What Is Health Insurance?

Health insurance helps pay for your medical, surgical, and prescription medication expenses. It also offers protection from high costs through negotiated rates with healthcare professionals. You typically pay monthly premiums for coverage and a share of the costs when you receive care.

Most people in the U.S. have some form of health insurance. About half, or 154 million people, get insurance through their jobs. But health plans vary — both in costs and coverage. People with plans that leave them exposed to high costs and financial risk are considered “underinsured.” 

There are more ways to enroll in a health plan now than there were over a decade ago. And worries about insurers rejecting people because of preexisting medical conditions are mostly a thing of the past. You may buy or get coverage from:

• Your employer

• A government-run health insurance marketplace

• A private health insurance company 

• Medicare

• Medicaid

• U.S. Department of Veterans Affairs

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Public programs

The government offers several public health insurance programs. Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP) are among the best known. Each has different requirements, restrictions, and coverage.

• Medicare is a federal health insurance program for adults age 65 and over, younger people with disabilities, and those with permanent kidney failure or ALS (Lou Gehrig’s disease). It has different parts and options, such as coverage for prescription medication.

• Medicaid provides free or low-cost health insurance to low-income families and children, pregnant women, older adults, and people with disabilities. All but 10 states have expanded Medicaid eligibility to adults earning up to 138% of the federal poverty level under the Affordable Care Act (ACA).

• CHIP offers low-cost health coverage to children in families who earn too much income to qualify for Medicaid. CHIP also covers pregnant women in certain states. All states provide a version of CHIP, but the program’s name can vary.

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Private insurance

Private — also known as commercial — health insurance is available through employers as well as directly from insurers. Under the ACA, any company with more than 50 workers must offer a basic health plan and cover at least 60% of the cost, or it may have to pay a penalty. 

Some of the largest U.S. private, for-profit health insurance companies are:

• Kaiser Permanente

• Elevance Health (Anthem)

• UnitedHealth Group

• Health Care Service Corporation (Blue Cross)

• Centene (Ambetter)

Some of the less common forms of private insurance include:

• Short-term health plans provide inexpensive, temporary coverage. These plans fall outside ACA rules. They generally don’t cover preexisting conditions and offer such limited benefits that you may pay a lot of money out of pocket if you need care.

• Catastrophic health plans operate under ACA rules. But you have to be under age 30 or have a hardship to qualify.

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Plan types

Once you get coverage, you’ll need to understand the different types of plans an insurer may offer. Monthly premiums, cost-sharing structures, and covered care can vary greatly between types. The most common are:

• Preferred provider organization: PPO plans have a network of participating healthcare professionals. You pay less for care from “in-network” professionals and more if you visit facilities and professionals outside the network.

• Health maintenance organization: HMO plans provide care from a network of specific professionals and hospitals. These plans often don’t cover any care from professionals outside their network, except in emergencies.

• Exclusive provider organization: EPO plans are a hybrid option. They don’t require a primary care provider referral to see a specialist. But out-of-network care isn’t covered, except in emergencies.

• Point-of-service plans: POS plans combine qualities of HMO and PPO plans. You pay less if you use in-network professionals, but you may need a referral if you want to see a specialist.

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Costs

Health insurance costs vary based on your plan and where you get coverage. 

Aside from monthly premiums, you may be responsible for:

• A deductible: The amount you pay for services before your health plan begins paying its share

• Copayment, or “copay”: A fixed rate that you pay for services like office visits

• Coinsurance: A percentage of the charges that you may be required to pay after you’ve met your deductible

With a job-based plan, your employer may cover some or all of your monthly premium costs. But high-deductible health plans have become more common. 

You may be able to offset out-of-pocket costs with tax-favored money you set aside in a health savings account (HSA) or flexible spending account (FSA).

If you enroll through the insurance marketplace via Healthcare.gov, your monthly costs will depend on:

• The plan tier you choose (Bronze, Silver, Gold, or Platinum)

• Government subsidies you’re eligible for

• Your income

If you enroll in Medicare, costs will depend on the parts you choose (A, B, C, or D), your income, and the specific plan or plans you pick.

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Coverage

The ACA regulates private insurance by requiring marketplace health plans to cover 10 essential health benefits such as prescription medications and maternity care. 

Marketplace plans also cover certain preventive care services that should be covered at no cost to enrollees, such as health screenings and vaccinations. Other examples include:

• Birth control

• Behavioral assessments for children up to age 17

• Obesity screening and counseling

Medicare covers routine vaccinations and annual wellness visits. And because of COVID-19, Medicare made it easier for enrollees to access telehealth services if they  prefer video visits. Medicare Advantage plan enrollees may have more telehealth coverage than those in original Medicare.

If you’re a veteran, you may receive VA Health Benefits. Veterans can receive low-cost care at any of the 1,200 VA medical facilities in the U.S. VA benefits may work in tandem with other coverage such as Medicare or private insurance. Active-duty military members and their families receive coverage through Tricare. 

Dealing with coverage problems

The ACA expanded coverage to millions of Americans starting in 2014. But about 26 million remain uninsured, and as many as 40 million are underinsured. The American Rescue Plan made coverage temporarily cheaper for marketplace plans and job-based COBRA plans. 

Some research suggests having continuous coverage improves health outcomes. But insurance alone doesn’t guarantee a smooth ride. Your plan may decide the surgery you’ve been waiting for isn’t “medically necessary.” Or a medication you need may drop off your insurer’s formulary (list of covered medications). A healthcare bill may cause financial panic.

Before you give up and either pay a bill out of frustration or ignore it and end up in debt, remember to:

• Use your insurer’s appeals process.

• Contact your state department of insurance or attorney general’s office if you’re not getting results.

• Review new protections from surprise medical bills, which can help. Call the No Surprises Help Desk at 1-800-985-3059 with questions or complaints.

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