Health Insurance Basics Explained

This article is about private health insurance and does not cover government programs like Medicare or Medicaid. Some terms may be similar across all insurance types, but the info here is specific to private plans only.

What Is Health Insurance?

Health insurance is a plan that helps pay for your medical care. You pay a set amount, and in return, the plan helps cover your health costs. Most people in the U.S. get insurance through their job, while others buy it on their own.

If you’re managing a blood clot or other vascular health condition, understanding your plan can make a big difference. From covering prescriptions like blood thinners to making follow-up visits and preventive screenings more affordable, knowing the basics can help you avoid surprises and get the care you need.

Key Terms to Know

Premium: The monthly payment to keep your coverage active. This cost is separate from your deductible and other out-of-pocket expenses.

Deductible: What you pay each year for certain services before insurance begins to share costs. Not everything applies to the deductible. For example, a routine checkup may be covered, but extra lab tests might not count toward it.

Copay: Flat fee at the end of an appointment (for example, $25 for a visit).

Coinsurance: The percentage of a medical bill you’re responsible for paying (for example, 20%). In many plans, this starts after you’ve met your deductible, but some plans apply co-insurance right away.

Out-of-pocket maximum: The most you’ll spend in a year. After this, your plan pays 100% of covered care.

Provider network: The group of clinicians, hospitals, and facilities your plan contracts with.

Formulary: A list of prescription drugs your plan covers, often divided into cost “tiers.”

HMO (Health Maintenance Organization): A plan that usually limits coverage to care from clinicians and hospitals who contract with the HMO. Out-of-network care is not covered

except in emergencies. HMOs may require you to live or work in the service area. They often focus on prevention and wellness. With HMO plans, you often need a referral from your primary care clinician before seeing a specialist.

PPO (Preferred Provider Organization): A plan that contracts with clinicians and hospitals to form a network. You pay less if you use network providers but can also see out-of-network

providers for a higher cost.

High-Deductible Health Plan (HDHP) with Health Savings Account (HSA): A plan with a higher deductible, paired with a special savings account you can fund with pre-tax dollars to cover medical expenses.

Allowed charge: The maximum amount your insurer will pay for a covered service. Out-of-network providers may bill you for the part your insurer doesn’t cover.

Prior authorization: Pre-approval required by your insurer before certain services or medications are covered.

Medical referral: A recommendation from your clinician to see another provider or get a specific service. For example, your primary care clinician may give you a referral to physical therapy after an ankle injury.

Insurance referral: Approval required by some insurance plans (different than a medical referral) before you can see a specialist. This usually comes from your primary care clinician and may be limited to certain providers or a set number of visits.

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

Preventive Services: What’s Covered at No Cost

Under the Affordable Care Act (ACA), many preventive services are covered at no cost when you see an in-network clinician. These services apply to people who are asymptomatic (no current signs or symptoms).

Examples of covered preventive care:

• Well-child visits and immunizations (e.g., flu, shingles, HPV, pneumonia)

• Well-woman visits

• Screening mammograms (for women ages 40–74 without breast symptoms)

• Pap tests (cervical cancer screening)

• Colorectal cancer screening (routine)

• Blood pressure and cholesterol screening

• Diabetes screening (for adults with hypertension)

• HIV screening

• Obesity screening and counseling (Refers to nutrition and lifestyle counseling, not medications.)

• Tobacco use screening and counseling

• Iron supplements for children at risk

• Skin cancer counseling

• Contraceptive counseling and methods (for women)

Choosing a Plan

When comparing plans, look at more than just the monthly premium:

1. Clinician networks: Review the in-network clinicians and hospitals to make sure your preferred providers are included. Using in-network care usually means lower bills.

2. Prescriptions: Check the plan’s formulary (list of covered medicines) to confirm your prescriptions are included.

3. Covered benefits: Preventive care is covered at no cost. Other services may need a referral or prior approval.

4. Total costs: Your monthly premium is separate from your out-of-pocket maximum. Even if you reach your out-of-pocket maximum, you’ll still pay your premium each month. When comparing plans, look at both along with your deductible, copays, and coinsurance to understand what you might spend in a year.

5. Plan type: Understand how the plan structure—HMO, PPO, or HDHP + HSA if offered—affects flexibility and cost. If your employer has a human resources or benefits department, that can also be a good resource to sort out your options when enrolling in an insurance plan.

Common Limitations to Know About

Even if listed as “no cost,” preventive services may lead to charges in certain situations:

• Symptoms or follow-up care: If a test is ordered because of symptoms (like a lump or abnormal finding), it becomes diagnostic and you may have to pay part of the cost (such as a copay, deductible, or coinsurance).

• Out-of-network providers: Preventive services are only free when you use in-network clinicians or facilities.

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

• Billing or coding errors: Mistakes in documentation can lead to claim denials or unexpected bills.

• Plan exceptions: Some older plans aren't required to cover all preventive services.

• Frequency limits: Coverage follows recommended schedules (for example, basic blood work may be covered once a year at your annual physical). Tests done more often may not be covered and could apply to your deductible.

• Claim denials: Administrative barriers still happen and can impact access— especially for people in lower-income or under-resourced communities.

Always confirm with your clinician’s office and your insurer whether a service will be billed as preventive or diagnostic before your visit.

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 at first— but that doesn’t always mean you’re stuck with the bill.

Why claims get denied:

• The insurer didn’t consider the service “medically necessary.”

• Care was from an out-of-network clinician or facility.

• There were errors in the paperwork or billing codes.

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

Steps you can take:

1. Read the denial letter. It will explain the reason and your appeal options.

2. Check your Explanation of Benefits (EOB). Compare it with your provider’s bill to see if the services listed match what you actually received and whether your provider was marked as in-network.

3. Call your insurance company. Ask for a clear explanation, and write down the date, the person’s name, what they told you, and the reference number for the call.

4. File an appeal. This is a formal request for review. Ask your clinician’s office to provide medical records or a letter of support—this often helps.

5. Know your rights. If your appeal is denied, you may qualify for an external review by an independent reviewer. Be sure to check deadlines in the denial letter—timing is important.

How to Advocate for Yourself

• Stay organized: Keep copies of bills, letters, and a call log.

• Ask for help: Clinician offices can explain billing codes or prior authorization.

• Find advocates: Some hospitals and nonprofits offer patient advocates to guide you.