Health Insurance Basics

Health insurance is a way to help pay for health care expenses. Having insurance helps in the event of an accident or illness by paying some of the medical costs when you're injured or sick. Like car insurance or home insurance, you can choose from a variety of plans.

How insurance works

When you have health insurance, the insurance company pays a portion of your medical expenses. The amount the insurance company will pay, and the services that are covered (coverage) varies by plan.

For example, you may have to pay a $20 co-paymentA fixed amount (for example, $15) you pay for a covered health care service, usually when you receive the service. for each doctor visit. Or, the plan may not cover anything until you've paid a certain amount (the deductiblesThe amount you owe for eligible health care services before your health insurance or plan begins to pay. ). These deductibles and co-payments, along with any other expenses you may pay, are referred to as out-of-pocket expenses.

Some plans may also have co-insuranceYour share of the costs of a covered health care service, calculated as a percent (for example, 20%) of the allowed amount for the service. You pay co-insurance plus any deductibles you owe. , which is the percentage of the bill that you're required to pay, in addition to your deductible and co-payment.

The term cost-sharingThe share of costs covered by your insurance that you pay out of your own pocket. This generally includes deductibles, co-insurance, and co-payments, but it doesn't include premiums, balance billing amounts for non-network providers, or the cost of non-covered services.  is often used to describe the share of costs covered by your insurance that you pay out of your own pocket. This generally includes deductibles, co-insurance, and co-payments, but it doesn't include premiums, balance billing amounts for non-network providers, or the cost of non-covered services.

The amount you pay each month for your coverage is the premium The amount that must be paid for your health insurance or plan. .

The relationship between premium and deductible

No matter which health insurance plan you choose, you’ll pay a monthly payment (your premium) to keep your health insurance coverage. You may also pay a certain amount (co-payment or co-insurance) each time you receive medical care.

Generally, the higher your monthly premium, the lower your deductible will be.

Still want to learn more? Learn about:

• Choosing a Health Insurance Plan