Health insurance is among the more complicated types of insurance coverage. In the United States, an unexpected medical bill can easily cut through any savings you’ve stashed away. To protect your health — and finances — learn about how health insurance works and available policies and plans when comparing your options.
Unlike other insurance, you may pay deductibles, copays, and out-of-pocket costs in addition to the monthly premium for your health insurance.
Whenever you visit the doctor or go to the hospital, you may pay a copay as specified in your policy. When the total cost of services and treatments you’ve received under your plan — minus copays — hits your annual deductible, your coinsurance kicks in. In that situation, your insurer starts paying a larger portion of your bills, usually 60% to 80%.
You’ll keep paying copays or coinsurance until you reach your plan’s out-of-pocket limit. At that stage, your insurer pays 100% of your medical bills for the remainder of the year your policy is in effect.
The cost structure of health insurance policies can vary wildly. Your policy may have low premiums and high deductibles and out-of-pocket limits, or vice versa. Carefully read the details of your health insurance plan to avoid unexpected costs.
Key health insurance terms
Learn these key terms when comparing health insurance plans or analyzing your own:
Premium. The fee you pay each month to maintain your coverage. If you have health insurance through your workplace, your employer may pick up part of the tab.
Copay. A set rate you’re charged for specific healthcare services. For example, you might have a $30 copay every time you see your primary care doctor and a $500 copay for emergency room visits.
Deductible. The amount of money you’re responsible for paying before your health insurance kicks in to cover a larger chunk of your medical bills. Let’s say you have a $1,000 deductible — this means you’ll cough up a cumulative $1,000 for your health care on your own before your insurer steps in.
Coinsurance. After you’ve reached your deductible, coinsurance is the percentage of your medical bill you’ll pay — and your insurer pays the rest. For instance, if you have a 30% coinsurance, you’ll cover 30% of each bill, and your insurer pays the remaining 70%.
Out-of-pocket maximum. The highest dollar amount you will pay in a year, out of pocket, before your health insurance provider covers 100% of your medical bills.
In-network. The doctors, clinics and hospitals that accept your insurance. When you see an in-network provider, your rates typically are lower, and any costs for your visit count toward your deductible and out-of-pocket limit.
Out-of-network. The doctors, clinics and hospitals that won’t accept your insurance. If you visit an out-of-network provider, you might cover a significant portion of the costs yourself — or even the whole bill.
How to get health insurance
You can sign up for health insurance through employers, state-sponsored marketplaces, private providers and the government.
With health insurance, you typically buy, cancel or adjust your coverage during an “open enrollment” period. The timeframe varies between plans, but the dates remain the same from year to year.
Type of health insurance
Open enrollment period
Employer-sponsored health insurance
It depends on your employer, but generally between October and December
Marketplace and individual policies
November 1st to December 15th
Six states and DC offer longer open enrollment periods:
California — October 15 to January 15
Colorado — November 1 to January 15
Massachusetts — November 1 to December 23
Minnesota — November 1 to December 23
Nevada — Open enrollment is year-round.
New York — November 1 to January 31
Washington, DC — November 1 to January 31
October 15th to December 7th
No open enrollment period applies
Get insured through an employer
Under the Affordable Care Act, businesses with 50 or more employees must provide health insurance. If your company has fewer than 50 employees, it may still offer health insurance as part of your employee benefits.
Coverage might be more limited than that of an individual policy, but premiums are subsidized. While open enrollment period is generally in the fall, exact timing comes down to your employer.
Get insured on the Health Insurance Marketplace
Thanks to the Affordable Care Act, you can apply for a subsidized policy through HealthCare.gov. The site guides you to a state or federal marketplace, where you can browse for a policy that suits your budget and needs.
Depending on your income and household size, you might be eligible for a low-cost private plan with tax credits or cheap coverage through your state’s Medicaid program. Open enrollment for marketplace policies lasts 45 days: November 1st to December 15th. Outside of this period, you can sign up for coverage if you have a qualifying life event.
Get quotes from private insurers
For customized coverage, consider signing up for an individual policy through a private provider. You can shop directly with providers, or enlist an agent or broker to help you get quotes and apply for a policy.
Like marketplace plans, the open enrollment period stretches from November 1 to December 15. When the 45 days are up, you can’t apply for an individual health insurance policy unless you have a qualifying life event.
Apply for Medicare or Medicaid
Medicare and Medicaid are two low-cost government programs that apply to different types of people.
Medicare is primarily for those aged 65 and older, though people aged 18 to 64 with a qualifying disability or end-stage renal disease might also be eligible.
There are a few Medicare plans on offer:
Parts A and B: Original Medicare. Run by the federal government, Part A is hospital insurance and Part B covers outpatient care.
Part C: Medicare Advantage. This plan replaces Original Medicare and Medigap plans.
Part D. This policy covers prescriptions only.
Parts F, G, K, L, M and N: Medigap. These private plans are designed to supplement Original Medicare coverage.
The open enrollment for Medicare lasts from October 15th to December 17th annually.
Medicaid is open to low-income Americans. Eligibility varies by state, but you’ll typically qualify for coverage if your income is at or below 138% of the federal poverty level. The limit might increase if you’re pregnant or disabled, or have children, disabled dependents or a serious illness.
There’s no set open enrollment for Medicaid. You can enroll in the program at any time.
Sign up for military-related health insurance
If you’re an active or retired military service member, you might be eligible for coverage through:
Tricare. Offered to active or retired military service members and their families by the Department of Defense.
Veterans Affairs coverage. Applies to veterans and retired military service members.
For more information on these policies, contact the relevant government department.
What is the Affordable Care Act?
Sometimes called Obamacare, the Affordable Care Act (ACA) is a healthcare law that dates back to 2010. It aims to expand access to health care at lower costs to improve quality of care for all Americans.
It’s a complicated law, but one that introduced six main takeaways:
Large businesses with 50 or more employees must provide health insurance.
Americans are eligible for subsidized policies through state or federal marketplaces.
Insurance plans are categorized into four tiers — bronze, silver, gold and platinum — which reflect the price and extent of coverage.
Insurers can’t deny coverage or set premiums based on gender or pre-existing conditions.
Children can stay on their parents’ health insurance plans until age 26.
All medical clinics and hospitals must use electronic medical records to help doctors and patients access records.
What is a qualifying life event?
A qualifying life event is a major life change — like getting married or having a baby — that allows you to buy or adjust your health insurance policy outside of the open enrollment period.
Qualifying life events include:
Loss of health insurance. For example, turning 26 and losing coverage on your parent’s plan, or no longer qualifying for Medicare or Medicare.
Changes in household size. Includes marriage, divorce, having a baby, adopting a child or losing coverage due to a family member’s death.
Changes in residence. Moving to a different ZIP code or country, going to college or changing work locations.
Other events. Becoming a US citizen, being released from prison or becoming eligible for Medicaid.
How much does health insurance cost?
It comes down to the policy. Private and marketplace plans tend to be the most expensive options, while employer-sponsored plans, Medicare and Medicaid can come with low or no premiums.
Through an employer
Employers often pay the bulk of the premiums — usually 70% or 80%. To put this into context, in 2018, the average annual premium for employer-sponsored health insurance was $6,715, according to the Kaiser Family Foundation. On average, employees contributed $1,427 toward the premium, and employers paid $5,288.
This is a breakdown of the average costs and contributions by state.
When you shop on the marketplace, you might be eligible to lower your premiums with the help of tax credits. The subsidies vary based on state, income, household size and whether you or your spouse have health insurance through work. But typically, your household income must be between 100% and 400% of the federal poverty level to qualify for a premium tax credit.
In 2019, the average annual premium for marketplace plans was $5,736, according to the Kaiser Family Foundation. This is the state-by-state breakdown:
With Medicare, costs depend on the type of plan you choose and how much coverage you want. For the most popular plan — Part A: Original Medicare — your payroll taxes might pay for your policy in full. If you were in the workforce for fewer than 10 years, you might be charged a premium.
If you’re eligible for Medicaid, your coverage is likely free. But if you’re a “high earner” with an income at or above 150% of the poverty level, you may pay a small premium monthly.
What are the different types of health insurance plans?
Policies aside, a few types of plans determine how much control you have over your coverage. With HMO and POS plans, your primary doctor takes charge of your treatment, while you have more freedom to choose your own specialists with PPO and EPO plans.
Type of plan
Do you need to see an in-network doctor?
Are referrals required for procedures and specialists?
Health maintenance organization (HMO)
Yes, unless it’s an emergency
Those who prefer a primary doctor to handle their care and choose their specialists.
Preferred provider organization (PPO)
Those who want more provider options and can afford higher out-of-pocket costs.
Exclusive provider organization (EPO)
Yes, unless it’s an emergency
Those who want lower out-of-pocket costs.
Point of service (POS)
Those who prefer a primary doctor to coordinate their care, but also want to make the most of more provider options.
How to choose a health insurance plan
If you don’t have access to employer-sponsored plans, follow these steps to make sure you’re getting the best possible policy and premium on your own:
If you decide to go with a marketplace or individual policy, narrow down whether you want an HMO, PPO, EPO, POS or HSA-eligible plan.
Determine your budget and whether you want a low premium and higher deductible and out-of-pocket limit, or vice versa.
Research and create a short list of insurers that include your doctor and local hospital as part of their provider network. If you don’t have a preferred doctor, look for a plan with a larger network so that you have more options.
Get quotes from a handful of insurers.
Compare policy premiums, out-of-pocket costs and benefits across plans.
Ensure that your plan covers your prescriptions, specialists and any other treatments or medications you regularly need.
Once you’ve found a policy that meets your needs, apply for coverage following the guidelines the insurer or marketplace gives you.
What’s an HSA?
A health savings account (HSA) is a tax-advantaged account that helps you pay for healthcare costs. If you’re enrolled in a high-deductible health insurance plan (HDHP), you can apply for an HSA.
In 2019, the IRS defines an HDHP as any policy with a deductible of at least $1,350 for an individual or $2,700 for a family and out-of-pocket expenses totaling no more than $6,750 for an individual or $13,500 for a family.
You decide how much money you want to contribute to your HSA account (up to government maximums) each year. These contributions are tax-deductible. You typically receive a debit card, and you can use the funds in your HSA account to pay for eligible medical expenses. This includes copays and coinsurance, but not premiums.
Frequently asked questions
Most plans allow a grace period for missed payments:
For marketplace plans, it’s 90 days — provided you’ve paid at least one full month’s premium during the benefit year. If you file a claim during the first 30 days of the grace period, your insurer is obliged to pay it. But if you file a claim between days 31 and 90, your insurer doesn’t have to cough up the money. They’ll likely hold onto the claim instead of denying it altogether.
For individual plans, the grace period varies — but most insurers allow you 30 days to make up a missed payment.
Yes, but not for all health insurance plans:
You can have Medicare and Medicaid at the same time. You can’t have Medicaid and an individual policy.
You can have Medicare and employer-sponsored health insurance. You can’t have Medicare and a marketplace policy.
You can have multiple individual health insurance policies.
If your company has at least 20 employees, it’s required to offer health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985. COBRA allows eligible employees to keep their health insurance coverage if they retire, lose their job or experience a reduction in work hours. COBRA coverage can last 18 to 36 months.
The catch? Your former employer no longer pays for coverage. Rather, you’re responsible for 100% of your premium — plus an additional 2% admin fee.
Katia Iervasi is a writer from Sydney, Australia. Her writing — and curiosity — has taken her around the world, and she now calls New York home. With a journalistic eye for detail, she navigates insurance and finance for Finder, so you can splash your cash smartly (and be a pro when the subject pops up at dinner parties).
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