The 2019 Kaiser Family Foundation report on health insurance shows that roughly half of Americans (49.6%) get their insurance through an employer. For the other half, they have to purchase a plan separate from their job.

Employer Plans

When you sign up for insurance through an employer it is part of a group plan and generally has a lower cost than a comparable individual plan. If your employer offers health insurance, you should talk to your manager or HR representative and make sure you sign up. Many employers subsidize the cost of the plans and this can make them an even better deal. Your monthly premiums will come right out of your paycheck.

Non-Employer Plans

Even if you’re working a regular job, your employer may not offer health insurance. If you’re self-employed, out of work, or for another reason don’t have access to a traditional employer or “group” plan, you’ll need to find health insurance on your own. 

Review the options below for ways to sign up. 

• HealthCare.gov: Also known as the “Healthcare Exchange”, this site will ask for your zip code and then you can either browse plans directly on this site or you will be directed to your state’s specific site if it has one. The plans shown on the exchange include some (but not all) health insurance policies sold by private insurance companies but they will all offer the ten essential benefits previously mentioned. If your income is low enough, you may find you are eligible for a subsidy or tax credit which will effectively lower the cost of your insurance. You’ll also be able to see if you qualify for Medicaid or CHIP by completing the application on this site.
  

• Insurance Company: These are plans purchased directly from the insurers website. Plans that are indicated as being compliant with the Affordable Care Act will all have the same essential benefits previously mentioned. However if they’re being sold only on the insurers website (as opposed to also being on the government healthcare exchange) the insurer has some flexibility on how the plans are structured which may mean they can be sold at a lower price. Look for an insurer in your area (e.g. Aetna, United Healthcare, Blue Cross, Cigna, Humana, etc.) and do some comparison shopping between companies and compared to the exchange. Plans purchased from a private insurance company’s site will not allow you to qualify for a subsidy or tax credit.
  

• Private Enrollment Site: These sites may offer tools that help make comparing different plans – from many different insurers – easier for you. If you’re looking for coverage that is short-term or others that might not have all the “essential benefits”, these plans may be shown alongside ACA approved plans. While these plans may have fewer benefits, they may also have lower costs. Just make sure you understand the type of plan you’re signing up for. A few examples of these types of sites are EHealthInsurance.com, HealthSherpa.com, GetInsured.com, and many more.
  

• Health Insurance Agent/Broker: These are people who can help you find care and evaluate your needs. They are paid a commission by insurance companies when you use them to purchase a plan but you won’t have to pay for that and it won’t affect the cost of your policy. To find an agent you can use the “Find Local Help” tool directly from HealthCare.gov.
  

• Membership Organization: Some large professional organizations, unions, and academic organizations (e.g. colleges and universities) may allow you to get a health insurance plan at a group rate. In effect, this makes it similar to purchasing insurance through an employer. If you belong to any of these groups, or find one you can join (e.g. the Freelancer’s Union) it’s worth checking to see if this is an option. 

Action

Once you’ve signed up for a plan, write down the plan details (use the list below as your guide) so you have a quick and easy reference. Then mark this task complete (available to logged in users).

• Monthly premium
• Deductible amount
• Typical coinsurance percentage 
• Typical copayment
• Annual out-of-pocket maximum

(Now give yourself a pat on the back for getting through one of the most important but admittedly annoying parts of the Security tier!)

* Note: MoneySwell does not receive any commissions, payments, or any other benefits from the companies or organizations listed on this page. They are referenced for your educational purposes only. Learn more about MoneySwell’s business model and philosophy here. (Hint: MoneySwell is built for our users, not advertisers.)

Share the Costs

Insurance is designed to share medical costs, between you and an insurer, based on a predetermined structure. The details below will help you understand the basics for evaluating the financial implications of your health insurance choices.

Key Health Insurance Terms

Below are the most important terms to understand for health insurance. When you evaluate your plan choices, if you come across other terms you need to understand, we recommend using the HealthCare.gov glossary.

• Premium: This is the amount you pay at regular intervals for your insurance. If purchasing privately, you typically pay every month. If purchasing through an employer, a portion is taken out with each paycheck.
  
  Premiums differ significantly between different plan types and you can’t evaluate an insurance plan based on premiums alone. But as a general rule, the higher the premium, the lower your costs when you use medical services. Conversely, the lower your premium, the more you’ll pay for medical services.
  
  Therefore, if you anticipate needing a lot of medical services, it may make sense to pay a higher premium in exchange for lower medical costs. If you don’t anticipate needing a lot of medical services, you may save money by finding a plan with lower premiums.
  

• Deductible: This is the annual amount you will have to pay for medical services before your insurance kicks in. For example, if you have a $1,000 deductible, you have to pay $1,000 before your insurance will cover any portion of your medical costs.Imagine you have a doctor’s appointment and get some tests done. The total cost is $500. Assuming you haven’t previously paid toward your deductible, you will owe $500. Then imagine you have another appointment and more tests for a total cost of $750. You would owe a further $500. But because you’ve now paid your $1,000 deductible, for the remaining $250, your insurance kicks in. It doesn’t mean insurance will pay the full $250. Instead, your insurance would pay based on the predetermined percentage agreed upon. For example, your plan may pay for 90% of covered services. This would mean insurance would pay 90% of $250 which is $225. You would therefore owe an additional $25 (on top of the $500 you already paid).
  
  Special Note: Plans that qualify as a “High Deductible Health Plan” – $1,350 for an individual or $2,700 for a family plan – allow you to qualify for a Health Savings Account (HSA). HSAs can be a great way to pay for medical expenses with pre-tax dollars but their funds can also be invested and allow for potential tax-free growth. In short, if you can afford to pay for a high deductible out of pocket, HSAs can be a great part of your long-term savings strategy.

• Coinsurance: This is a predetermined percentage amount you pay for a specific service. For example a plan is set to pay for 80% of a covered service – like a doctor’s visit – the amount you owe for your “coinsurance” is the remaining 20%.
  

• Copayment: Also known as “copay,” is a predetermined dollar amount you pay for a specific service or prescription medication. For example a visit to a doctor’s office may always require a copay, maybe $10 or $20. Similarly, picking up a prescription from the pharmacy may require a copay.
  
  Putting coinsurance and copays together: After you’ve paid your annual deductible a plan may agree to pay 80% of costs (meaning your coinsurance is the remaining 20%) and require a $10 copay for doctor’s visits. So if you’ve met your deductible for the year, and have a doctor’s visit that costs $100, you would owe: $10 (your copay) + $20 (which is 20% of the $100 doctor’s bill) = $30. Your insurance would pay $80 which is 80% of the doctor’s bill.
  
  Copays generally do not count toward your annual deductible but coinsurance payments do. Both copays and coinsurance payments count toward your annual out-of-pocket maximum.
  

  Your out of pocket maximum represents the MOST you would have to pay for covered services in a single year.

• Out-of-pocket Maximum: This is the maximum amount you would ever have to pay for covered health care services or prescriptions in a single year. Once you’ve hit this number, for the remainder of the year you would not owe any additional costs.For example if your annual out-of-pocket max is $8,000 and you’ve spent $7,000 that year and then have a need for a surgery that costs $50,000, you would only have to pay $1,000. By that point you would have reached your out-of-pocket maximum and the remaining $49,000 of surgery-related expenses would be covered by insurance.

Consider Who the Insurance is For

Depending on who is going to use the insurance, different plan types may be available. When you’re shopping for different plans, search in all applicable categories so you can find one with the best balance between cost and benefits. If you have health insurance through your employer, they typically pay some of those costs and it’s likely to be your cheapest and best health insurance option.

• Active Military – Your insurance is covered by TRICARE and you do not need to purchase any additional health insurance.

• Family – These plans cover you, your partner, and dependents. If you get health insurance through an employer you can almost always add family members for additional cost.

• Individual – These are plans that cover just one person.

• Low income – The government offers two primary low-income options: Medicaid and Children’s Health Insurance Protection (CHIP). To see if you qualify you can check healthcare.gov or your state government’s healthcare website.

• Married but No Kids – You have the option of purchasing an individual plan or a plan that covers you and your partner.

• Self-employed – You can search for plans on healthcare.gov or your state’s exchange. Note that you may qualify for some sort of subsidy or credit as well which can make coverage more affordable.

• Senior – Individuals over the age of 65 (sometimes even 62) qualify for Medicare. There are multiple different “parts” (essentially plan types) available at varying cost levels so make sure to do some research and find what works for you.

• Student – Students can be on their parent’s plan up to age 26 and many colleges and universities also offer plans for their students as well.
  

• Veteran – You are covered under the U.S. Department of Veterans Affairs (VA) insurance. However you can also get additional or separate health insurance through another private option (e.g. a private employer-based plan) if you like.

Consider What Type of Coverage is Needed

There are several different ways to sign up for and purchase health insurance (see the next task). Some plans will cover more than others or with different pricing structures (this is your mix of premiums, deductibles, coinsurance, copays, out-of-pocket max). But whether the plan is a public one (e.g. Medicaid, Medicare, CHIP) or private (any plan sold through a private insurance company like United Healthcare, Aetna etc. – and many of which can be found via the healthcare.gov exchange), at a minimum they will cover these 10 essential benefits (as described on healthcare.gov)

1. Ambulatory patient services (outpatient care you get without being admitted to a hospital)
2. Emergency services
3. Hospitalization (like surgery and overnight stays)
4. Pregnancy, maternity, and newborn care (both before and after birth)
5. Mental health and substance use disorder services, including behavioral health treatment (this includes counseling and psychotherapy)
6. Prescription drugs
7. Rehabilitative and habilitative services and devices (services and devices to help people with injuries, disabilities, or chronic conditions gain or recover mental and physical skills)
8. Laboratory services
9. Preventive and wellness services and chronic disease management
10. Pediatric services, including oral and vision care (but adult dental and vision coverage aren’t essential health benefits)

When is coverage needed and for how long?

Short-term health insurance can cover you for up to 1 year but it does not cover the same essential benefits listed above. These plans generally have high deductibles and vary greatly in other respects as well, including coverage. But they are often more affordable than traditional health insurance plans so they may be a suitable solution for short-term coverage gaps or healthier individuals who don’t expect to need regular medical care in the short-term.

If you’ve recently left a job you are eligible to continue your previous employer-based coverage for several months (through COBRA). However, you will have to pay for the full cost of this coverage and often there are cheaper options.

For traditional health insurance, you can only purchase it during set times, either during an open enrollment period (usually November – mid December), or within a specified window (usually 30 or 60 days) after a qualifying life event (e.g. moving, changing jobs, having a child etc.). The reason for these set purchase times is that insurance is something you pay for before you need it. Without this, people could just wait until they needed coverage and sign up – but this wouldn’t create a viable revenue stream for insurers from which they would pay these claims.

Details

Whether we like it or not, in the United States you can’t have a conversation about health care without also talking about health insurance. Let’s cover the most important points.

Healthcare Quality

Journalistic investigations as well as broader studies have consistently shown that whether in emergencies or planned care situations – those without health insurance receive poorer health care. Not only that, but having health insurance may make us more likely to get the preventative care we need to keep us healthy in the first place.

The reasons for this are myriad. But because health insurance and the healthcare system are so entrenched, the best intentions of individual healthcare providers working with an uninsured patient, are likely to be overwhelmed by a complex and overburdened system that isn’t designed to work without insurance in the mix. Arguably, this setup isn’t always good for those with insurance but it’s never good for those without it. 

Simply put, in the current system, the best chance you have for high-quality health care is to have health insurance. 

Healthcare Costs

Medical debt is one of the major contributors for consumer debt and a reason for huge financial stress for Americans. And because health care and insurance are so intertwined, what is charged for health care often assumes an insurer will bear part of the cost. But when an insurer is taken out of the equation, it’s often the patient who is forced to pay the difference. And the costs can be crippling. 

What do “crippling” health care costs look like? It’s an ambulance ride of mere minutes costing several thousand dollars (whether it’s a life threatening emergency or not). It’s an X-ray to check for a broken bone costing thousands of dollars. It’s an overnight hospital stay costing many tens of thousands of dollars. It’s ongoing treatment for a rare – or often not-so-rare – condition that costs hundreds of thousands of dollars or even more.

When you have health insurance, costs become much more manageable. Not only do insurers get special rates that they’ve negotiated with various providers, but depending on your policy the insurer will be obligated to pay for a predetermined percentage of those negotiated rates, sometimes as much as 90 – 100%. 

Key Points

In addition to getting better care and paying less when you have health insurance, here are a few details that are essential to consider.

• Out of Pocket Maximum: When you have health insurance, there’s something called an annual out of pocket maximum for covered services. This means that no matter what, for things your insurer covers, even if you have costs in the millions of dollars, you will never have to pay more than a certain maximum amount in a given year. Typically this number is in the single digit thousands.
  

• Preventative Care: Depending on the specifics of your plan, there’s a good chance your insurer will cover preventive services at very low or no cost. They’re not doing this because they’re nice. They’re doing this because with preventative care they believe you’ll be healthier which can actually save them money in the long run.
  

• You Will Need Care: Whether you’re young and healthy or old and frail, at some point you will need care.
  

  Even if you’re young and healthy, you will need health insurance.

  Whether it’s a broken ankle you get while playing basketball, mental health services, medicine for a condition you didn’t even know you had, or a surprise surgery, something will happen that causes the need for care. Don’t fall into the trap of believing that you are invincible. You’re not. And when you find yourself in a situation where you need care, the last thing you want to be worrying about is whether or not you can pay for it.
  

• It’s Not Just For You: If you needed medical care and you couldn’t pay for it yourself, the lengths your friends and family would be willing to go to help you might surprise you. But it may be through incredible sacrifice. They may raid their retirement fund, sell their house, or quit their job to care for you if that’s what the situation called for. How terrible would it be if you knew these hardships could have been avoided if you had health insurance and your costs were more manageable? Hopefully, you’ll never need to find out.

Conclusion

Now that you’ve given some thought to the need for health insurance, move on to the next task (for logged in users) to understand how to evaluate your health insurance needs and where to buy health insurance.