You need to know: What is the Health Insurance?

Overview

Most health care in the United States is paid for by health insurance. Health insurance is a contract between an individual or a family and insurance company to cover their health care costs when needed. When covered by an insurance policy, the policy owner pays a fixed amount, or premium, on a regular basis to the health insurance company.  In return, the insurer agrees to pay a pre-arranged share of the cost when healthcare is needed. Every company provide varieties of the insurance plans. Although each insurance plan is different, most health plans have three main parts: benefits, networks, and costs.

Benefits: Benefits are only those paid for checkups, prescriptions and medical care under the plan.

Networks: Networks are groups of doctors, hospitals or other health care providers contracted to provide discounted services within the health plan.

Costs: Costs are like premiums, deductibles, co-payments and co-insurance affect how much your family pays for health care.  An individual or family may be covered by a private or public insurance program.

Health insurance costs

Health insurance comes with some basic costs:

• A premium is a monthly fee you pay to your insurance company.
• The deductible is the annual amount you pay before the insurance company starts paying your share of the costs.
• A copay is a fixed amount you pay at each visit to the provider or for each prescription filled.
• Coinsurance is the percentage you pay for health care services after you meet your deductible.

 Costs vary depending on your health plan and the type of health care or prescription you’re getting.   To learn more about health insurance costs, read about general health insurance terms.

An individual or family may be covered by a private or public insurance program.

Private health insurance

You can buy private health insurance individually or through an employer.

You can buy your health insurance directly from the insurer.   Or you can buy it through your state or federal government-run health insurance marketplaces.   Costs and number of plans vary by state.   Find more details by state on the Marketplace link opens in a new window.

With employer-based coverage, your employer may pay for all or part of your health insurance.   Typically, an employer will provide several health insurance plan options.

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Transitional health coverage – COBRA

COBRA stands for Consolidated Omnibus Reconciliation Act.

When you leave your job or reduce your work hours to care for a child, you may still get some coverage through your employer’s group health plan for a limited time.

The employer’s human resources department can give you details on COBRA coverage options and related costs.

Health insurance assistance programs

If you buy insurance through the state or federal marketplaces, a Premium Tax Credit may be available to reduce the cost of insurance premiums. The size of your premium tax credit is based on your income. If you have a lower income, you get a larger credit to cover insurance costs. During enrolment, you can calculate an estimate of the amount of this tax credit. Or, you can get the full amount of the premium tax credit when you file your income tax return. To learn more, visit the eligibility page on the IRS website Link.

Cost-sharing reductions (CSRs) are programs that help lower the amount you pay for deductibles and co-payments. CSRs may be available through your state or federal marketplace and can reduce your out-of-pocket expenses. The amount will depend upon:

• Your income
• Your insurance plan
• If you meet certain conditions (eligibility)
• To qualify for these reductions, you must be enrolled in specific plans.

Public health insurance

Two main types of public insurance programs cover families and children: Medicaid and the Children’s Health Insurance Program (CHIP).

Medicaid

Medicaid is a government health insurance program for people with low incomes. It covers children, elderly, disabled, and other eligible people who get federal income payments.

Every state gives families with low incomes the option to get free or low-cost public health insurance.

Each state has a different name and income requirement for its Medicaid program. For example, in Wisconsin, Medicaid is known as BadgerCare. Medicaid in California is known as Medi-Cal.

For Medicaid coverage, enroll any time of year and be covered right away. To find out how to qualify, contact a state Medicaid agency.

Children’s Health Insurance Program (CHIP)

CHIP provides low-cost health insurance to children in families who do not qualify for Medicaid.

Each state has a different name and income requirement for its CHIP. For example, in Rhode Island, the Children’s Health Insurance Program is known as Rite Care. In New York, it is known as Child Health Plus.