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For someone new to the United States or just new to enrolling in or purchasing health care coverage, the health care system can feel confusing.
In some countries, people go to a doctor or hospital, pay a small amount (or nothing at all), and receive care. Coverage is automatic, and there is no need to sign up. Care is available to everyone, regardless of residency status.
The United States’ health care system does not work that way. Babies are not immediately covered at birth, and those arriving in the U.S. from elsewhere may face challenging paths to coverage. Coverage is not continuous, as a person’s eligibility for various programs changes over time and circumstances throughout their lives.
Health care here is very expensive, and coverage is neither automatic nor guaranteed. A surgery can cost tens of thousands of dollars, and a hospital stay hundreds of thousands. Even doctor’s visits, prescriptions, or emergency care can create bills that are impossible to pay.
In order to obtain health care coverage in the U.S., a person must qualify. They must sign up. They often have to pay monthly premiums and other costs such as copays, coinsurance, and deductibles. It is also very easy to lose coverage.
There are several types of coverage programs, and each one has its own rules that determine who is eligible and how it works.
The sections below provide a simple overview of health care coverage in the U.S. and describe the different types of coverage available.
Why Health Care Coverage Exists in the U.S.
Health care coverage was created to help manage medical costs and to make sure doctors, hospitals, and other providers are paid for their services.
Coverage programs control costs in several ways.
First, insurance companies make agreements with doctors and hospitals about how much they will be paid for certain services. For example, if a doctor charges $100 for an office visit, they might agree to accept only $75 from the insurance company instead in order to be included on the panel. The federal and state governments unilaterally decide what provider reimbursements will be for Medicare and Medicaid, respectively; there is no negotiation. These arrangements lower the amounts that the payer and the patient pay.
Second, plans control costs by limiting which doctors and hospitals can participate in their network. If a patient sees a provider who is not in-network, the patient will most likely pay more or may not have coverage altogether for that service.
Third, many plans require prior authorization. This means that if a doctor recommends a test or treatment, the insurance company must approve it before it is done. If the plan does not approve the service and the patient chooses to receive it anyway, the patient may have to pay the full cost.
Insurance is designed to spread risk. When someone joins a program or plan, the money they contribute, directly or through taxes, combined with any employer contributions, is pooled to pay for the care of everyone covered under that program or plan. In this system, people who use little care help cover the costs of those who need more care. This sharing of costs is how insurance works.
The Main Types of Health Care Coverage
Not everyone qualifies for every type of coverage. The United States uses a mix of employer-based plans, public and military programs, and individual plans. Coverage options depend on age, income, job benefits, disability, military service, immigration status, or other qualifications. With only a few exceptions, undocumented persons in the U.S. cannot qualify for any type of health care coverage programs.
Job-based coverage is the most common type of coverage for working-age adults and occurs when an employer offers health benefits to their workers.
Not all employers must provide health insurance to their employees. When they do offer it, the employer usually pays most of the monthly premium. The worker pays the rest through money taken out their paychecks.
If the worker wants to cover a spouse or children, they usually have to pay more.
Even after paying their share of the monthly premium, workers often pay additional costs when they get care. This can include copays, coinsurance, and deductibles.
Sometimes, employers will offer more than one option for coverage. One plan may have lower monthly premiums but higher deductibles, while another may have higher monthly premiums but lower copays or coinsurance costs. High-deductible health plans, known as HDHPs, can have health savings accounts (HSAs) attached. HSAs are programs that allow policyholders to put aside tax-free money to pay for qualified health care expenses.
As it sounds, employer-sponsored coverage is tied to employment. If someone works fewer hours than required to qualify for coverage, loses their job, or retires, they will most likely lose their health coverage from that employer. Temporary continuation of coverage, known as COBRA, may be available, but it is often expensive because the now-former employee is responsible for the entire premium cost.
Medicare is a federal program primarily for people age 65 and older and for some younger people with certain disabilities, and kidney disease.
Medicare has four different parts. Part A covers hospital care, Part B covers doctor’s visits and outpatient services, and Part D covers prescription drugs. Medicare Part C, also known as Medicare Advantage, is administered by private companies and combines Medicare Parts A and B, and often D, into one plan.
Even with Medicare, people often pay monthly premiums, deductibles, and coinsurance. Many people choose additional coverage to help pay for costs that Traditional Medicare does not fully cover. These are known as Medigap policies and help pay Medicare Parts A and B deductibles and coinsurance costs.
Medicare does not cover every service, such as most long-term care.
Medicaid is a public program for people with limited income.
It is funded by the federal and state governments, and each state has certain flexibility regarding administration and coverage rules and regulations. Because of this, eligibility, income limits, benefits, and rules can vary from one state to another.
Medicaid generally serves adults with low incomes, children in low-income families, pregnant individuals, people with disabilities, and some older adults.
Medicaid usually has no premiums and low out-of-pocket costs.
However, not everyone with low income qualifies. Immigration status, disability status, household size, and state policy can all affect eligibility.
The Health Insurance Marketplace was created under the Affordable Care Act.
It allows individuals, families, and small businesses to buy coverage directly from insurance companies. States can use the federal Marketplace or set up their own. Kentucky operates its own Marketplace, known as kynect.
Marketplace plans are grouped into four tier levels – Bronze, Silver, Gold, and Platinum. These levels are based on how costs are shared between the plan and the enrollee. Platinum plans are not available in Kentucky.
In an effort to prevent people from waiting until they get sick to obtain health care coverage, most people must sign up during the yearly open enrollment period, which runs from November 1 to December 15 nationally, and from November 1 to December 31 in Kentucky. In certain situations, people may qualify for a Special Enrollment Period, such as marriage, the birth of a child, or loss of employer-sponsored coverage.
Marketplace plans must cover a set of essential health benefits. Financial assistance for Marketplace insurance costs (premium subsidies and cost-sharing reductions) may be available based on household income.
Marketplace coverage is typically used by people who do not have access to affordable employer-sponsored coverage and do not qualify for other programs such as Medicaid, Medicare, VA, or TRICARE.
Military, Veterans, and Other Types of Coverage
Other, less common, types of coverage include military and veterans’ programs, tribal health services, and short-term or limited plans.
Military programs serve active-duty service members, veterans, and their families.
Members of federally recognized tribes may receive care through the Indian Health Service or may enroll in other coverage programs.
Short-term or limited plans are sometimes marketed as lower-cost options. These plans often provide fewer benefits and may not cover pre-existing conditions or essential services.
Each of these programs has its own rules, eligibility requirements, and cost and benefit structure.
Important Things to Know
Health care coverage in the United States is not automatic. It requires active enrollment and is very complex. Rules and structure differ depending on the program.
Most commercial insurance plans and Medicare require monthly premiums and cost-sharing expenses such as deductibles, copays, and coinsurance. Having coverage does not necessarily mean that care will be affordable.
Many people move between different types of coverage over their lifetime. A person may begin on a parent’s employer plan, later enroll in coverage through an employer, the Marketplace, or Medicaid, and eventually enroll in Medicare.
Each transition can bring new rules, new costs, and new provider networks.
The Limits of the Current Structure
Because all coverage programs have specific criteria, there is no guarantee of stability. Coverage changes are common as circumstances shift.
Life events such as job loss, divorce, disability, aging out of a parent’s plan, or income changes can affect eligibility, cost, and coverage.
Unlike all other high-income countries, the U.S. does not provide universal health care. Countries that do have universal health systems have lower costs and better health outcomes.
These materials were supported by funds made available by the Kentucky Department for Public Health’s Office of Population Health from the Centers for Disease Control and Prevention, National Center for STLT Public Health Infrastructure and Workforce, under RFA-OT21-2103.
The contents of these materials are those of the authors and do not necessarily represent the official position of or endorsement by the Kentucky Department for Public Health or the Centers for Disease Control and Prevention.