out of your pocket. But with health insurance, you can be better prepared for those unexpected, costly moments.
  • Health insurance helps offer peace of mind by ensuring that there’s a limit to how much you may need to spend out of your pocket for medical bills. And if you need to go to the doctor for any reason, you’ll feel more comfortable knowing that the costs will be shared with your health plan for covered services.

  • With health insurance coverage, you have help staying your healthiest with preventive care, which is often available at no extra cost with most health plans. That means you can get an annual wellness exam and screenings you need to help you feel confident about your current and future state of health.

Health Insurance Myths vs. Facts

View some common myths about health insurance to make sure you have the facts about health care plan options for you and your family.

Frequently Asked Questions

There are many different costs associated with health plans, including deductibles, copayments and coinsurance. Learn more about health care costs.

There are many different types of health insurance plans, including HMO plans, PPOs, EPOs and POS plans. Explore the differences between these types of coverage.

Group health insurance, also known as employer health insurance, is a health plan offered by employers to their employees. With group health plans, the employer chooses the insurance company and picks plan options for their employees and their dependents. In group plans, your employer will typically share the cost of your premium with you.

Individual health insurance plans, or personal health plans, are ones selected and purchased by you for yourself or your family. You can work with an insurance agent to find a plan that works for you, both from a financial and coverage standpoint. With individual plans, you also may be eligible for a subsidy from the government to purchase a plan that is compliant with the Affordable Care Act. This could help you save money on your health insurance. Since individual plans are not tied to your job, you’re able to change jobs without losing coverage.

Everyone can benefit from having a health insurance plan. No one plans to get sick or hurt, but most people end up needing medical care at some point in their lives. With health insurance, you don’t have to pay the full bill on your own for services covered under your health plan.

Health insurance can help keep you healthy. Having a plan means you are covered for checkups, vaccines, yearly bloodwork and cancer screenings at no extra cost. The earlier you catch any health issues, the more likely the issues will be easier to treat and cost less. 

Learn More About Health Insurance

  • When and How to Enroll >

    Find out more about the enrollment process, including when you're able to enroll and how to get a health insurance plan.

  • How to Choose a Plan >

    Ready to take the next step? Explore our guide on how to choose the right plan for you when shopping for health insurance.

Policies have limitations and exclusions. The amount of benefits provided depends on the plan selected and the premium may vary with the amount of benefits selected.

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