How Does Health Insurance Work?

Once you’ve applied for a non-Medicare health coverage plan and made your first month’s payment, you’ll receive a policy with a start date indicating when your coverage begins. Each month, you’ll pay a premium, which is your health plan’s monthly bill.

If you purchase your own health insurance, you may qualify for government assistance to help cover part of your premium. This financial assistance is called an Advanced Premium Tax Credit (APTC) or subsidy. The government sends this subsidy directly to the insurance company, reducing your monthly premium cost.

✅ Most health plans have a deductible, which is the amount you must pay out of pocket each year before your health plan starts covering its share. Depending on your plan, the deductible may apply to all covered services or only to select covered services. For example, your plan may cover a primary care visit right away, while an inpatient hospital stay may only be covered after you’ve met your deductible.

✅ You may also have to pay part of the cost for some covered services even after reaching your deductible. This is called cost-sharing and can include things like copays (fixed fees you pay for covered healthcare services) or coinsurance (a percentage of a covered medical bill you are responsible for paying).

✅ Most health insurance plans have a network—a list of doctors, hospitals, and other healthcare providers you can choose from. These are known as in-network providers. Visiting in-network providers when you need care will usually save you money. If you see a provider who is out of your plan’s network, you may have to pay more.

Some plans, like HMOs, only cover services provided by in-network providers. Other plans, such as EPOs, may require you to use exclusive providers for certain covered services, like prescription drugs or medical equipment.

Your plan will have an annual out-of-pocket maximum, which is the most you’ll pay each year for covered healthcare services. Once you reach this amount, your insurance will cover 100% of the cost for covered medical services for the rest of the year.

Health insurance plans may also include additional benefits at no extra cost, such as health and wellness reward programs or discounts on services and products.