How does health insurance work?

When my daughter was 10, she had unexplained weight loss and constant fatigue. Doctor visits left us in the dark until we received her life-changing diagnosis: type 1 diabetes. 

Facing our first family encounter with a chronic disease was daunting, but thanks to our health insurance plan, we avoided crippling debt and ensured she got the care and insulin she needed. Today, she’s flourishing, independent, and living a healthy and happy life with the support of her own employer's health insurance plan.

So how does health insurance work? Coverage, copays, and other important details vary by plan, which is why it's important to understand your plan's benefits and how health insurance works. 

Once you know what Blue Cross and Blue Shield of North Carolina (Blue Cross NC) covers with your health plan and how much you might pay before and after you meet your deductible, you can save money by using in-network providers for doctor visits, preventive care, X-rays, hospital stays, and more. 

Here are the most frequent concepts and terms we hear customers ask about. Knowing this information will help you get the most out of your health plan's coverage. 

Health insurance is a contract between you – as well as covered family members – and an insurance company that provides financial protection against the costs of medical expenses such as doctor and hospital bills, prescriptions, and health-related costs. In exchange for coverage, the insured individual typically pays a monthly fee, known as a premium.

Depending on the plan you have, you may have to pay some or all medical expenses until you meet your deductible. However, once you meet the deductible, you may or may not have a copay and / or coinsurance for some medical costs. After meeting your deductible and your out-of-pocket maximum, you may not have to pay additional fees outside of your premium. 

Health insurance plans typically include partial or complete coverage for a wide range of health care costs. Generally, coverage includes doctor visits, hospital stays, preventive care, prescription drugs, and other health care provider services. 

Types of health insurance plans vary, so it's important to choose the type of plan that works best for you and your family. Here’s a rundown of the most common plans: 

• Health Maintenance Organization (HMO) plans typically limit coverage to health care providers that contract or work with the HMO. An HMO may also require you to work or live in the plan's service area. If you receive care from an out-of-network provider, generally an HMO won't cover your medical expenses unless they're due to an emergency. 
• Preferred Provider Organization (PPO) plans let you pay less if you use the plan's in-network providers. If you use out-of-network doctors, hospitals, and other health care providers, you'll typically pay more for those services. 
• High-Deductible Health Plans (HDHP) have a higher deductible than traditional plans, but also generally have a lower premium than many plans with a low deductible. With a high-deductible plan, the insurer may cover some medical expenses before you meet your deductible. That said, you'll often have to pay at least a portion of medical expenses until you meet the deductible, depending on the plan. 

When choosing or managing your health insurance plan, make sure you factor in additional amounts you may have to pay beyond the monthly premium. Most – but not all – health plans have a deductible, copays, and coinsurance. 

Most health insurance plans have a deductible. The deductible amount is what you must pay out-of-pocket before the plan starts to pay for some or all covered services. Deductible amounts vary, from a few hundred to several thousand dollars, depending on the plan. Generally, plans with a higher deductible have a lower monthly premium. Once you meet your deductible, you'll begin paying the copays and coinsurance percentages listed in your plan. 

For example, if your health plan's deductible is $3,000 with 20% coinsurance and a surgical procedure costs $4,000, you'd pay the $3,000 plus 20% ($200) of the remaining $1,000 balance. 

Copays are fixed amounts you'll pay upfront for certain health care services, often – but not always – once you meet your plan's deductible. For example, a health plan may require you to pay a $20, $50, or higher copay when you visit the doctor. The same plan might also have different copay amounts for seeing a specialist, lab tests, prescriptions, urgent care, ER visits, or other services. 

Let's say your health plan has an allowable fee of $100 for a doctor's visit, and your copay is $20. In this case, you'd pay $20, typically at the time of service. You'll find all copay amounts in the details of a health plan. 

Coinsurance is the percentage you pay for services once you meet your plan's deductible. Unlike a copay, which is usually paid upfront, your insurance company sends an explanation of benefits (EOB) stating the amount you will owe after the insurance pays. 

For example, if your doctor bills the insurance company $100 for a visit and you haven't met your deductible, you'd pay $100. But if you've already met your deductible and your plan's coinsurance amount is 20%, you'd pay only $20 for the visit. 

Most health plans have contracts and negotiated fees with specific providers, which are considered in-network. When you visit an in-network health care provider, pharmacy, emergency room, urgent care, or other facility listed in your health plan, you'll typically pay less than if you receive services from an out-of-network provider. That's because out-of-network providers don't have a contract or agreements for negotiated rates with the insurance company. 

You can enroll in a Blue Cross NC health insurance plan through:

• our Shop Plans page
• the Health Care Marketplace, the government website for health plans under the Affordable Care Act (ACA)
• a licensed agent, like the people who work at our Centers
• your employer, though you will need to ask them about your eligibility

But you can't get health insurance at any time of the year. You must enroll during the open enrollment period from November 1 to December 15. For coverage beginning January 1, you must make the first premium payment by December 15. 

If you miss open enrollment, you may qualify for a special enrollment period for certain life events, including if you've recently: 

• moved 
• had a baby 
• adopted a child 
• lost health insurance coverage 
• gotten married 
• earned a household income below a certain amount 

Health insurance protects you against high, unexpected medical bills due to an accident, serious illness, a lengthy hospital stay, or another medical emergency. ACA health plans also cover certain preventive services, including annual physicals, annual mammograms, blood pressure and cholesterol tests, and certain other screenings to help you stay healthy and manage your health. 

Health insurance can also help you save money on routine medical expenses like doctor visits or other health care services. For example, with some health plans, you may be able to pay a copay for certain services before you meet the deductible. Health plans may also offer lower, negotiated rates with in-network providers even before you meet your deductible. 

Now that you have a better understanding of how health insurance works, review your health plan or the plan you're considering in detail to know how much you'll pay for the deductible, copays, and coinsurance. This allows you to navigate your health insurance more effectively, ensure access to the care you need, and better manage your health and health care expenses.