How Health Insurance Works

Health care in the United States is expensive. A doctor’s office visit can cost hundreds of dollars and an emergency room visit can cost several thousand dollars or more depending on the type of care you need. Most people cannot afford to pay these charges unexpectedly, which is where insurance comes in.

Health insurance covers part of the cost of the health care services you need. There are many ways your health insurance plan shares the cost with you (or the policy holder):

  • Deductibles
  • Co-pays
  • Coinsurance

Learn more about common health insurance terms like this.

Your health insurance plan sets the rules, including:

  • What services they will cover
  • How much they will pay toward each service
  • Which doctors are in-network or out-of network
  • Any special rules that affect coverage
  • What portion of your bill you will pay for each service

What you need to know before you use your health insurance

Before you access health care with any provider, you should make sure your health care provider is in-network with your plan and how your plan will cover costs for the service you will receive. You can do this one of three ways:

  1. Call your health insurance plan. The number is typically on the back of your insurance card
  2. Log in to your health insurance portal and use the interactive web tools to explore your coverage
  3. Use your health insurance mobile app to explore your coverage

Using one of the three methods above, check your plan against the type of service you will receive (primary care visit, psychiatry visit, physical therapy, immunizations, etc.) and the doctor or facility you will be visiting. You’ll want to learn the following:

  • Is this doctor in-network with my plan? If not, choose a new provider who is in-network or investigate the out-of-network cost to visit this provider.
  • Does my plan cover this service? Make sure you understand if there are limitations or exclusions for the service you need, if prior authorization or a referral is required, if your plan limits the number of visits they will cover, etc.
  • Do I need to pay a deductible? If so, determine how much your deductible is, when the deductible resets each policy year and if you are a different deductible for in-network and out-of-network providers. If your deductible has been met, check to see if you need to pay co-insurance.
  • Does my plan provide prescription and/or dental coverage? If not, consider purchasing additional plans for these services before seeking this type of care.

Bills vs. Explanation of Benefits (EOBs)

Medical bills are sent from the doctor and/or facility where you received care. They can include a detailed description of your visit, your diagnosis, testing, etc. Anyone who views it can have a clear sense of your diagnosis and treatment plan.

EOBs are sent from your health insurance plan. They are less detailed, but they do show where you were seen and give a general description of services. For example, it may say “physical therapy,” “lab work” or something similar depending on the type of care you received.

You can control where bills and EOBs are sent by making sure the address you have on file with your health care provider and your health insurance is correct.