Understanding Your Insurance

How Does Health Insurance Work?

What are the costs associated with health insurance?

Most health insurance costs can be divided into three categories:

Premiums: Most health insurance companies offer several types of plans with varying degrees of coverage. These differences in coverage affect monthly costs, known as premiums. The higher the premium, the less you will pay when you get sick.
Deductibles: The dollar amount you pay out-of-pocket before your insurance begins to pay is called your deductible. Insurance plans that have higher monthly premiums tend to have lower deductibles, while plans with lower monthly premiums tend to have higher deductibles.
Copays or Coinsurance: When you visit the doctor, you may be asked to pay either a copay which is a standard flat rate, or coinsurance, which is a percentage of the total charge for the visit.
What are the different types of health insurance plans?

There are four types of traditional healthcare plans:

  • Exclusive Provider Organization (EPO): A managed care plan in which services are covered only if you use doctors, specialists or hospitals in the plan’s network (except in an emergency).
  • Health Maintenance Organization (HMO): A type of health insurance plan that usually limits coverage to care from doctors who work for or contract with the HMO. It generally does not cover out-of-network care except in an emergency. An HMO may require you to live or work in its service area to be eligible for coverage, and you must select a primary care physician (PCP) to manage your care.
  • Preferred Provider Organization (PPO): A type of health plan in which you pay less if you use providers in the plan’s network. You can use doctors, hospitals or providers outside of the network without a referral for an additional cost.
  • Point of Service (POS): A type of plan in which you pay less if you use doctors, hospitals or other health care providers that belong to the plan’s network. POS plans require a referral from your PCP in order to see a specialist.