Health Insurance Guide

If you're feeling confused about your health insurance coverage or needing help choosing the best option for you, you're not alone.
Get a Free Quote
Health Insurance Guide

Written by Brian Greenberg
CEO / Founder & Licensed Insurance Agent

Last updated: November 24th, 2022

Reviewed by Paige Geisler
Licensed Insurance Agent

Health insurance can confuse many people because soo many options and considerations are involved. This guide has been designed to give you a comprehensive understanding of health insurance, from what it is and who needs it to choosing the right plan for you and paying for services.

What Is Health Insurance?

Health insurance, sometimes known as medical insurance, is designed to cover all or part of your medical expenses. Coverage varies significantly between plan types, insurance providers, and individual policies. However, covered medical expenses usually include:

  • Doctor’s visits (including sick visits and annual wellness visits)
  • Emergency room trips
  • Inpatient and outpatient hospital services.
  • Prescription medications
  • Mental health treatments (but options are often limited)
  • Bloodwork and diagnostic imaging
  • Rehabilitation like physical therapy or occupational therapy

Some plans may offer additional coverages, like hearing, vision, and dental. However, many plans don’t, and you may need a supplemental or separate policy if you want these types of visits covered. Alternatively, you could search only for specific insurance plans that provide these additional coverages.

Who Needs Health Insurance?

Everyone needs health insurance. Since the Affordable Care Act was passed in 2010, every person must either have medical insurance coverage or pay a penalty. This penalty is most often levied during tax season and can cost uninsured individuals hundreds of dollars or uninsured families thousands of dollars.

Ready to shop for Health Insurance?
Start here

How Does Health Insurance Work?

The general idea of how health insurance works is simple. You or your employer choose a health insurance plan and sign legal documents stating you agree to pay a specific rate (known as a premium) each month. In return, your health insurance provider agrees to pay a portion of your medical costs. Of course, to be reimbursed, those medical costs have to be listed under covered services. Anything that isn’t listed likely won’t be covered, and you’ll end up paying out of pocket for those visits, tests, or services.

Where it gets complicated is when you’re trying to figure out what is covered and how your premium, copay, and deductible work.

What Is a Health Insurance Premium?

A health insurance premium is an amount you’ve agreed to pay for your health coverage. You can think of it as a subscription fee. So long as you pay your premium, you’ll continue receiving the health insurance coverage you signed up for. Premiums are generally billed monthly, although a few providers allow you to pay upfront for the year. You’ll have to pay your premium regardless of whether you’ve used your insurance that month.

Although most health insurance policies have premiums, a few don’t. For example, people who qualify for Medicaid because of a low income typically have no premiums. However, when they do, these premiums are very low.

What Is a Health Insurance Copay?

A health insurance copay is the amount you pay for services alongside your provider’s coverage. Copays are usually represented in dollar amounts for specific services.

For example, you may be required to pay $20 each time you visit your primary care physician and $200 each time you visit the hospital’s emergency room. This is just an example, as copay requirements vary by provider and policy. Copays must always be paid at the time of service.

What Is a Health Insurance Deductible?

A health insurance deductible is the amount of annual health-related expenses you agree to pay before your health insurance provider pays for anything. For example, suppose your insurance plan has a $1,000 deductible. In that case, you’ll have to pay 100% of your eligible healthcare expenses up to that amount. Once you’ve spent $1,000, your health insurance provider will begin paying their predetermined portion.

It’s important to understand that only eligible costs count toward your health insurance deductible. Any out-of-pocket expenses don’t count toward this total. For example, let’s say your deductible is $2,000, and you pay $2,500 for a pair of hearing aids, but they aren’t considered an eligible cost. In this situation, you still have $2,000 left on your deductible because your provider wouldn’t have covered those costs anyway. However, if hearing aids were considered an eligible cost, you would have paid $2,000 out of pocket, and your health insurance provider would have contributed toward the last $500.

What Are Out-of-Pocket Expenses?

In health insurance, out-of-pocket expenses are anything that isn’t covered or reimbursed by your health insurance provider. Examples of common out-of-pocket expenses include:

  • Your annual deductible
  • Copays for any services or prescriptions
  • Coinsurance agreements.
  • Cost for any services or prescriptions that aren’t covered by your policy

Where Can You Get Health Insurance?

There are a few different ways you can get health insurance. Generally, you may be eligible for three categories of health insurance: group, private, and public health insurance plans.

Group Health Insurance

Group health insurance is also known as employer-provided health insurance. This option is available through certain employers, although current regulations don’t require every company to provide it. If your employer does offer group health insurance, the premiums and deductibles are often lower than private health insurance options (although not always). This is because your employer contributes a certain amount to your plan instead of you footing the entire bill yourself.

Private Health Insurance

Private health insurance is any plan you purchase that isn’t funded by your state or federal government. If you purchase individual or family insurance through a broker or directly from a health insurance company, this is private health insurance. Although these plans often cost more than either group or public health insurance, they’re available to everyone and provide many more options for you.

Public Health Insurance

Public health insurance includes any coverage offered by your state or federal government. To be eligible for these insurance types, you must meet specific criteria. Common examples of public health insurance include:

  • Medicare: Medicare is a federal health insurance program available to people over 65. Although this program isn’t income-based, people with little or no income may sometimes qualify for lower premiums. Supplemental vision, dental, hearing, and prescription plans are also provided by Medicare, although they do require higher premiums.
  • Medicaid: Medicaid is a state and federally funded program that offers medical insurance for families with little or no resources. To qualify, your household income must be under a certain amount, and you may also have to meet other criteria.
  • CHIP: The Children’s Health Insurance Program provides low-cost healthcare for families that earn too much money to qualify for Medicaid but not enough to afford private health insurance.
Ready to shop for Health Insurance?
Start here

What Are the Different Types of Health Insurance Plans Available?

There are several different types of health insurance plans available. The most common plans include an HMO, PPO, POS, EPO, and HDHPD.

What Is an HMO Health Plan?

HMO is short for health maintenance organization. This comprehensive health plan allows members to receive medical care from certain hospitals, doctors, and specialists affiliated with the HMO. If you get care from a doctor or hospital that is not in your HMO, you may receive partial or no benefits at all from the insurance company.

What Is a PPO Health Plan?

PPO is short for preferred provider organization. With a PPO, you can use other medical service providers but will pay significantly less if you use hospitals, doctors, and specialists that belong to your plan’s network.

What Is a POS Health Plan?

A POS, or point of service, health plan combines the characteristics of an HMO and a PPO. In exchange for lower medical costs, you receive fewer choices of where you can go or what care you can receive.

What Is an EPO Health Plan?

An EPO health plan is also known as an exclusive provider organization. This type of health insurance only offers coverage in its specified network and doesn’t require referrals if you need specialty care. However, the only out-of-network costs that would be covered are emergencies.

What Is an HDHP Health Plan?

A high-deductible health plan is one where the deductible is significantly higher than for an average policy. If you want a health savings account, you have to be covered by an HDHP. The benefit is that these plans have significantly lower monthly premiums, which may work well for some people. Having a health savings account allows the insured to save for medical costs on their own.

What Is a Health Plan Network?

A health plan network is a group of doctors, hospitals, and other medical providers working under contract for a health insurance provider. This contract stipulates that the provider will grant the policyholder use of their medical services. When you go to a doctor, hospital, or specialist in your health plan network, you’re only responsible for the predetermined deductibles and copays outlined in your insurance agreement.

However, out-of-network providers aren’t always covered by insurance policies. If they are, the amount the insurance provider will pay is significantly less than what they’d pay for in-network coverage. That means you’ll end up paying higher out-of-pocket costs for out-of-network medical services.

Why Does a Health Network Matter?

A health network matters for everyone involved, albeit for different reasons.

  • A health network matters for your insurance provider because it lets them offer their policyholders access to various medical services. This helps keep them in business and limits the range of their covered services to specific medical health providers.
  • A health network matters for your doctor because it lets them see more patients. Insurance companies often refer their policyholders to in-network doctors in their region.
  • For you, a health network means more significant cost savings. So long as you stay within your health plan’s network, you’ll pay less for medical services.

How Much Does Health Insurance Cost?

Health insurance costs vary significantly based on numerous factors. Your location, plan type, age, pre-existing conditions, and how you receive your plan are all cost considerations. For example, someone who qualifies for a state-funded program like Medicaid pays significantly less than someone who has to pay for a private insurance plan.

Why Would Someone Choose a Plan With a Lower Premium?

Someone might choose a lower premium if they don’t mind a higher deductible. In addition, people without chronic health conditions or who rarely use their health insurance may choose this option for lower monthly costs.

Why Would Someone Choose a Plan With a Higher Premium?

Someone might choose a plan with a higher premium because they’re looking for a lower deductible. This may be the best option for someone with chronic health conditions or who regularly takes prescriptions. If you’ll regularly use your health insurance plan, choosing a higher premium and lower deductible may be the best option.

Ready to shop for Health Insurance?
Start here

Where Can You Get a Quote for Health Insurance?

You can get a quote for health insurance online, over the phone, or in person. Most major insurance companies offer online quote services that allow you to enroll if you accept their quote. If you’re in a low-income household, you can apply for state or federally funded health insurance programs on your state’s social services or department of health websites.

What Are the Best Options for Affordable Health Insurance?

The best option for finding affordable health insurance is to work for a company or organization that provides group health insurance. Group plans are generally much more affordable than private health insurance plans. If you’re in a low-income household, you should apply for Medicaid or CHIP to see if you qualify for these low-cost health insurance options. If you must purchase a private health insurance plan, the best option is to go through the Health Insurance Marketplace .

Key Takeaways About Health Insurance

Since the Affordable Care Act of 2014, every person must be covered by health insurance or face fines usually levied during tax season. There are many different health insurance plan options, with group insurance through your employer or state and federally funded programs being the most affordable options. For some, paying a higher deductible in exchange for a lower premium is well worth it. For others, paying a lower deductible and higher monthly premiums is the better option.

Find The Best Policy
Find The Best Policy

Get the most accurate rates in 2 minutes or less
Making a financial decision doesn’t have to be stressful.