Health insurance is one of the most important forms of financial protection you can have. It helps you access medical care when you need it while shielding you from high medical costs. Yet, many people find health insurance confusing—premiums, deductibles, networks, copays, coinsurance, and countless plan options can feel overwhelming. This FAQ breaks everything down in simple, practical language so you can make confident, informed decisions about your coverage.
What Is Health Insurance?
Health insurance is a contract that helps pay for your medical expenses, including doctor visits, hospital care, prescriptions, and preventive services. You pay a premium (monthly or yearly) and in return, your insurer shares the cost of your healthcare.
Health insurance is available through:
- Employers
- Government programs (Medicare, Medicaid)
- Private marketplaces
- Direct purchase from insurance companies
Why Is Health Insurance Important?
Health insurance protects you from high out-of-pocket costs. A single medical emergency can cost thousands of dollars. With coverage, you pay only a portion of the cost while your insurer covers the rest.
Health insurance also:
- Gives access to preventive care
- Helps manage chronic conditions
- Covers emergency services
- Protects long-term financial stability
What Are the Main Types of Health Insurance Plans?
Here are the most common plan types:
Health Maintenance Organization (HMO)
- Requires staying within a provider network
- Requires referrals for specialists
- Lower premiums and predictable costs
Preferred Provider Organization (PPO)
- Offers more flexibility
- Out-of-network care available (higher cost)
- No referrals needed
Exclusive Provider Organization (EPO)
- Similar to HMOs but does not require referrals
- No out-of-network coverage except emergencies
Point of Service (POS)
- Hybrid of HMO and PPO
- Requires referrals
- Some out-of-network coverage
High-Deductible Health Plan (HDHP)
- Pairs with a Health Savings Account (HSA)
- Lower premiums, higher deductibles
- Ideal for healthy individuals or those wanting tax benefits
What Do Common Health Insurance Terms Mean?
Premium
The amount you pay each month for coverage.
Deductible
How much you must pay out of pocket before insurance begins covering services.
Copay
A fixed amount you pay for certain services (e.g., $30 for a doctor visit).
Coinsurance
A percentage of costs you pay after meeting your deductible (e.g., you pay 20%, insurer pays 80%).
Out-of-Pocket Maximum
The most you’ll pay in a calendar year. After reaching this limit, insurance covers 100% of covered services.
What Does Health Insurance Typically Cover?
Most plans include:
- Preventive care (annual exams, vaccines)
- Doctor visits
- Hospitalization
- Emergency care
- Prescription drugs
- Maternity and newborn care
- Mental health services
- Lab tests and imaging
- Pediatric care
Under the Affordable Care Act (ACA), these are known as essential health benefits.
What’s NOT Covered by Health Insurance?
Common exclusions include:
- Cosmetic procedures
- Non-FDA-approved treatments
- Long-term care
- Most dental and vision services (unless you add separate plans)
- Private nursing
- Experimental therapies (varies by plan)
Always review your summary of benefits to know the limits.
How Much Health Insurance Coverage Do You Need?
Consider your:
- Age
- Health history
- Prescription needs
- Financial situation
- Preferred doctors or hospitals
- Comfort with out-of-pocket costs
Healthy individuals may choose HDHPs, while those with chronic conditions may benefit from lower deductibles and more inclusive coverage.
How Much Does Health Insurance Cost?
Costs vary widely, depending on:
- Plan type
- Deductible level
- Coverage tiers (bronze, silver, gold, platinum)
- Age and location
- Employer contributions
- Subsidies on the marketplace
Premiums tend to rise with age and higher levels of coverage.
What Are Healthcare Networks?
A network is a group of doctors, hospitals, and specialists contracted with an insurer. Using in-network providers usually gives you the lowest costs.
- HMO/EPO: Often no out-of-network coverage
- PPO/POS: Out-of-network available but more expensive
Always verify that providers are in-network before scheduling care.
Does Health Insurance Cover Prescriptions?
Yes. Most plans include prescription drug coverage categorized into tiers (generic, preferred brand, specialty, etc.). Higher tiers typically have higher costs.
Some medications require:
- Prior authorization
- Step therapy
- Quantity limits
What Is an HSA, FSA, or HRA?
Health Savings Account (HSA)
- Paired with HDHPs
- Tax-deductible contributions
- Funds roll over yearly
- Can invest funds
- Portable between jobs
Flexible Spending Account (FSA)
- Use-it-or-lose-it annually (with some exceptions)
- Employer-owned
- Not tied to HDHPs
Health Reimbursement Arrangement (HRA)
- Employer-funded
- Covers medical expenses or premiums
Each option helps lower healthcare costs differently.
How Do You Choose the Right Health Insurance Plan?
Ask yourself:
- What are my total yearly healthcare needs?
- Do I prefer lower premiums or lower out-of-pocket costs?
- Are my doctors in-network?
- Am I eligible for subsidies?
- Do I need prescription coverage?
- Could I benefit from an HSA?
Balance cost, coverage, and your personal health profile.
How Do Health Insurance Claims Work?
- You visit a provider.
- The provider bills your insurance.
- Insurance determines what’s covered.
- You receive an Explanation of Benefits (EOB).
- You pay any outstanding copays, deductibles, or coinsurance.
Most claims are handled electronically, requiring minimal effort from you.
Can You Have Multiple Health Insurance Plans?
Yes. This is known as coordination of benefits. One plan becomes the primary payer, and the other becomes secondary. This is common when:
- Children are on two parents’ plans
- You have employer and spouse coverage
- You have Medicare plus supplemental policies
How Can You Lower Your Health Insurance Costs?
Try:
- Choosing an HMO or EPO
- Enrolling in an HDHP paired with an HSA
- Using preventive services
- Staying in-network
- Comparing pharmacy options
- Taking advantage of wellness programs
- Checking eligibility for subsidies or Medicaid
Even small strategic decisions can reduce annual medical spending.
Final Thoughts
Health insurance doesn’t have to be confusing. With the right information and a clear understanding of how coverage works, you can choose a plan that fits your needs, protects your finances, and gives you peace of mind. Use this FAQ as a guide to confidently navigate your health insurance options.