How Health Insurance Works
Health insurance and the health care law
Many people get health insurance through their job, a family member’s job, or a government program like Medicare or Medicaid. In the past, people often went without health insurance if they couldn’t get it in one of these ways.
The health care law known as the Affordable Care Act now makes it easier for more people to buy health insurance on their own. It also requires that most Americans have health insurance or pay a penalty. This makes it important to understand what health insurance is and how it works.
Do I need health insurance?
We all live with the risk that we could have serious health problems at any time because of an accident or illness. If you get hurt or sick, you may need medical care. The question is, will you be able to get the medical care you need, and if so, will you be able to afford it?
Health insurance can make it possible to see a doctor, be treated, or get needed tests and procedures. Health insurance helps to pay the costs of medical care, which often costs a lot, and helps to provide financial security for you and your family. Regardless of your age or overall health, it’s important to have health insurance.
What is health insurance?
Health insurance is a contract between you and an insurance company that agrees to pay part of your medical costs if you get hurt or sick. In return, you make monthly payments to the insurer and help cover part of the cost of your care.
Health insurance plans generally cover preventive care to help keep you healthy, such as cancer screening tests, vaccines, and check-ups. It also covers treatment for injuries or diseases. Health plans can differ on what they cover and how much of the cost they will pay, but the health care law is helping many people find a plan that offers the coverage they need at a price they can afford.
Don’t people go without health insurance?
Before the health care law took effect, there were more than 50 million people in the United States without health insurance. Some of them chose to go without coverage, while others were denied coverage or couldn’t afford it. All of them faced the risk of needing medical care and not being able to get it. If you don’t have health insurance, you pay the full price of health care out of your own pocket. Just one night in a hospital can cost thousands of dollars. And treatment for a disease like cancer can cost hundreds of thousands of dollars.
People with or without insurance can go to an emergency room for urgent care. But emergency rooms don’t offer check-ups, care for ongoing illnesses, or other preventive services that can help you stay healthy. If you have an advanced-stage illness, an emergency room might not treat the illness at all. If you have a serious injury, you may not get the surgery or treatment you need to get better. And, if you don’t have health insurance you’ll be billed for the emergency room services, which average over $1,000 per visit.
A breakdown of the costs of health insurance
When choosing a plan, it’s important to look at all the costs that you’ll have to pay along with the benefits or coverage offered:
- Monthly premium: the amount you pay the insurer for health coverage or the amount of your monthly bill.
- Annual deductible: the amount you must pay for health care in a calendar year before the plan starts to pay.
- Co-pays: a flat dollar amount you pay each time you use a covered service, such as a doctor visit.
- Co-insurance: the percentage of the total cost of the service you must pay.
The health care law limits the amount of money your insurance company can make you pay for your health care in a given year, often called the out-of-pocket limit. (This limit only applies to private insurance plans, not plans offered through Medicare.)
How do I know which plan is right for me?
It’s important to know what services a health plan covers and how much you’ll have to pay for those services. Until recently, people had a hard time finding details about their insurance plan.
The health care law requires insurers to give consumers a Summary of Benefits that’s short and easy to understand. Make sure you ask for one on any insurance plan you’re thinking about buying. The law also requires all plans to cover essential health benefits, which include services needed to help prevent and treat a serious disease such as cancer. Still, health plans cover different doctors and hospitals, and costs for those that aren’t in their network can be much higher. You’ll want to read about the benefits and ask questions about the health plans you are considering. Here we list some of the things you should look for in a health insurance plan.
These are the health care services a plan covers. Most plans cover basic benefits such as doctor’s visits, hospitalizations, preventive care, and prescriptions. But if you have special health needs, such as costly drugs or need to see certain medical specialists, you may want to be sure the plan covers these, too.
Make sure you know how much a health plan will expect you to pay for your care in the form of monthly premiums, annual deductibles, co-pays, and co-insurance before the plan will pay for the services you need. (These are often called out-of-pocket costs. See the section, “A breakdown of the costs of health insurance” for more on this.)
A health plan may require you to get care from certain doctors, specialists, hospitals, and clinics. Some plans have broad networks that offer a lot of choices for care, while others have narrow networks in which choices are more limited. Before choosing an insurance plan, gather up the names and contact information of your doctors. Have all of your prescription bottles nearby. Then you can call the plan administrator to find out the following:
- Are the doctors you’ve been seeing included in the plan’s network?
- Does the network include specialists and facilities you may need to visit for a certain health problem?
- Are your prescription drugs covered?
Where can I get help?
Information is available in several languages online through www.healthcare.gov and www.getcoveredamerica.org. You can also learn more through the Health Insurance Marketplace toll-free call center at 1-800-318-2596 or TTY 1-855-889-4325 – both of which are available 24 hours a day, 7 days a week.
Details on understanding and choosing health insurance can be found online at www.healthcare.gov/using-insurance/understanding/basics.
You can use the website https://localhelp.healthcare.gov to find people in your community who can help you apply, enroll, or give you answers to any questions you might have.
The American Cancer Society Cancer Action Network has facts and tip sheets about health insurance at www.acscan.org/healthcare/learn.
No matter who you are, we can help. Contact your American Cancer Society anytime, day or night, for information and support. Call us at 1-800-227-2345 or visit www.cancer.org.
Last Medical Review: November 13, 2014 Last Revised: November 14, 2014