How US health insurance actually works

Premium is what you pay every month to have the insurance at all. You pay it whether or not you see a doctor. With employer coverage, the employer typically pays the larger share and yours comes out of your paycheck pre-tax.

Deductible is what you pay yourself before the plan starts contributing. If your deductible is $2,000, you pay the first $2,000 of covered care. Crucially, you pay the insurer's negotiated rate rather than the sticker price, which is often a fraction of it — so having insurance saves you money even before the deductible is met.

Copay is a flat fee for a specific service — $30 for a primary care visit, $60 for a specialist, $15 for a generic prescription. Many plans apply copays for some services before the deductible is met and coinsurance for others after.

Coinsurance is a percentage you pay after the deductible. An '80/20' plan pays 80 percent and you pay 20 percent of the negotiated rate.

Out-of-pocket maximum is the total you can pay in a plan year for covered in-network care, counting deductible, copays and coinsurance but not premiums. Once you hit it, the plan pays 100 percent of covered in-network care for the rest of the year. This is the number that determines your worst-case exposure, and it is the one to compare hardest.

Network is the set of providers who have contracted rates with your insurer. Going outside it means paying a much higher share, or everything, depending on the plan type.

HMO — Health Maintenance Organization. Lowest premiums, narrowest network. You choose a primary care physician who coordinates your care, referrals are usually required to see a specialist, and out-of-network care is generally not covered at all except emergencies.

PPO — Preferred Provider Organization. Higher premiums, wider network, no referral needed for specialists, and partial coverage for out-of-network care. The flexible option, priced accordingly.

EPO — Exclusive Provider Organization. In between: no referrals needed, but no out-of-network coverage except emergencies.

POS — Point of Service. Requires referrals like an HMO, but offers some out-of-network coverage like a PPO.

HDHP — High Deductible Health Plan. Defined by having a deductible above a threshold set by the IRS each year. Lower premiums, higher deductible, and the key advantage: it makes you eligible for a Health Savings Account.

An HSA is a genuinely unusual tax vehicle — contributions are pre-tax, growth is untaxed, and withdrawals for qualified medical expenses are untaxed. It is the only triple-tax-advantaged account in the US code. Funds roll over indefinitely and the account is yours if you change jobs. If you are healthy and offered an HDHP with an employer HSA contribution, the arithmetic often favors it.

Employer-sponsored insurance covers roughly half the US population. You enroll during a defined open enrollment window each year, usually in the autumn, or within a limited window after a qualifying life event such as starting a job, marriage, birth or losing other coverage. Outside those windows you generally cannot change plans.

The ACA Marketplace, at HealthCare.gov or a state exchange, is for people without employer coverage. Open enrollment typically runs from November into January, with the exact dates set annually. Premium tax credits substantially reduce cost for households below an income threshold, and cost-sharing reductions further lower deductibles for lower incomes on Silver plans specifically.

Medicaid covers low-income households, is jointly funded and state-administered, and has no enrollment window — you can apply at any time. Eligibility varies sharply by state because the ACA's Medicaid expansion was made optional for states.

Medicare covers people 65 and over and some younger people with disabilities. It has its own parts — A for hospital, B for outpatient, C for private Medicare Advantage plans, D for prescriptions — and its own enrollment periods with late-enrollment penalties that last for life.

COBRA lets you keep employer coverage after leaving a job, typically for 18 months, but you pay the full premium including the employer's former share plus an administrative fee — usually a large increase. Compare it against a Marketplace plan before enrolling, since job loss is a qualifying life event that opens Marketplace enrollment.

Check the out-of-pocket maximum first, then the deductible, then the premium. That is the reverse of how most people read plan documents and the right order for understanding your exposure.

Check that your doctors are in-network — by name, on the insurer's directory, and ideally by calling the practice. Directories are frequently out of date, and a plan that excludes your existing specialist is worth less than its premium suggests.

Check the drug formulary if you take regular medication. Plans place drugs in tiers with different costs, and a plan that puts your medication in a high tier or excludes it can cost thousands more.

Check whether preventive care is genuinely free. ACA-compliant plans must cover a defined list of preventive services — annual wellness visits, immunizations, many screenings, contraception — with no deductible and no copay. Short-term and non-ACA-compliant plans need not, which is one reason they are cheaper.

When you get care, always confirm in-network status of the facility and the individual providers. The No Surprises Act, in effect since 2022, protects you from surprise balance billing for emergency care and for out-of-network providers at in-network facilities — a genuinely significant protection that did not exist before.

Always request an itemized bill before paying anything, and compare it against the Explanation of Benefits from your insurer. The EOB is not a bill; it explains what the insurer paid and what you owe. Billing errors are common.