Most Americans get health insurance through a plan offered by their employer or they buy it themselves from an insurance company. There are many different kinds of private health insurance policies and the benefits vary, depending on the plan.

You’ve heard the saying – you get what you pay for. That also can apply when you’re buying health insurance. The cheapest policy isn’t always the best. Consumers need to consider the following factors when purchasing a health insurance plan:

• The premium – the amount you pay (usually monthly) to an insurance company for a health insurance policy.
• The benefits offered – the scope of care and treatments covered under the plan.
• The deductible – the amount you pay before your insurance coverage begins.
• The amount you’re required to pay for services once your deductible is met.
• The out-of-pocket maximum – how much in total you have to pay over the course of treatment, should you become ill.

Look carefully at the benefits covered under your plan. There’s often a tradeoff between how much you pay for health insurance and the number of covered benefits offered under your plan. If you buy a plan with the cheapest premium or a very high out-of-pocket maximum, many services may not be covered. In that case, you or your family members could be vulnerable to high medical costs.

What Does It Mean? Common Healthcare Definitions

Copayment: A fixed fee for the use of certain covered services under the policy. Copays are flat-dollar fees — $25 for a doctor’s visit, for example.

Coinsurance: A percentage of the covered charges, such as 20% of the price of a prescription.

Deductible: What you pay before insurance coverage begins.

Cost-Sharing or Out-of-Pocket Costs: All of the costs described above – deductibles, copayments and coinsurance.

Out-of-Pocket Maximum: The limit on what you will pay each year for your deductible, copayments and other cost-sharing for the healthcare you receive under your plan. It’s a good idea to have an out-of-pocket maximum because it will cap how much you pay annually for these expenses. Without this cap, your fees for care could reach catastrophic amounts. Even if you have an out-of-pocket maximum, not all costs may apply. For example, copayments for prescriptions don’t always count against the out-of-pocket maximum.

Benefits: The healthcare items or services covered under a health insurance plan. Be sure to check your benefits to ensure you will be covered for the services you need. Benefits can include:

• Hospital and doctor care.
• Lab tests.
• Medical equipment.
• Prescription drugs.
• Vision care.
• Preventive care.
• Rehabilitation following illness or injury (physical therapy, for example).
• Mental health care.

Limits on Services: Determine how comprehensive your coverage is. Examples of limits on covered services include policies that may cover only 4 doctor visits per year, only $5,000 for chemotherapy or only $800 annually for prescription drugs. These policies could leave you with tens of thousands of dollars in medical bills, should you become seriously ill.

Exclusions: Many policies temporarily exclude services that the policy covers related to a medical condition you have now or in the past. Under the the Affordable Care Act, employment-based health plans and new individual plans cannot deny or exclude coverage for children (under age 19) based on pre-existing conditions. Starting in 2014, these same plans cannot exclude anyone or charge more for a pre-existing condition, including a disability.

Formulary (list of covered prescription drugs): Most health insurers restrict coverage for prescription drugs to those on a list of covered medications. This list is called a “formulary.” Check to see if the medications you take are listed on the formulary. The insurer should tell you whether exceptions can be made if you need a prescription drug that is not listed.

Preauthorization: Some health plans require you or your doctor to submit documentation to prove why you need certain medications or medical procedures before the plan will cover them.

Network Provider: Networks include healthcare providers that have a contract with an insurer to take care of a plan’s members. Private insurance plans often have networks of hospitals, doctors, specialists, pharmacies and other healthcare providers. A health insurer should have a list of providers so you can see if your doctor is included in the plan’s network. Some health plans only cover care provided by a network provider. Also in some plans, your primary care physician must give you a referral to see a specialist.

Types of Health Plans

Traditional HMOs (health maintenance organizations) and EPOs (exclusive provider organizations) require you to see doctors within the HMO or EPO network in order to receive full coverage under the plan. If you see a doctor or use a facility that isn’t in the network, you’re likely to pay the full cost for the services you receive.

Other types of insurance plans give you a choice of getting care within or outside of the provider network, although the portion of health costs covered by insurance may be much lower for out-of-network care. This means you will pay more to use out-of-network providers. Plans like these may be called PPOs (preferred provider organizations) or POS (point-of-service plans). Fee-for-service plans usually don’t have networks. The following are definitions of health plans from HealthCare.gov:

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 won’t 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. HMOs often provide integrated care and focus on prevention and wellness.

Preferred Provider Organization (PPO): A type of health plan that contracts with medical providers, such as hospitals and doctors, to create a network of participating providers. You pay less if you use providers that belong to the plan’s network. You can use doctors, hospitals, and providers outside of the network for an additional cost.

Exclusive Provider Organization (EPO): A managed care plan in which services are covered only if you go to doctors, specialists, or hospitals in the plan’s network (except in an emergency).

Point-of-Service (POS) Plan: A type of plan in which you pay less if you use doctors, hospitals, and other healthcare providers that belong to the plan’s network. POS plans also require you to get a referral from your primary care doctor in order to see a specialist.

Fee-for-Service Plan: A method in which doctors and other healthcare providers are paid for each service performed. Examples of services include tests and office visits.

Medicare: A federal health insurance program for people who are age 65 or older and certain younger people with disabilities. It also covers people with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant). For more information, visit the Medicare Web site.

Healthy Families Program: Healthy Families is the State Children’s Health Insurance Program (S-CHIP) in California. The program provides health, dental and vision coverage to uninsured children  and teens who do not qualify for free Medi-Cal. For more information, visit the Healthy Families Web site.

COBRA: A federal law that may allow you to temporarily keep health insurance coverage after your employment ends, you lose coverage as a dependent of the covered employee, or another qualifying event. If you elect COBRA coverage, you pay 100% of the premiums, including the share the employer used to pay, plus a small administrative fee.

Medi-Cal: Medi-Cal is California’s Medicaid program. This is a public health insurance program which provides needed healthcare services for low-income individuals including families with children, seniors, persons with disabilities, foster care families, pregnant women, and low-income people with specific diseases such as tuberculosis, breast cancer or HIV/AIDS. Medi-Cal is financed equally by the state and federal governments. For more information, visit the Medi-Cal Web site.

If you are enrolled in one of the following programs, you can get Medi-Cal:

• SSI/SSP.
• CalWorks (AFDC).
• Refugee Assistance.
• Foster Care or Adoption Assistance Program.
• In-Home Supportive Services (IHSS).

You can also get Medi-Cal if you are:

• 65 or older.
• Blind.
• Disabled.
• Under 21.
• Pregnant.
• In a skilled nursing or intermediate care home.
• On refugee status for a limited time, depending how long you have been in the United States.
• A parent or caretaker relative or a child under 21 if:
  • The child’s parent is deceased or doesn’t live with the child, or
  • The child’s parent is incapacitated, or
  • The child’s parent is under-employed or unemployed.
• Diagnosed with breast and/or cervical cancer Breast and Cervical Cancer Treatment Program and in need of treatment.

Additional Resources

Want to know what insurance options are available to you? Click here and get the latest information from HealthCare.gov.

Contact your local County office for more information about Medi-Cal.