Understanding Your Health Insurance Benefits: A User’s Guide

Types of Health Insurance Plans

  • Health Maintenance Organization (HMO): Requires you to choose a primary care physician (PCP) and get referrals to see specialists. Coverage is typically limited to doctors within the HMO network.
  • Preferred Provider Organization (PPO): Offers more flexibility in choosing healthcare providers. You can see any doctor or specialist without a referral, but you’ll pay less if you use providers within the PPO network.
  • Exclusive Provider Organization (EPO): Combines features of HMOs and PPOs. You don’t need referrals to see specialists, but coverage is limited to providers within the network.
  • Point of Service (POS): Requires a PCP referral to see specialists. You have the option to use out-of-network providers at a higher cost.
  • High-Deductible Health Plan (HDHP): Often paired with a Health Savings Account (HSA). These plans have lower premiums and higher deductibles, making them suitable for individuals who do not expect frequent medical expenses.

2. Key Health Insurance Terms


The amount you pay for your health insurance every month. Paying your premium keeps your coverage active.


The amount you pay out-of-pocket for covered healthcare services before your insurance begins to pay. For example, if your deductible is $1,000, you’ll need to spend $1,000 on covered services before your insurer starts covering costs.

Copayment (Copay)

A fixed amount you pay for a covered service, typically at the time of service. For example, you might pay $20 for a doctor’s visit or $10 for a prescription.


The percentage of costs you pay after you’ve met your deductible. If your plan has 20% coinsurance, you’ll pay 20% of the cost of covered services, and your insurance will cover 80%.

Out-of-Pocket Maximum

The most you have to pay for covered services in a plan year. After you spend this amount on deductibles, copayments, and coinsurance, your insurance pays 100% of the costs of covered benefits.


A group of doctors, hospitals, and other healthcare providers that your health plan has contracted with to provide services at negotiated rates.

3. Understanding Your Coverage

Preventive Services

Most health plans cover preventive services, such as vaccinations, screenings, and annual check-ups, at no additional cost to you. These services are designed to prevent illnesses or detect health issues early when they are more treatable.

Essential Health Benefits

Under the Affordable Care Act (ACA), health insurance plans must cover certain “essential health benefits” which include:

  • Ambulatory patient services (outpatient care)
  • Emergency services
  • Hospitalization
  • Pregnancy, maternity, and newborn care
  • Mental health and substance use disorder services
  • Prescription drugs
  • Rehabilitative and habilitative services
  • Laboratory services
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including dental and vision care

In-Network vs. Out-of-Network

Understanding the difference between in-network and out-of-network providers can save you significant amounts of money. In-network providers have agreed to lower rates with your insurer, while out-of-network providers have not. Using in-network providers generally results in lower out-of-pocket costs.

Prior Authorization

Some health services and medications require prior authorization from your insurance company. This means your insurer must approve the service or medication before it is provided to ensure it is medically necessary.

4. Maximizing Your Health Insurance Benefits

Choose the Right Plan

Selecting the right health insurance plan depends on your healthcare needs and financial situation. Consider the following when choosing a plan:

  • Your health status and anticipated medical needs
  • The plan’s network of doctors and hospitals
  • Monthly premiums, deductibles, copayments, and coinsurance
  • Out-of-pocket maximums
  • Prescription drug coverage

Use Preventive Care

Take advantage of preventive services covered by your plan to maintain your health and catch potential problems early. Regular check-ups, screenings, and immunizations can prevent more serious health issues down the road.

Stay In-Network

Whenever possible, use in-network providers to minimize your out-of-pocket costs. Verify that your providers are in-network before scheduling appointments or procedures.

Understand Your Plan’s Drug Formulary

A drug formulary is a list of medications covered by your health plan. Understanding your plan’s formulary can help you and your doctor choose medications that are covered, reducing your out-of-pocket costs. If you need a medication that isn’t on the formulary, your doctor can sometimes request an exception.

Manage Chronic Conditions

If you have a chronic condition, work with your healthcare provider to manage it effectively. Many plans offer disease management programs that provide support and resources for managing chronic illnesses, which can help prevent complications and reduce healthcare costs.

Keep Track of Your Healthcare Expenses

Maintain records of your medical bills, explanations of benefits (EOBs), and payments. This can help you track your healthcare spending and ensure you’re being billed correctly. Dispute any discrepancies promptly with your healthcare provider or insurance company.

5. Navigating the Claims Process

Filing a Claim

In most cases, your healthcare provider will file claims directly with your insurance company. However, if you need to file a claim yourself, follow these steps:

  • Obtain a claim form from your insurance company.
  • Complete the form, providing all required information.
  • Attach itemized receipts and any supporting documentation.
  • Submit the claim to your insurance company within the specified timeframe.

Understanding Your Explanation of Benefits (EOB)

An EOB is a statement from your insurance company explaining what was covered and what you owe for a medical service. It includes:

  • The total cost of the service
  • The amount covered by your insurance
  • Any amount applied to your deductible
  • Your coinsurance or copayment
  • Any remaining balance you owe

Review your EOBs carefully to ensure they match the bills from your healthcare providers and address any discrepancies promptly.

Appealing a Denied Claim

If your insurance company denies a claim, you have the right to appeal. Follow these steps:

  • Review the denial letter and understand the reason for denial.
  • Gather supporting documentation, such as medical records or a letter from your healthcare provider.
  • Submit a written appeal to your insurance company, including all relevant information and documentation.
  • Follow up to ensure your appeal is being processed.

6. Special Considerations

Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs)

  • HSA: Available with HDHPs, HSAs allow you to save money tax-free for qualified medical expenses. Funds roll over year to year and can be invested.
  • FSA: Available through employers, FSAs also allow you to save pre-tax dollars for medical expenses. Unlike HSAs, FSA funds must be used within the plan year (with some exceptions).

Understanding Medicare and Medicaid

  • Medicare: A federal program providing health coverage for people 65 and older, and some younger people with disabilities. It consists of Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage), and Part D (prescription drug coverage).
  • Medicaid: A joint federal and state program providing health coverage for low-income individuals and families. Eligibility and benefits vary by state.

COBRA Coverage

The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows you to continue your employer-sponsored health insurance for a limited time after losing your job or experiencing another qualifying event. You must pay the full premium, which can be costly, but it provides a safety net while you transition to other coverage.

7. Tips for Managing Your Health Insurance

Stay Informed

Keep up-to-date with changes to your health insurance plan and any new healthcare laws that might affect your coverage. Your employer or insurance provider should communicate these changes, but it’s also wise to do your own research.

Communicate with Your Healthcare Providers

Inform your healthcare providers about your insurance plan and any changes to it. They can help you understand what services are covered and may assist in obtaining prior authorizations.

Utilize Customer Service

Don’t hesitate to contact your insurance company’s customer service for help understanding your benefits, resolving billing issues, or finding in-network providers. They can be a valuable resource in navigating your coverage.

Annual Review

Review your health insurance plan annually during open enrollment. Consider any changes to your health status or financial situation and compare your current plan to other available options. This can help ensure you have the best coverage for your needs.


Understanding your health insurance benefits is crucial for making informed decisions about your healthcare and managing costs effectively. By familiarizing yourself with key terms, knowing how to navigate the claims process, and maximizing your benefits, you can take control of your health insurance and ensure you receive the care you need. Stay informed, ask questions, and utilize available resources to make the most of your health insurance coverage.