Health Insurance: Plans, Costs, and How to Choose the Right Coverage

Types of Health Insurance Plans

Understanding the different types of health insurance plans is the first step toward finding coverage that fits your medical needs and budget. Each plan type structures its provider network, referral requirements, and cost-sharing differently. The five most common plan types available through employers and the health insurance marketplace are HMO, PPO, EPO, POS, and HDHP.

HMO (Health Maintenance Organization) plans require you to select a primary care physician (PCP) who coordinates all of your care. You need a referral from your PCP to see a specialist, and services are only covered when you use providers within the HMO network, except in emergencies. HMO plans typically offer the lowest health insurance premiums and predictable copays, making them a popular choice for individuals and families who want affordable health insurance with straightforward costs.

PPO (Preferred Provider Organization) plans give you the most flexibility. You can see any doctor or specialist without a referral, both in-network and out-of-network. In-network care costs less, but you still receive partial coverage when you go outside the network. PPO health insurance plans generally have higher premiums than HMOs but are ideal for people who want freedom to choose their providers or who need to see specialists regularly.

EPO (Exclusive Provider Organization) plans are similar to PPOs in that you do not need referrals to see specialists. However, like HMOs, EPO plans do not cover out-of-network care except in emergencies. EPOs often fall in the middle on price, offering lower premiums than PPOs while still providing some flexibility in choosing providers within the network.

POS (Point of Service) plans combine features of HMOs and PPOs. You choose a primary care physician and need referrals for specialists, like an HMO, but you can also see out-of-network providers at a higher cost, like a PPO. POS plans can work well for people who want a coordinated care approach but also want the option of going out-of-network when necessary.

HDHP (High-Deductible Health Plan) plans feature lower monthly premiums in exchange for higher deductibles. You pay more out of pocket before insurance kicks in, but HDHPs are the only plans that qualify for a Health Savings Account (HSA), which lets you save pre-tax money for medical expenses. For healthy individuals who do not expect frequent medical visits, an HDHP paired with an HSA can be one of the most cost-effective health insurance strategies available.

Plan Type	Referral Needed?	Out-of-Network Coverage	Premiums	Best For
HMO	Yes	No (emergencies only)	Lowest	Budget-conscious, routine care
PPO	No	Yes (at higher cost)	Highest	Flexibility, specialist access
EPO	No	No (emergencies only)	Moderate	No-referral convenience, in-network only
POS	Yes	Yes (at higher cost)	Moderate	Coordinated care with out-of-network option
HDHP	Varies	Varies	Lowest premiums, highest deductible	Healthy individuals, HSA savings

How to Choose a Health Insurance Plan

Choosing the right health insurance plan requires balancing your medical needs, budget, and preferences for provider access. There is no single best plan for everyone, so the goal is to match your situation with the plan structure that delivers the most value. Here is a step-by-step approach to making a confident decision.

Assess your coverage needs. Start by thinking about how often you visit the doctor, whether you have any ongoing health conditions, and what types of care you anticipate needing in the coming year. If you rarely see a doctor and are generally healthy, a high-deductible plan with lower premiums may be the most affordable health insurance option. If you manage a chronic condition or take expensive medications, a plan with higher premiums but lower out-of-pocket costs could save you money overall.

Check the provider network. Before enrolling in any health insurance plan, verify that your preferred doctors, specialists, and hospitals are included in the plan's network. Going out-of-network can result in significantly higher costs or no coverage at all, depending on the plan type. If you have established relationships with specific providers, a PPO may be worth the higher premiums to maintain that access.

Compare total costs, not just premiums. Many people choose the plan with the lowest monthly premium without considering the full picture of health insurance costs. A low-premium plan with a $6,000 deductible could cost you far more in a year with significant medical expenses than a higher-premium plan with a $1,500 deductible. Calculate your estimated total annual cost by adding up premiums, the expected deductible spend, copays, and coinsurance for the care you anticipate using.

Review prescription drug coverage. If you take regular medications, check each plan's formulary, which is the list of covered drugs. Plans categorize drugs into tiers, and your out-of-pocket cost varies depending on which tier your medication falls into. A plan that does not cover your specific prescriptions or places them on a high-cost tier could add hundreds or thousands of dollars to your annual expenses.

Consider family needs. If you are choosing health insurance for a family, factor in each member's medical needs, from pediatric care and maternity coverage to specialist visits. Family health insurance plans often cost significantly more than individual coverage, so compare the total cost of adding dependents to your plan versus each family member obtaining separate coverage, especially if a spouse has access to employer-sponsored insurance.

Health Insurance Marketplace (ACA) Explained

The Health Insurance Marketplace, established by the Affordable Care Act (ACA), is a platform where individuals and families can shop for and purchase health insurance plans. If you do not have access to employer-sponsored coverage, the marketplace is one of the best ways to find affordable health insurance with standardized benefits and consumer protections.

The federal marketplace operates at HealthCare.gov, though several states run their own exchanges with different websites and sometimes extended enrollment periods. All marketplace plans are required to cover ten essential health benefits, including hospitalization, prescription drugs, maternity care, mental health services, and preventive care at no additional cost.

Open enrollment is the annual window during which you can sign up for or change your health insurance marketplace plan. It typically runs from November 1 through January 15, though state-run exchanges may offer extended deadlines. Missing open enrollment means you generally cannot enroll until the next year, unless you qualify for a special enrollment period.

Subsidies and financial assistance make marketplace coverage more affordable for many Americans. Premium tax credits reduce your monthly health insurance premiums based on your household income, and cost-sharing reductions lower your deductibles and copays if you select a Silver-tier plan. In recent years, enhanced subsidies have expanded eligibility, allowing households earning well above 400% of the federal poverty level to qualify for assistance.

Metal tiers help you compare plans by how costs are shared between you and the insurer. Bronze plans have the lowest premiums but highest out-of-pocket costs, covering about 60% of expected expenses. Silver plans cover roughly 70% and are the only tier eligible for cost-sharing reductions. Gold plans cover about 80% with higher premiums but lower costs at the point of care. Platinum plans cover approximately 90% of costs and have the highest premiums but the lowest out-of-pocket expenses when you receive care. Choosing the right tier depends on how much care you expect to use and whether you qualify for subsidies.

Understanding Premiums, Deductibles, Copays, and Coinsurance

Health insurance costs can feel confusing because the money you pay is split across several different categories. Understanding how premiums, deductibles, copays, and coinsurance work together is essential for evaluating plans accurately and avoiding financial surprises when you need care.

Premiums are the fixed amount you pay each month to maintain your health insurance coverage, regardless of whether you use any medical services. Think of it as your membership fee. Health insurance premiums vary widely based on your age, location, plan type, and whether you receive employer contributions or marketplace subsidies. In 2025, the average monthly premium for an individual marketplace plan was approximately $480 before subsidies, though most enrollees paid significantly less after tax credits.

Deductibles are the amount you must pay out of pocket for covered medical services before your insurance begins to share costs. For example, if your plan has a $2,000 deductible, you pay the first $2,000 of covered services yourself. After meeting your deductible, you typically pay only copays or coinsurance for additional care. Some services, like preventive care, are covered before you meet your deductible.

Copays are fixed dollar amounts you pay for specific services, such as $25 for a primary care visit or $50 for a specialist appointment. Copays are predictable and apply at the time of service. Not all plans use copays; some rely entirely on coinsurance after the deductible is met.

Coinsurance is the percentage of costs you share with your insurer after meeting your deductible. If your plan has 20% coinsurance, you pay 20% of covered services and your insurer pays 80%. Coinsurance applies until you reach your out-of-pocket maximum for the year.

Out-of-pocket maximum is the most you will pay for covered services in a plan year. Once you reach this limit, your insurance covers 100% of additional covered care. For 2026 marketplace plans, the out-of-pocket maximum cannot exceed $9,450 for an individual or $18,900 for a family. This cap provides critical financial protection against catastrophic medical expenses.

Cost Component	When You Pay	How It Works	Typical Range
Premium	Monthly	Fixed payment to maintain coverage	$200–$700+/month (individual)
Deductible	Before insurance pays	Amount you pay first for covered services	$500–$8,000+/year
Copay	At time of service	Fixed fee per visit or prescription	$15–$75 per visit
Coinsurance	After deductible is met	Your percentage share of costs	10%–40% of service cost
Out-of-Pocket Max	Annual cap	Most you pay in a year; insurance covers 100% after	$3,000–$9,450 (individual)

Special Enrollment Periods and Qualifying Life Events

Outside of the annual open enrollment window, you can only sign up for or change your health insurance plan if you experience a qualifying life event (QLE). A QLE triggers a special enrollment period (SEP) that typically lasts 60 days, giving you a limited window to enroll in new coverage or modify your existing plan.

The most common qualifying life events include losing existing health coverage (such as through job loss, aging off a parent's plan, or divorce), getting married, having or adopting a baby, and moving to a new ZIP code or county where different health insurance plans are available. Other qualifying events include changes in household income that affect subsidy eligibility, gaining citizenship or lawful presence, and leaving incarceration.

To enroll during a special enrollment period, you will need to provide documentation of your qualifying event, such as a termination letter, marriage certificate, or birth certificate. You can apply through HealthCare.gov, your state's marketplace, or directly with an insurance company. It is important to act quickly because the 60-day window begins on the date of the qualifying event, not the date you realize you need coverage. If you miss the window, you will generally have to wait until the next open enrollment period unless another qualifying event occurs.

If you lose employer-sponsored coverage, you may also be eligible for COBRA continuation coverage, which lets you keep your former employer's plan for up to 18 months. However, COBRA is typically very expensive because you pay the full premium (including the portion your employer previously covered) plus a 2% administrative fee. For most people, a marketplace plan with subsidies is a more affordable alternative.

Our Health Insurance Guides

We have created in-depth guides on specific health insurance topics to help you navigate particular situations. Each article focuses on a single issue with actionable advice so you can make informed decisions about your coverage.

Health Insurance for Pre-Existing Conditions

Before the Affordable Care Act, millions of Americans struggled to find health insurance because insurers could deny coverage, charge higher premiums, or exclude treatment for pre-existing conditions such as diabetes, asthma, cancer, heart disease, and mental health disorders. The ACA fundamentally changed this by establishing guaranteed issue, which means that health insurance companies must accept all applicants regardless of their medical history.

Under current law, no ACA-compliant health insurance plan, whether purchased through the marketplace or directly from an insurer, can refuse to cover you because of a pre-existing condition. Insurers also cannot charge you more based on your health status. The only factors that can affect your premium are your age, location, tobacco use, and plan category. This protection applies during open enrollment and special enrollment periods alike.

It is worth noting that these protections apply specifically to ACA-compliant plans. Short-term health insurance plans, health care sharing ministries, and certain other non-ACA coverage types are not required to follow these rules and may deny coverage or exclude pre-existing conditions. If you have a pre-existing condition, always verify that the plan you are considering is ACA-compliant to ensure you receive full protections. Marketplace plans at HealthCare.gov are always ACA-compliant, as are individual plans sold during open enrollment through licensed insurers in your state.

Related Finance Topics

Health insurance is a key piece of your overall financial plan. Understanding how it connects to other areas of personal finance helps you make better decisions and avoid coverage gaps. Explore these related guides for a more complete picture.

• Healthcare Costs — Understand what you will pay even with insurance, from hospital bills and prescription drugs to strategies for reducing medical expenses and negotiating bills.
• Life Insurance — Protect your family's financial future. If health insurance covers you while you are alive, life insurance ensures your loved ones are not left with financial burdens if something happens to you.
• Personal Finance — Health insurance fits into your overall budget. Learn how to balance insurance costs with savings, debt repayment, and other financial priorities.

Frequently Asked Questions

Are health insurance premiums tax deductible?

It depends on your situation. If you are self-employed, you can generally deduct 100% of your health insurance premiums as an above-the-line deduction on your federal tax return. If you receive employer-sponsored insurance, your premiums are typically paid with pre-tax dollars, which already reduces your taxable income. For those who purchase individual health insurance and are not self-employed, premiums may be deductible as an itemized medical expense, but only the portion of total medical expenses that exceeds 7.5% of your adjusted gross income qualifies.

Can I get health insurance without a job?

Yes. You have several options for health insurance without employer-sponsored coverage. You can purchase a plan through the Health Insurance Marketplace (HealthCare.gov) during open enrollment or a special enrollment period, and you may qualify for premium subsidies based on your income. You may also be eligible for Medicaid if your income falls below your state's threshold. Other options include COBRA continuation coverage from a previous employer, short-term health insurance plans, or joining a spouse's or parent's plan if you are under 26.

What is the difference between HMO and PPO?

The main differences are network flexibility and cost. An HMO requires you to choose a primary care physician, get referrals for specialists, and stay within the plan's network for coverage. A PPO lets you see any doctor or specialist without a referral and provides partial coverage for out-of-network care. HMO health insurance plans typically have lower premiums and out-of-pocket costs, while PPO plans offer more freedom to choose providers but come with higher health insurance premiums.

When is open enrollment for health insurance?

For health insurance marketplace (ACA) plans, the annual open enrollment period typically runs from November 1 through January 15. Some states that operate their own exchanges may have extended deadlines. Employer-sponsored plans set their own open enrollment windows, which usually occur in the fall. Outside of open enrollment, you can only sign up for or change your health insurance if you experience a qualifying life event such as losing other coverage, getting married, having a baby, or moving to a new area.

Is it illegal to not have health insurance?

At the federal level, the individual mandate penalty was reduced to $0 starting in 2019, meaning there is no federal tax penalty for being uninsured. However, several states and the District of Columbia have enacted their own individual mandates with financial penalties for residents who do not maintain qualifying health coverage. These states include California, Massachusetts, New Jersey, Rhode Island, and Vermont. Check your state's specific requirements, as penalties can be several hundred dollars or more per year.