Health insurance is the most complex and most important insurance decision you will make. We break it down completely in plain English.
How Health Insurance Works
Health insurance is a contract that requires your insurer to pay some or all of your healthcare costs in exchange for a monthly premium. Key terms include the premium which is your monthly payment, the deductible which is what you pay before insurance kicks in, copays which are fixed amounts per visit, coinsurance which is your percentage share after meeting your deductible, and the out-of-pocket maximum which caps your annual costs at $9,450 for individuals in 2026.
ACA Marketplace vs Employer Coverage
Employer-sponsored health insurance is subsidized by your employer who typically pays 70 to 80 percent of the premium making it the most affordable option if available. ACA marketplace plans through healthcare.gov are best for self-employed people and those without employer coverage. Premium tax credits are available for households earning 100 to 400 percent of the federal poverty level. Open enrollment runs November 1 through January 15 each year.
HMO vs PPO vs EPO vs HDHP
HMO plans require a primary care physician referral for specialists and have lower premiums with limited networks. PPO plans need no referrals allow any doctor and have higher premiums with larger networks. EPO plans need no referrals but only cover in-network care. HDHP plans have lower premiums but higher deductibles above $1,600 for individuals and pair with a Health Savings Account for triple tax-advantaged medical expense savings.
How to Save on Health Insurance
Maximize your premium tax credits by accurately reporting your estimated income on the ACA marketplace. Choose an HDHP and contribute to an HSA if you are healthy. Use in-network providers whenever possible since out-of-network costs can be 3 to 5 times higher. Take advantage of free preventive care which is covered at zero cost on most plans. Generic prescriptions cost 80 to 85 percent less than brand names.