What Is Health Insurance?

Medical care, from routine visits to accidents and emergencies, can be very expensive. Health insurance helps you to pay for your medical expenses. It is important to have insurance coverage to help you to pay for the costs associated with keeping yourself and your family healthy. Finding a policy in which the benefits suit your needs and the costs are appropriate for your budget is the key to finding the best health insurance plan for you.

How Health Insurance Works

When you purchase health insurance, you (or your employer) generally agree to pay a fee (or "premium") up-front to cover some of your health care costs. In return, health insurance companies pay for part of the cost. Coverage can include:

• Emergency care
• Hospital stays
• Immunizations
• Prescription drugs
• Sick visits
• Well visits/physicals.

When you are seen by a health care provider, her office submits a claim to your insurance company, who, upon approval of the claim, pays the provider. You may also be responsible for a co-payment, which is an additional portion of the cost of a medication or health care service that must be paid up-front by the insured individual. Insurance companies send you an Explanation of Benefits (or EOB) after your doctor visits, which details the cost of the visit, the amount paid by the insurance, and the remaining amount owed by the insured individual (if any).

If you get health insurance through your job, as many people do, your employer will have chosen a plan, or may give you a few plans to choose from. If you are self-employed or your employer does not provide insurance, you will be responsible for finding your own coverage, and for shopping around to find the best coverage and most affordable health insurance for your needs. Insurance coverage is available through private insurance companies, and also through federal and state government agencies, for those who qualify.

Know Your Health Insurance Policy

It is important to understand your coverage, as you are responsible for insurance claims denied by your insurance company. You should know whether you must get prior permission (in the form of a pre-authorization or referral) before seeing a particular doctor or specialist, or whether your plan requires you to see a doctor in a particular network.

In addition, you should be familiar with whether your policy includes coverage maximums, which are maximum amounts the insurance company will pay during a specified period of time. Your policy may also include out-of-pocket maximums, which means that you are only responsible for a certain amount of payment before the insurance company agrees to pay the rest. Coverage varies widely by company and by policy type, so it is important to be familiar with the details of your policy. If you work within your policy's coverage, health insurance can make your medical expenses much more affordable.