Common Health Insurance Questions and Answers

Health insurance gets less attention than car insurance and matters considerably more. It is what stops a hospital bill from becoming a financial emergency, and what keeps routine care — checkups, screenings, the tests you are supposed to have — happening on schedule rather than being postponed.
Most people find the subject harder than it needs to be, usually because nobody has explained the vocabulary. These are the questions we are asked most often, answered plainly.

1. Why do you need health insurance?

Medical technology keeps advancing, and the cost of access to it rises alongside it. The purpose of health insurance is to help pay hospital bills without emptying your savings, and to keep your household running while you deal with the problem. Health issues do not arrive by invitation. Planning ahead is most of what you can do about them, and a policy that covers routine checkups keeps you and your family on track in the meantime.

2. How do you get health insurance in California?

Most people are covered through the organization they work for. Employees are insured as part of a group plan, and because the employer usually pays a large share of the premium it is often the best value available to anyone who has the option. Those without it have three further routes:

• Covered California — the state marketplace, and the only place income-based financial help is available. If you are buying for yourself, start here.
• Directly from a carrier — off-exchange plans, bought straight from the insurer. No subsidy, but occasionally a wider network.
• Government programs — Medi-Cal and Medicare, based on income, age or disability rather than employment.

The point worth remembering is that financial help exists only on the exchange. Buying the same plan directly from the carrier can cost you a subsidy you would otherwise have received. Our California health insurance exchange page covers who qualifies and how the subsidies work in detail.

3. What is the difference between HMO, PPO and EPO plans?

This is the distinction that decides whether a plan actually works for your family, and it matters more than the premium.

• HMO — you name a primary care doctor and need a referral to see a specialist. Out-of-network care is covered only in an emergency. Lower premium, less flexibility.
• PPO — no referral needed, and out-of-network care is covered at a higher cost to you. Higher premium, most choice.
• EPO — no referral needed, but in-network care only apart from emergencies. A middle path on both price and freedom.

4. What do deductible, copay, coinsurance and out-of-pocket maximum mean?

These four terms decide what you actually pay, and most plan comparisons are meaningless without them:

• Deductible — what you pay before the plan starts sharing costs.
• Copay — a fixed amount per visit or prescription.
• Coinsurance — a percentage of the bill you keep paying after the deductible is met.
• Out-of-pocket maximum — the ceiling. Once you reach it, the plan pays covered costs in full for the rest of the year.

The out-of-pocket maximum is the number to look at hardest. It is the most a covered year can cost you, and it is the figure that tells you whether a plan is genuinely affordable in a bad year rather than only in a good one.

5. Which type of health insurance is right for you?

To judge whether a policy matches your situation, look at premiums, coverage and benefits, access to doctors, hospitals and other providers, access to after-hours and emergency care, out-of-pocket costs, and the exclusions and limitations. Read what different policies actually offer, compare them properly, and discuss them with your agent before deciding.
One addition to that list: work out what care you realistically expect to use over a year, then price the plans against that rather than against each other. The lowest premium is very rarely the lowest total cost.

6. Is employer coverage always better than buying your own?

Usually, but not always, and it is worth checking rather than assuming.
An employer typically pays a substantial share of the premium, which is difficult for an individual plan to beat. But a household on a modest income may do better with a subsidized Covered California plan — particularly where the employer contributes generously toward the employee and very little toward a spouse or children. Price both before you decide, especially at open enrollment.

7. What are consumer-directed accounts?

Consumer-directed accounts give families more control over healthcare spending — when care is used, what kind, and how much it costs. The common ones are health savings accounts, health reimbursement arrangements and flexible spending accounts.

• HSA — you own it, it requires a qualifying high-deductible plan, the balance rolls over every year, and it follows you if you change jobs.
• HRA — your employer funds and owns it. You claim against it, and it usually ends when the job does.
• FSA — you fund it from salary. No high-deductible plan required, but carryover is limited, so the amount needs planning.

Contribution limits change every year, so check the current figures before setting an amount.

8. What is a high-deductible health plan?

A plan with a higher deductible and a lower premium, meeting the federal thresholds that let you pair it with a health savings account. It suits people who use little routine care and could absorb a larger bill if something happened. It suits someone managing an ongoing condition considerably less well, because the deductible arrives before the plan starts contributing.

9. How long do you need a health insurance policy?

Health is a matter of uncertainty, and nobody can predict how long they will need cover — which in practice means continuously. The more useful question is what happens if you stop, and that answer is less simple than it sounds.

10. Can you cancel a health insurance policy at any time?

You can usually end an individual policy when you ask. An employer plan generally only changes at open enrollment or after a qualifying life event.
The part that matters comes next. Choosing to drop coverage is not itself a qualifying life event. Cancel in February and you may be unable to buy a new plan until the following open enrollment period — uninsured for most of a year, by your own decision, with no route back in.

Losing coverage involuntarily is different — that does open a special enrollment period, as do marriage, a new child, a permanent move, a significant income change, and turning 26. If you are thinking about dropping a policy for cost reasons, talk to us first. There is almost always a cheaper plan available, and a gap in coverage costs far more than the premium it saves.

Still Have Questions?

Tell us who needs covering, your household income, and the doctors you want to keep. That is usually enough for us to say which of the four routes fits and what it will cost.
Call 714-761-4336 or email rai@raisinsurance.com.

Related reading: Covered California and the health insurance exchange, top health insurance companies in California, and our California health insurance overview.