Health insurance 101: A guide to health coverage

Health insurance is one of the most important things you can get to control the high costs of medical care, and give yourself and your family the peace of mind that if an accident happened, you’d be covered head to toe.  

But we’ll admit — it can be confusing. With terms you might have not heard before (like, what’s major medical? Is there a difference between major medical and health insurance? Answer: there is not!) and the endless coverage options, picking a plan isn’t always a walk in the park. To help you get started and to clear up the basics, read on for our roundup of all things health insurance.  

What is health insurance? 

Health insurance protects you from unexpected and high medical costs — anything from general medical care (like doctor’s visits and hospital stays) to surgical procedures and prescription drugs. For a premium, or a set amount of money each month, you have access to all the benefits of your chosen plan, like free preventive care services and low upfront costs.  

Health insurance terms to know 

There’s a lot of information out there — and sometimes it’s tough to know where to go for all the facts. Before we go any further, here’s a mini glossary of terms you should know when exploring healthcare plans:  

• Premium: a set amount of money that you pay each month, once a quarter, or once per year to keep your insurance plan active.

• Deductible: what you will pay for your healthcare needs before your health insurance plan begins to pay. For example, if your plan includes a deductible of $1,000, you’ll pay the first $1,000 in covered services for the year. After that, your insurance company will cover nearly 60-90% of the bills.

• Co-pay: this is the amount you owe each time you receive care. This can depend on the kind of care you’re getting, though — for example, a specialist visit might cost $60, while your visit to a general practitioner might only be $30. Typically, co-pays cannot be used to meet your deductible, but this varies. (Be sure to read the fine print on your plan to find out.) 
  

• Coinsurance: after meeting your deductible, you still will have to pay a (smaller) portion of your medical bills — usually a percentage. For example, if you meet your deductible in June and your coinsurance is 20%, you only have to pay 20% of each medical bill that comes your way for the remainder of the calendar year, until you hit your MOOP.
  

• Maximum out-of-pocket (MOOP): the most you’d have to pay each year for your healthcare needs. Once you’ve met your MOOP, your healthcare plan will pay for any covered services for the rest of the year. 
  

• Health Insurance Marketplace: A service that helps people shop for and enroll in health insurance through websites, call centers, and in-person help. 

Who should buy health insurance? 

In short: everyone. Even if you’re young and healthy, things happen. And these things can be expensive. A visit to the emergency room can cost anywhere from $150 to $3,000, and that’s not including tests, lab fees, and other services, too. Health insurance is the best way to keep costs low and predictable.  

What kinds of health insurance plans are available? 

Health insurance comes in many different forms. There are plans that are better suited for the young and healthy, and others for those that make frequent doctor’s visits. To determine the plan that’s best for you, here are a few things to consider: your medical history, if you need coverage for yourself or for your whole family, how often you visit the doctor, and how often you’d anticipate needing care over the next year. (Of course, accidents can happen, so keep that in mind, too.) Let’s break down a few of the most common kinds of plans:  

• Preferred Provider Organization (PPO): a PPO plan encourages you to use a designated network of doctors and hospitals that are contracted with the insurance plan to offer negotiated or discounted rates to insurance members. Generally, you have an annual deductible you’ll have to meet before the insurance company begins covering your bills, and you’ll usually have to pay a co-pay for your services needed. If a large network of doctors is important to you, a PPO is a great option. 

• Health Maintenance Organization (HMO): with an HMO plan, you’ll typically see lower out-of-pocket expenses (like your monthly premium) but have less flexibility in your choice of doctors or hospitals. If you want coverage with an HMO plan, you must stay in-network, or the doctors that accept your HMO. However, an HMO does cover preventative services and some immunizations. If you’re young, healthy, and don’t have much of a provider preference, an HMO plan might be for you. 

• HSA-eligible plans: these plans are like a PPO plan, but with higher deductibles (meaning a lower monthly premium). Because you might have a higher deductible, those costs can be paid using a health savings account (HSA), which is a savings account that you can contribute to pre-tax and use on any qualifying medical expense — even prescription eyeglasses! If you prefer greater control over your costs and want to save money for medical expenses now and in the future (your account balance rolls over year after year), an HSA-eligible plan is worth looking into. 

• Medicare: the federal health insurance program for people who are 65 years or older or have certain disabilities. Head here for everything you need to know about Medicare. 

How much does health insurance cost?

Nearly 28 million people in the United States do not have health insurance, and nearly half of U.S. adults say they or a family member put off or skipped regular health care needs because of cost. Health insurance can be a big expense for you and your family, but the rising costs of healthcare and unexpected bills are far greater.  

The price of health insurance depends on your age, how many people you’re insuring, the level of coverage you need, and where you live. If you have the option of getting health insurance through your employer, you can typically expect a lower monthly premium.  

If you’re self-employed, unemployed, or choose not to participate in your employer’s health insurance benefit, you can search for a plan and its costs on a health insurance Marketplace, like this one. Your actual expenses will vary, but the estimate is a great starting point to begin budgeting.  

According to the Kaiser Family Foundation, the average cost of an individual’s monthly health insurance premium was $440. The average cost of a family health insurance monthly premium is $1,168. If you qualify, you can also apply for a Cost-Sharing Reduction subsidy and tax credits to lower your overall monthly payments.  

Generally speaking, though, if you opt for a higher deductible plan, you can expect to see lower monthly costs. On the other hand, if you’d prefer a lower deductible and lower overall care costs, your monthly premium might be higher. No plan is better than the other — it all depends on your unique situation and health-related needs.  

When can I buy health insurance?

If you start a new job and your employer offers a health insurance benefit, you can enroll when you begin employment.  

If you’re shopping on the Marketplace, you have to wait for a qualifying event (such as getting married or having a baby), or wait for Open Enrollment. The Open Enrollment period is a time when you can enroll, re-enroll, or change an insurance plan, and these dates vary from state to state. If you miss your state’s Open Enrollment deadline, which typically falls within the last few months of the calendar year, you’ll have to wait another year to enroll in coverage — unless you participate in a qualifying event.  

Health insurance is one of the most important things you can purchase for yourself and your family. It protects you from unexpected medical costs, especially during a pandemic when healthcare is critical. If you’re still feeling overwhelmed — don’t worry. Picking a healthcare plan is a big decision, so take your time, identify your needs, and research, research, research!