Health Insurance Basics: Plans, Terms, and How to Choose

## Why Health Insurance Matters Health insurance is one of the most important financial tools you have. A single emergency room visit can cost $2,000 or more, a broken bone can run $7,500, and a three-day hospital stay can exceed $30,000. Without insurance, a serious illness or accident can lead to medical debt that takes years to pay off — or worse, cause people to avoid care they genuinely need. Beyond financial protection, health insurance gives you access to preventive care, prescription drug coverage, and a network of providers who have agreed to negotiated rates. Even routine care costs less when you're insured. ## Types of Health Insurance Plans ### HMO (Health Maintenance Organization) HMOs offer lower premiums and out-of-pocket costs but require you to use doctors within the plan's network. You'll need a primary care physician (PCP) who coordinates your care and provides referrals to specialists. Out-of-network care generally isn't covered except in emergencies. **Best for**: People who want lower costs and don't mind choosing from a specific network of doctors. ### PPO (Preferred Provider Organization) PPOs offer more flexibility. You can see any doctor without a referral, and you'll pay less if you use in-network providers. Out-of-network care is covered but at a higher cost to you. Premiums tend to be higher than HMOs. **Best for**: People who want the freedom to see specialists directly or who travel frequently. ### EPO (Exclusive Provider Organization) EPOs are a middle ground. Like PPOs, you don't need referrals to see specialists. Like HMOs, you must stay in-network (except for emergencies). Premiums fall between HMO and PPO levels. **Best for**: People who want specialist access without referrals but are comfortable staying in-network. ### POS (Point of Service) POS plans combine HMO and PPO features. You choose a PCP and need referrals for specialists (like an HMO), but you can go out of network at a higher cost (like a PPO). **Best for**: People who want a primary care physician managing their care but want the option to go out of network. ## Key Terms You Need to Know ### Premium Your premium is the amount you pay each month for your health insurance, regardless of whether you use any medical services. Think of it like a subscription fee. Lower premiums usually mean higher out-of-pocket costs when you actually receive care. ### Deductible Your deductible is the amount you pay out of pocket before your insurance starts covering costs. For example, with a $1,500 deductible, you pay the first $1,500 of covered medical expenses each year. After that, your plan begins sharing costs with you. Preventive care (annual checkups, vaccinations, screenings) is typically covered at no cost even before you meet your deductible. ### Copay A copay is a fixed amount you pay for a specific service. For example, you might pay $25 for a primary care visit or $50 for a specialist visit. Copays usually apply after you've met your deductible, though some plans offer copays for certain services before the deductible. ### Coinsurance Coinsurance is the percentage of costs you pay after meeting your deductible. If your plan has 20% coinsurance and you have a $10,000 medical bill (after deductible), you pay $2,000 and your insurer pays $8,000. ### Out-of-Pocket Maximum This is the most you'll pay in a year for covered services. Once you hit this limit, your insurance covers 100% of remaining covered costs for the rest of the plan year. For 2026, the ACA limits out-of-pocket maximums to $9,450 for individual plans and $18,900 for family plans. This is your financial safety net — the ceiling on your worst-case medical spending. ## How to Choose During Open Enrollment Open enrollment is the annual window when you can sign up for or change your health insurance plan. For ACA Marketplace plans, it typically runs from November 1 to January 15. Employer plans set their own enrollment periods. Here's a practical approach to choosing: 1. **Estimate your healthcare usage** — Are you generally healthy and rarely see doctors? Do you have ongoing prescriptions or regular specialist visits? Your expected usage should drive your plan choice. 2. **Check the provider network** — Make sure your current doctors and preferred hospitals are in-network before choosing a plan. 3. **Compare total costs, not just premiums** — A low-premium plan with a $6,000 deductible might cost more overall than a higher-premium plan with a $1,000 deductible if you use healthcare regularly. 4. **Review the drug formulary** — If you take prescription medications, check that they're covered and what tier they fall under. Moving from a Tier 2 to Tier 3 drug can significantly increase your costs. 5. **Consider HSA eligibility** — High-deductible health plans (HDHPs) paired with Health Savings Accounts (HSAs) let you save pre-tax money for medical expenses. The tax advantages are significant: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. ## Marketplace vs. Employer Plans If your employer offers health insurance, it's usually your best option. Employers typically pay 70-80% of the premium, and group plans often have broader networks and lower deductibles than individual plans. If you're self-employed, unemployed, or your employer doesn't offer coverage, the ACA Health Insurance Marketplace is your primary option. Depending on your income, you may qualify for premium tax credits and cost-sharing reductions that make coverage more affordable. You can check your eligibility at HealthCare.gov or your state's marketplace. Don't overlook Medicaid and CHIP if your income qualifies. These programs provide free or low-cost coverage and have no enrollment deadline — you can apply any time of year.