What is health insurance?

Your guide to understanding how health insurance works.

What you need to know

Health insurance is an insurance product designed to cover medical expenses. Medical expenses include, but are not limited to, preventative care, emergency services, surgeries, and prescription medication. Health insurance is similar to other types of insurance in that you pay a monthly premium in order to access the plan.

Health insurance doesn't always cover all of your medical costs; your total out-of-pocket costs may include your deductible the amount you have to spend before health insurance kicks in), your copayments (a fixed amount you pay for certain services or medication), and your coinsurance (a percentage of the cost that you pay for certain services or medication).

In order to be considered "qualifying health coverage" as defined by the Affordable Care Act, a health insurance plan must have the minimum essential coverage (MEC). All plans purchased through the marketplace need to meet these requirements. To meet MEC requirements, plans need to follow all new rules and regulations laid out by the Affordable Care Act, including the ten essential health benefits, affordability standards, and guaranteed coverage of pre-existing conditions.

All health insurance plans have a maximum out-of-pocket limit that limits that amount you have to spend on medical expenses every year. The maximum out-of-pocket limit for 2019 is $7,900 for individual plans and $15,800 for family plans.

For 2019 health insurance plans, there is no individual mandate tax penalty.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

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