Health Insurance Benefits

Between confusing terms, complicated processes, and big dollar amounts, dealing with health insurance can be stressful and confusing. Here’s a primer of everything you need to know when it comes to health insurance.

Getting Covered

The government allows you to stay on your parent’s or guardian’s health insurance until you turn 26 but, ideally, your employer would offer healthcare plans as part of your benefits package. Some colleges also offer basic student health insurance plans that you can enroll in if you’re a student there. You can also enroll in a health insurance plan through the marketplace by visiting healthcare.gov. If you get married one day, your partner can add you to their plan or you can add a partner or dependents to yours—just know that coverage will get more expensive if you do so.

If you have no other options for health insurance, you can also investigate the individual coverage that’s available from insurance companies or through the Affordable Care Act (ACA) in your state or other private options. While there’s a chance this coverage will be expensive because you’re paying for it all yourself, it will still be infinitely better than not having health insurance at all.

Do I Need Health Insurance?

Healthcare in the United States is extremely expensive. Trying to pay for everything on your own without health insurance can drain your accounts, and one serious health concern or accident can lead to a major financial setback.

How Health Insurance Works

Let’s go over each of the major terms surrounding health insurance. It’s important to note that this isn’t how every type of health insurance works, but it’s how most of them do.

You’re required to pay a monthly premium to your health insurance company for covering you, whether you use health insurance that month or not. If you have employer-provided health insurance, your employer usually foots part of that bill (often 70-80%), and you pay the rest. If you’re getting insurance yourself, you’ll have to cover the entire premium.

When it’s time to go to a doctor or other care provider, there are two types of providers you need to be aware of: in-network and out-of-network. In-network providers are those that your insurance company has agreed to work with. That means that they’ve negotiated discounts with them. Out-of-network providers are those with no such agreement, which means you’ll have to pay higher prices. To find in-network providers, you can call your health insurance company or check their website for a doctor search tool.

When you go to the doctor, you’ll have to pay a copay. This is an amount that you pay whenever you get certain regular services like a checkup or buy prescription medication. In most plans, preventive services, such as cancer screenings and immunizations don’t require a copay.

For less regular care, you’ll be required to pay the full cost of the procedure until you meet your deductible. A deductible is a set amount of money that you have to pay out-of-pocket (meaning you pay it yourself) toward healthcare in a year. Copays and premiums don’t count toward deductibles.

Once you meet your deductible, you’ll be responsible for coinsurance. Coinsurance is a percentage of the full cost of care. So, for example, if your coinsurance is 20%, you’ll pay 20% for a procedure after meeting your deductible (instead of the full cost) and your insurance will pay for the remaining 80%.

Finally, there’s a limit to how much you’ll have to pay in one year. This is called your out-of-pocket maximum. Everything you pay (except premiums) for covered expenses in a year counts toward this maximum. Once you hit it, your health insurance will cover every other eligible expense 100% for the rest of the year.

Personalizing Your Coverage

Within your plans, there will likely be options to customize your coverage. Premiums and deductibles work opposite of one another. If you have a lower deductible, you’ll have a higher premium. If you have a high deductible, you’ll have a lower premium. So, if you opt for a High Deductible Health Plan (HDHP) and don’t have a lot of medical expenses in a year, you may end up benefiting from a lower monthly premium. But, if you have major health expenses, you’ll pay a lot out-of-pocket before meeting your deductible.

There are also health savings accounts (HSAs), which you may be eligible for if you have an HDHP. An HSA is an account that you can put pre-tax money into and use for qualifying expenses such as medicines, eyeglasses or contacts, bandages, acupuncture—it’s a long list. Basically, you can buy these things without having to pay income taxes on the money you use, which can save you money come tax time.

Health insurance is overwhelming, but understanding the basics can help you get prepared for the future. And don’t worry, your health insurance company will have representatives that can walk you through expenses as needed.