Understanding Health Insurance Basics

Health insurance helps cover the cost of your medical care so you don’t have to pay for everything yourself. Most people in the U.S. have private health insurance through their job, while others buy a plan on their own.

If you’re managing a blood clot or another vascular condition, understanding how your coverage works can make a big difference. It can affect how much you pay for prescriptions like blood thinners, follow-up appointments, and preventive care. Knowing the basics of your plan helps you avoid surprise bills and make informed choices about your health.

What Is Health Insurance and Why It Matters for Your Health

Health insurance is a financial safety net that helps pay for medical care. In exchange for a monthly payment (called a premium), your plan helps cover part of the cost when you need care—from regular checkups to emergencies.

Having the right health insurance can:

• Make care more affordable: It reduces what you pay out of pocket for appointments, lab work, imaging, and medications.

• Encourage preventive care: Many plans cover screenings, vaccines, and annual visits at no cost.

Protect against high costs: Even one hospital stay or emergency can cost thousands of dollars without coverage.

Key Health Insurance Terms Explained

Understanding your plan’s terms and rules can help you get the most out of your benefits and avoid unexpected costs. Below are key terms to know when reviewing your coverage.

Cost Terms You’ll See Often

Premium: The amount you pay each month to keep your health insurance active. This payment is separate from what you pay for visits, medications, or tests.

Deductible: The amount you pay each year for certain services before your plan begins sharing costs. Not every service counts toward your deductible—for example, a yearly checkup might be covered even if you haven’t met it.

Copay: A set fee you pay when you receive care, such as $25 for a clinic visit or $10 for a prescription.

Coinsurance: The percentage of a covered bill that you pay after meeting your deductible. For instance, if your coinsurance is 20%, you pay 20% and your plan pays 80%.

Out-of-pocket maximum: The most you’ll spend on covered services in a year. Once you reach this limit, your plan pays 100% of covered costs for the rest of the year.

Network and Coverage Details

Provider network: The group of clinicians, hospitals, and facilities that contract with your plan. You’ll usually pay less when you stay in-network.

Allowed charge: The maximum amount your insurer will pay for a covered service. Out-of-network clinicians may bill you for the remaining balance.

Formulary: A list of prescription drugs your plan covers, often grouped into “tiers” that determine how much you’ll pay for each medicine.

Types of Health Plans

HMO (Health Maintenance Organization): Covers care only from in-network clinicians, except in emergencies. You may need a referral from your primary care clinician to see a specialist.

PPO (Preferred Provider Organization): Offers more flexibility—you can see out-of-network clinicians, but you’ll pay more than you would in-network.

High-Deductible Health Plan (HDHP) with Health Savings Account (HSA): Combines a higher deductible with a special savings account you can fund with pre-tax dollars to pay for qualified medical expenses.

Approvals, Referrals, and Paperwork

Prior authorization: Pre-approval required by your insurance plan before certain services or medications are covered. Without it, the claim may be denied.

Medical referral: A recommendation from your clinician to see another specialist or receive specific care, such as physical therapy after an injury.

Insurance referral: Permission from your insurance plan—often coordinated through your primary care clinician—to see a specialist or get certain services. Some plans limit how many visits are covered.

Explanation of Benefits (EOB): A summary from your insurer showing what was billed, what they paid, and what you may still owe. An EOB is not a bill—always compare it with your provider’s statement before paying.

Preventive Services: What’s Covered at No Cost

Many preventive services are covered at no cost under the Affordable Care Act (ACA), as long as you see an in-network clinician and you don’t have current symptoms. Preventive care focuses on keeping you healthy, not treating an existing condition.

These services can help detect health issues early or prevent them altogether. Examples include:

• Well-child visits and immunizations: Regular checkups and vaccines like flu, shingles, HPV, and pneumonia.

• Well-woman visits: Routine care that may include screenings and counseling.

• Screening mammograms: For women ages 40–74 who do not have breast symptoms.

• Pap tests: Cervical cancer screening.

• Colorectal cancer screening: Such as colonoscopy or stool-based tests, depending on your age and risk.

• Blood pressure and cholesterol screening: Helps identify cardiovascular risks early.

• Diabetes screening: For adults with high blood pressure or other risk factors.

• HIV screening: Recommended for everyone at least once, and more often for higher-risk groups.

• Obesity screening and counseling: Focuses on nutrition and lifestyle guidance, not medications.

• Tobacco use screening and counseling: Includes support for quitting.

• Iron supplements: For children at risk of anemia.

• Skin cancer counseling: Education about sun protection and skin checks.

• Contraceptive counseling and methods: For women, includes FDA-approved options.

  Tip: If you’re unsure whether a service is considered preventive or diagnostic, ask your clinician’s office and your insurance company before your visit. This can help you avoid surprise charges.

Choosing a Health Insurance Plan

When comparing private health insurance plans, look beyond just the monthly premium. A lower premium doesn’t always mean lower overall costs. These steps can help you make a more informed choice:

1. Check the clinician network.
   Look for in-network clinicians and hospitals you already use or prefer. Using in-network care usually means lower costs and fewer billing surprises.

2. Review prescription coverage.
   Check the plan’s formulary (list of covered medicines) to make sure your prescriptions are included. If you take a blood thinner or another ongoing medication, look for plans that cover it in a lower-cost tier.

3. Understand covered benefits.
   Preventive care—such as annual checkups and certain screenings—is covered at no cost under most plans. For other services, find out if you’ll need a referral or prior authorization before your plan pays.

4. Compare total yearly costs.
   Your monthly premium is only one part of what you’ll pay. Add in your deductible, copays, and coinsurance to estimate your total yearly costs. Even if you reach your out-of-pocket maximum, you’ll still owe your monthly premium.

5. Know your plan type.
   Each plan type affects your flexibility and costs:

   • HMO: Lower costs but limited to in-network care, usually with required referrals.

   • PPO: More flexibility to see out-of-network clinicians for a higher cost.

   • HDHP + HSA: Higher deductible paired with a Health Savings Account (HSA) that lets you use pre-tax dollars for medical expenses.

6. Use available resources.If your employer offers health benefits, your human resources or benefits department can help you compare options and understand your coverage before you enroll.

Common Limitations to Know About

Even when your plan lists a service as “no cost,” there are times when you could still receive a bill. These are some of the most common reasons preventive or routine care might not be fully covered:

Symptoms or follow-up care:
If a test is ordered because of symptoms—such as a lump or abnormal finding—it’s considered diagnostic, not preventive. That means you may have to pay part of the cost through a copay, deductible, or coinsurance.

Out-of-network clinicians:
Preventive services are only free when you use in-network clinicians or facilities. Out-of-network visits often come with higher costs or may not be covered at all.

Bundling with other services:
If you bring up a new medical concern during a preventive visit, your insurer may bill part of the appointment as diagnostic care.

Billing or coding errors:
Mistakes in documentation can lead to claim denials or unexpected charges. Ask your clinician’s office to double-check codes if a preventive visit isn’t covered as expected.

Plan exceptions:
Some older or grandfathered insurance plans aren’t required to cover all preventive services at no cost.

Frequency limits:
Preventive tests are covered based on recommended schedules. For example, routine blood work may only be covered once a year. Additional tests could apply to your deductible.

Claim denials or administrative barriers: Delays and denials can still happen, especially for people in lower-income or under-resourced communities. Following up quickly can help you resolve issues faster.

Tip: Before your visit, confirm with your clinician’s office and your insurance company whether a service will be billed as preventive or diagnostic.

If Your Claim Is Denied

A claim is the request your clinician or hospital sends to your insurance company asking them to pay for your care. Sometimes claims get denied—but that doesn’t always mean you’re responsible for the full bill.

Why claims get denied:

• The service wasn’t considered medically necessary by your insurer.

• You saw an out-of-network clinician or facility.

• There were errors in the paperwork or billing codes.

• The service wasn’t approved ahead of time (for example, missing prior authorization or an insurance referral).

What you can do:

• Read the denial letter carefully. It will explain the reason for denial and your options for appeal.

• Check your Explanation of Benefits (EOB). Compare it with your provider’s bill to confirm the services and dates match, and verify your clinician was marked in-network.

• Call your insurance company. Ask for a clear explanation, and write down the date, the representative’s name, and the reference number for the call.

• File an appeal. This is a formal request for your insurer to review the claim again. Ask your clinician’s office to provide supporting records or a letter of medical necessity—these can strengthen your case.

• Know your rights. If your appeal is denied, you may qualify for an external review by an independent reviewer. Follow the deadlines in your denial letter, since timing is important.

Tip: Stay organized. Keep copies of all letters, bills, and notes from phone calls. Tracking details can make the appeals process smoother and faster.

How to Advocate for Yourself

Navigating health insurance can be challenging, especially if you’re managing ongoing care or a chronic condition. Taking a few proactive steps can help you avoid billing errors, handle denials, and make sure you get the care your plan covers.

Stay organized:
Keep copies of all bills, Explanation of Benefits (EOBs), denial letters, and notes from phone calls. Keeping a simple folder—digital or paper—makes it easier to track what’s been resolved and what still needs attention.

Ask for help:
Your clinician’s office can clarify billing codes, explain what was submitted, or help you understand a denial. They can also provide medical documentation or letters of support for appeals.

Find patient advocates:
Some hospitals, nonprofits, and state agencies offer patient advocates or financial navigators who can guide you through insurance issues. They can help you file appeals, correct billing errors, or locate financial assistance programs.

Know your coverage:
Before appointments or procedures, confirm whether a service requires prior authorization or a referral. Understanding these requirements ahead of time helps prevent denials and delays.

Be persistent:
If something doesn’t seem right, follow up. Keep notes from every call, and don’t hesitate to ask for a supervisor if you need clearer answers. Staying calm, organized, and consistent can make a big difference.

Understanding how your health insurance works can help you make confident choices, avoid surprise bills, and focus on your health—not paperwork. Take time to review your coverage, ask questions, and use the resources available to you. The more you know, the easier it becomes to get the care you need.

References:
Fernandez B, Forsberg VC, Rosso RJ. Private Health Insurance: A Primer. Washington, DC: Congressional Research Service; April 18, 2023. Report No.: R47507

HealthCare.gov. Glossary. U.S. Centers for Medicare & Medicaid Services. Updated 2024. Accessed September 7, 2025. https://www.healthcare.gov/glossary/

Hoagland A, Yu O, Horný M. Social determinants of health and insurance claim denials for preventive care. JAMA Netw Open. 2024;7(9):e2433316. doi:10.1001/jamanetworkopen.2024.33316