Medical insurance is a contract between you and an insurer where you pay a monthly premium and they cover part of your medical bills

The insurer does not cover everything — you choose a plan based on what you think you will need, what you can afford to pay each month, and how much you are willing to pay out of pocket when you actually use care. The real decision is not "should I get insurance" but "which type of insurance, through which route, at what cost to me each month."

Your route depends on your situation: whether you work full-time, whether you are self-employed, whether you are retired, whether you are under 26, or whether you have no income. Each route has different plans available, different costs, and different important date for signing up. This guide walks you through how each route works and what to expect when you choose one.

Key Takeaways

  • Medical insurance comes through four main routes: your employer, the government (Medicare or Medicaid), the individual market, or a spouse's plan, and which route you use depends on your age and employment status.
  • You pay a monthly premium regardless of whether you use care, plus a deductible (the amount you pay before insurance kicks in) and copays or coinsurance (your share of each bill).
  • Most people get insurance during open enrollment periods — once a year for employer plans and individual market plans, or anytime for government programs if you meet income requirements.
  • If you miss the important date to sign up, you may not be able to get coverage until the next open enrollment unless you have a may have access to life event like losing a job or having a baby.
  • The cost of the same plan varies by age, location, and income, so comparing plans side by side is the only way to know what you will actually pay.

Getting insurance through your employer

If you work full-time, your employer usually offers health plans during an enrollment period — typically once a year in the fall, though some employers enroll in spring or summer. You receive a packet or email with plan options, each showing the monthly premium your employer will deduct from your paycheck, your deductible, and your copays for common services like doctor visits or emergency room care.

Your employer pays part of the premium (the amount varies widely), and you pay the rest. The plans offered are usually three to five options at different price levels: a cheaper plan with a higher deductible, a mid-range plan, and sometimes a high-end plan with lower out-of-pocket costs. You choose one during the enrollment window — usually a two-week period — and it starts on a specific date, often January 1st or the first of the following month.

If you do not choose a plan during enrollment, you lose coverage at the end of the current plan year and cannot sign up again until the next enrollment period, unless you have a may have access to event like losing your job, getting married, or having a child. Some employers allow you to make changes only during open enrollment; others allow changes if your life circumstances change.

Getting insurance on the individual market

If you are self-employed, work part-time, or your employer does not offer insurance, you buy a plan directly from an insurer or through the Health Insurance Marketplace (also called the Exchange), which is run by your state or the federal government. The Marketplace is the easiest route because it shows you all available plans side by side, tells you what you will pay based on your income, and handles the paperwork.

You visit Healthcare.gov (the federal Marketplace) or your state's Marketplace website, enter your income and household size, and see plans ranked by price. The Marketplace calculates a tax credit — money the government gives you to lower your monthly premium — based on your income. If you earn between 100% and 400% of the federal poverty line, you usually receive a credit. The credit reduces what you pay each month; the lower your income, the larger the credit.

Open enrollment on the individual market runs from November 1st through January 15th each year. If you miss this window, you cannot buy a plan until the next year unless you have a may have access to event: losing employer coverage, getting married, having a baby, moving to a new state, or losing Medicaid. When you have a may have access to event, you have 60 days to sign up for a plan.

Government insurance: Medicare and Medicaid

Medicare is for people age 65 and older, regardless of income. You become may be able to access automatically at 65; you do not have to do anything if you are already receiving Social Security. If you are not yet receiving Social Security, you must sign up for Medicare during your initial enrollment period, which begins three months before the month you turn 65 and ends three months after. If you miss this window, you pay a penalty for each year you delay.

Medicare has four parts: Part A (hospital care), Part B (doctor visits and outpatient care), Part D (prescription drugs), and Part C (an alternative plan that combines A, B, and D). Part A and B are free or low-cost; Part D and supplemental coverage cost extra. You sign up through Medicare.gov or by calling 1-800-MEDICARE.

Medicaid is for people with low income, regardless of age. Income limits vary by state, and some states cover more people than others. You explore through your state's Medicaid office or through the Marketplace, which will tell you if you are Medicaid-may be able to access based on your income. Unlike Medicare, Medicaid has no enrollment important date — you can sign up anytime you meet the income requirement. Medicaid is free or very low-cost.

Insurance through a spouse or family member

If you are married or in a domestic partnership, you can be covered under your spouse's employer plan or individual plan. Your spouse adds you during their employer's open enrollment or during the individual market's open enrollment. You will pay whatever additional premium the plan charges for a spouse or family member, and you will share the same deductible and copays.

If you are under 26, you can stay on your parent's employer plan or individual plan even if you do not live with them or go to school. Your parent adds you during their open enrollment. This is often cheaper than buying your own plan, though you will have the same deductible and copays as your parent.

Understanding what you pay: premiums, deductibles, and copays

Your monthly premium is what you pay to the insurer whether you use care or not. If your employer offers insurance, the premium is split between you and your employer — you see only your share deducted from your paycheck. If you buy on the individual market, you pay the full premium, though a tax credit from the government may reduce it. If you may have access to for Medicaid, the premium is free or very low.

Your deductible is the amount you must pay out of your own pocket for care before the insurance company starts paying. A plan with a $1,500 deductible means you pay the first $1,500 of your medical bills; after that, the insurer pays its share. Plans with lower premiums usually have higher deductibles. Plans with higher premiums usually have lower deductibles. Once you meet your deductible, you typically pay a copay (a fixed amount like $25 for a doctor visit) or coinsurance (a percentage like 20% of the bill).

Your out-of-pocket maximum is the most you will pay in a year for deductibles, copays, and coinsurance combined. Once you reach this amount, the insurer pays 100% of covered care for the rest of the year. This protects you from catastrophic bills. Plans with higher premiums have lower out-of-pocket maximums; plans with lower premiums have higher out-of-pocket maximums.

Comparing plans and choosing the right one

When you have multiple plans to choose from, compare them on three numbers: the monthly premium you will pay, the deductible, and the out-of-pocket maximum. A plan that looks cheap because of a low premium might cost you more overall if the deductible is very high and you expect to use care. A plan with a high premium might save you money if you take regular medications or see doctors frequently.

Check whether your current doctors and medications are covered. Each plan has a formulary — a list of covered medications — and a network of doctors and hospitals. If your doctor is out-of-network, you pay more. If your medication is not on the formulary, you either pay full price or switch to a covered medication. The plan's website shows you this information, or you can call the insurer's customer service number.

If you are buying on the individual market through the Marketplace, you can see the tax credit you will receive before you choose a plan. The credit is based on your expected income for the year, so estimate carefully. If you earn more than you expected, you may have to repay part of the credit when you file taxes. If you earn less, you may receive a larger credit.

What happens after you sign up

Once you choose a plan, you receive a member ID card in the mail within one to two weeks. You use this card at the doctor's office, pharmacy, and hospital. The insurer sends you a summary of benefits — a document explaining what is covered, what your copays are, and how to file a claim if needed. Read this carefully; it is the contract between you and the insurer.

Your coverage starts on a specific date, usually the first of the month following your enrollment. If you enroll on November 15th, your coverage might start January 1st. If you enroll during a may have access to event, your coverage might start the first of the following month or the first of the month after that, depending on when you enroll.

If your situation changes — you get married, have a baby, lose your job, or your income changes significantly — tell your insurer or the Marketplace within 60 days. These are may have access to events that allow you to change plans outside of open enrollment. If you do not report the change and your income drops, you may have overpaid your premium all year and will receive a refund when you file taxes.

Frequently Asked Questions

What if I cannot afford the monthly premium?

If you buy on the individual market, your income may may have access to you for a tax credit that lowers your monthly premium. The lower your income, the larger the credit. If you may have access to for Medicaid, the premium is free or very low. If your employer offers insurance, you can ask about a Health Savings Account (HSA) or Flexible Spending Account (FSA), which let you set aside pre-tax money to pay for medical costs.

Can I switch plans if I change my mind?

If you enrolled through your employer, you usually cannot switch plans until the next open enrollment period unless you have a may have access to event. If you enrolled on the individual market, you can switch plans during open enrollment (November 1 through January 15) or within 60 days of a may have access to event. If you enrolled in Medicaid, you can switch anytime.

What if I do not sign up during open enrollment?

If you miss open enrollment and do not have a may have access to event, you cannot buy a plan until the next open enrollment period. The exception is Medicaid — you can sign up anytime if you meet the income requirement. If you go without insurance, you may face financial hardship if you need medical care, since you will pay the full cost out of pocket.

Do I have to use the doctor my plan assigns to me?

Most plans do not assign you a doctor, but they do have a network of doctors you can see. You can choose any doctor in the network. If you see a doctor outside the network, you pay more or the plan does not cover it at all. Some plans require you to choose a primary care doctor who coordinates your care, but you can usually change this doctor anytime.

What if my plan does not cover a medication my doctor prescribed?

You can ask your doctor to prescribe a different medication that is on your plan's formulary, or you can ask the insurer for an exception (called a prior authorization). The insurer may approve the medication if your doctor explains why you need it. If the insurer denies the exception, you can appeal the decision or pay out of pocket for the medication.