What is health care coverage? Health care coverage helps people access medical care and protects them from high and unpredictable costs.
Most people think of health care coverage as something a person must show proof of at the doctor’s office. They hand over their card, get care, and assume that the insurance company will take care of the rest. But using and paying for health care coverage is not so simple.
Even with insurance, many people struggle with unaffordable health care costs. Our 2024 survey of Kentuckians found that 55% of adults with coverage avoided, skipped, or delayed medical care or medications because of cost.
So, what is health care coverage in practice, and why does it fall short for so many people?
What Is Health Care Coverage Meant to Do?
The need for medical services is often unpredictable and expensive. No one plans to get sick or to be involved in an accident. When those things happen, they can quickly lead to bills that people cannot afford, causing them to choose between paying for medical care and buying food for their families.
When insurance works well, it helps:
- Lower costs
- Protect savings
- Make care more accessible
The goal of insurance is to make costs more predictable and to prevent them from becoming overwhelming or impacting other needs.
Types of Health Care Coverage
There are different types of health care coverage in the U.S. The main types of coverage include:
- Employer-sponsored coverage – insurance offered through a job
- Marketplace plans – insurance purchased through the Health Insurance Marketplace; known in Kentucky as kynect
- Medicare – coverage primarily for people age 65 and older, certain younger people with disabilities, and those with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant, sometimes called ESRD)
- Medicaid – coverage for individuals and families with limited incomes who meet eligibility requirements
- TRICARE – coverage for active-duty service members, National Guard and Reserve members, retirees, and their families
- VA – coverage for eligible veterans who served in the active military, naval, or air service and did not receive a dishonorable discharge
- CHAMPVA – coverage for spouses, surviving spouses, or children of Veterans who have died in the line of duty, survived with service-related disabilities, or died with service-related disabilities
- Federal Employees Health Benefits (FEHB) Program – coverage for most active, full-time federal employees, retirees, and their families
People will sometimes have more than one option available to them. For example, a veteran who is offered employer-sponsored coverage might realistically choose between VA, employer-sponsored, or Marketplace coverage. Another person working at low wages without employer-sponsored coverage might qualify for discounted Marketplace coverage or Medicaid.
While these programs differ in who they serve and how they work, they are all intended to provide financial protection from the high cost of medical care. Note that they all require people to opt in or sign up. Enrollment is not automatic.
Why Being Insured Doesn’t Always Make Care Affordable
Many people are surprised to learn that having health care coverage does not necessarily make their care affordable. This is because, in addition to the premiums, most plans include cost‑sharing expenses, such as:
- Deductibles
- Copays
- Coinsurance
- Out-of-Pocket Maximums
These costs can add up quickly, especially for people with chronic health conditions, complicated problems, or unexpected medical needs. Also, high deductibles can force people to pay thousands of dollars before their coverage even starts to cover costs for services other than preventive care.
As a result, insured people may delay seeking care, skip medications, or avoid follow‑up care – not because they do not value their health, but because they can’t afford it.
How Life Changes Can Disrupt Coverage
In the United States, health care coverage is often tied to work. According to KFF data, nearly 49% of adults in the U.S. have insurance through their employer, 15% have Medicare coverage, 20% are enrolled in Medicaid, and around 7% use non-group coverage (mostly through the Marketplace). Changes in job status, income, family size, or location can quickly affect coverage costs and availability.
Common situations that can disrupt coverage include:
- Job loss or job changes
- Reduced work hours
- Moving to a new state
- Divorce from or death of the primary policyholder
- Age (i.e., no longer qualifying for coverage under a parent’s policy or having to switch from commercial coverage to Medicare)
- Income (i.e., no longer qualifying for Marketplace discounts or for Medicaid)
- Retirement
These changes can lead to gaps in coverage, higher costs, or confusion about next steps. Even short lapses in coverage can disrupt care and patient-provider relationships, as well as create financial stress.
Why Coverage Stability Matters for Health
When people can rely on their coverage benefits, they are more likely to:
- Get preventive care
- Obtain care earlier in the course of illness or health concerns
- Manage chronic conditions
- Follow treatment plans
When coverage changes or is lost, it can be harder for people to keep seeing their regular doctors and to stay on top of their health needs. Over time, this can lead to worse health and, in some cases, earlier death.
The Financial Risk of Inadequate Coverage
When health care coverage is not consistent or care is unaffordable, it puts both people’s health and their finances at risk. This happens in a couple of ways.
First, people with health insurance usually pay lower prices for care. Insurance plans negotiate discounts with providers and hospitals, which means insured patients are not charged the full price for most services.
Second, most employer-sponsored and Marketplace plans have limits set on deductibles (how much insurance companies can make an individual pay before they start covering at least a portion of non-preventive care) and out-of-pocket maximums (the most that an individual or family has to pay out-of-pocket in a plan year for covered services; also called the “MOOP”).
People without insurance do not have these protections. They are legally responsible for the full, undiscounted charges for the services they receive, sometimes known as the “rack rate.” These charges are typically much higher than what insured patients pay.
Without health care coverage, there is no limit on how much someone may have to pay for their medical care. Costs can add up quickly, especially during a serious illness or hospital stay.
To make matters worse, it is nearly impossible to know how much care will cost before a doctor’s visit or hospital stay. When people are unsure what care will cost or whether it will be covered, getting care can feel stressful. In many cases, this uncertainty leads people to delay care or avoid it altogether.
In fact, medical costs in the United States are often so high compared to what people can pay that two-thirds of bankruptcies are estimated to be related to medical debt or time off work due to illness, a situation unheard of in other high-income countries.
Understanding Coverage Helps People Protect Themselves
Understanding how health care coverage works can help people avoid unexpected costs and gaps in coverage. This includes knowing:
- What coverage options are available
- What benefits are offered by insurance plans or coverage programs
- How provider networks affect access to care
- The plan’s deductibles and out-of-pocket maximums
- Expected costs for various types of services (provider visits, lab testing, X-rays, and hospital stays, etc.)
- What insurance terms mean
Education plays an important role in helping people make informed decisions and use their coverage more effectively. We offer free resources to help navigate the complicated U.S. health care coverage system, including a spreadsheet that can be used to compare plans.
The Big Picture
When people ask what is health care coverage, they are often trying to understand how it protects them from high medical bills or improves access to care. When coverage is too expensive or can be easily lost, people face more uncertainty and risk to both their health and their finances.
Until a guaranteed, continuous, more reliable health care financing system is established, understanding the system that exists today can increase the chances that people will get the care they need, when they need it, without undue hardship.
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.