What is health insurance?

Health insurance is an agreement between you and your insurance company. You buy an insurance policy that requires monthly or annual payments. In return, the company guarantees payment for part of your medical expenses when you get sick or hurt.

How does health insurance work?

  • When you have insurance, you pay some costs and your insurance plan pays some:
    • Premium is a fixed amount you pay to your insurance plan, usually every month. You pay this even if you don’t use medical care that month.
    • Deductible is the amount you pay for medical care before the insurance company starts to pay its share. Once you meet your deductible, your insurance company begins to cover some costs of your care. Many plans provide preventive services and sometimes other care before you’ve met your deductible.
    • Copayment is a fixed amount you pay for a medical service after you’ve met your deductible. For example, after meeting your deductible, you may pay $25 for a visit to the doctor’s office that would cost $150 if you didn’t have coverage. The health plan pays the rest.
    • Coinsurance is similar to copayment, except that it is a percentage of the costs you pay. For instance, you may pay 20% (or $20) of the cost of a $100 medical bill and the health plan pays the remainder.

Why should I have health insurance?

  • No one plans to get sick or hurt, but most people need medical care at some point in their lives. Health insurance covers these costs and protects you from very high medical expenses.
  • There are other important benefits of health insurance; plans available in the Marketplace (and most other plans) provide free preventive care, like vaccines, screenings and checkups. They also cover some costs for prescription drugs.
  • Health insurance protects you from high, unexpected costs. Did you know the average cost of a three-day hospital stay is $30,000? Or, that fixing a broken leg can cost up to $7,500? Health coverage can help protect you from costs like these.

How does health insurance protect you?

Insurance coverage protects you from high medical costs two ways:

  • Out-of-pocket maximum This is the total amount you’ll have to pay if you get sick. For example, if your plan has a $3,000 out-of-pocket maximum, once you pay $3,000 in deductibles, coinsurance and copayments the plan will pay for any covered care above that amount for the rest of the year.
  • No yearly or lifetime limits Health plans in the Marketplace can’t put dollar limits on how much they will spend each year, or over your lifetime, to cover essential health benefits. After you’ve reached your out-of-pocket maximum, your insurance company must pay for all of your covered medical care with no limit. People without health coverage are exposed to these costs. This can sometimes lead people without coverage into deep debt or even into bankruptcy.

What are the types of health insurance?

There are two basic types of health insurance companies: (1) Private insurance companies such as MercyCare Health Plans, and (2) government-sponsored plans such as Medicare and Medicaid.

Marketplace insurance plans

There are four categories of Marketplace insurance plans that help you choose a plan that’s right for you. When you compare Marketplace insurance plans, they’re put into four categories based on how you and the plan can expect to share the costs of care:

  • Bronze
  • Silver
  • Gold
  • Platinum

All Marketplace insurance plan categories offer the same set of essential health benefits. The categories do not reflect the quality or amount of care the plans provide. The category you choose affects how much your premium costs each month and what portion of the bill you pay for things like hospital visits or prescription medications. It also affects your total out-of-pocket costs—the total amount you’ll spend for the year if you need lots of care.

Note: The Marketplace also offers “catastrophic” plans to people under 30 years old and to some people with very low incomes.

Balancing monthly premiums with out-of-pocket costs

As with all health plans, you’ll have to pay a monthly premium. But it’s also important to know how much you have to pay out-of-pocket for services when you get care.

  • Premiums are usually higher for plans that pay more of your out-of-pocket medical costs when you get care. For example, if you have a Gold plan, you’ll likely pay a higher premium, but may have lower costs when you go to the doctor or use another medical service.
  • With a Bronze plan, you’ll likely pay a lower premium, but you’ll pay a higher share of costs when you get care.
  • Platinum plans will likely have the highest monthly premiums and lowest out-of-pocket costs. The plan will pay more of the costs if you need a lot of medical care.

In general, when choosing your health plan, keep this in mind: the lower the premium, the higher the out-of-pocket costs when you need care; the higher the premium, the lower the out-of-pocket costs when you need care.

What to consider when choosing your plan

Think about the health care needs of your household when considering which Marketplace insurance plan to buy.
Do you expect a lot of doctor visits or need regular prescriptions?

  • If you do, you may want a Gold or Platinum plan.
  • If you don’t, you may prefer a Bronze or Silver plan. But, keep in mind that if you get in a serious accident or have an unexpected health problem, Bronze and Silver plans will require you to pay more of the costs.

How does the health insurance exchange figure into this?

A key feature of the Affordable Care Act is the requirement that all people be covered by a health insurance plan–either purchased individually, provided by an employer or provided by the government. This requirement is called the “Individual Mandate” and the exchange acts as a Marketplace for purchasing health insurance. It’s important to note that this does not affect people who receive health care coverage through Medicare.

Any health insurance company selling on the exchange must be a Qualified Health Plan (QHP), certified by the federal government to sell in this Marketplace.

To make sure that everyone has health insurance, the federal government provides tax credits to most people who purchase health insurance on the exchange. The amount of assistance will depend on family size and income and where they live. The cost of living is substantially higher in Alaska and Hawaii, so the tax credit will be adjusted for residents of those states.

The amount of the tax credit varies by family size and income.

What if I have job-based health insurance?

If you have job-based health insurance you like, you can keep it. You’re considered covered. You are able to change to Marketplace coverage if you want to. Any job-based health plan you currently have qualifies as minimum essential coverage. You don’t need to change to a Marketplace plan in order to avoid the fee that uninsured people may have to pay. If you’d like to explore Marketplace coverage options you can, but there are several important things to consider:

With most job-based health insurance plans, your employer pays a portion of your premiums. If you choose a Marketplace plan instead, your employer does not need to make a contribution to your premiums. You should consider this carefully before comparing Marketplace plans.

If you decide to check out Marketplace plans, be aware that you may not qualify for lower costs on your monthly premiums and out-of-pocket costs, even if your income would qualify you otherwise. Whether you qualify depends on what kind of coverage your employer offers. If your job-based coverage is considered affordable and meets minimum value, you won’t be able to get lower costs on premiums or out-of-pocket costs in the Marketplace. This is true no matter what your income and family size are. Your employer can tell you whether the insurance plan it offers meets minimum value and can provide you with information to determine if the plan is considered affordable to you.

If you do not qualify for lower costs in the Marketplace, and your employer does not pay part of your premiums on the Marketplace, be sure you take these things into account before you consider choosing a plan other than your employer’s.

What are the federal poverty guidelines?

Visit Healthcare.gov for the federal poverty guidelines for the 48 contiguous states and the District of Columbia. The 100 percent column shows the federal poverty level for each family size. The columns that follow represent income levels that are used as guidelines for health programs, including the health insurance exchange. More information can be found at Healthcare.gov.