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Health Insurance – How it Works

Having health insurance usually means you pay a premium every month and, in return, your health insurance plan pays part of the bill when you need a service from a doctor or another provider. Health insurance usually covers doctors' visits, prescription drugs, medical, and surgical services.

There are several different ways to get health insurance:

  • Buy coverage on your own
  • Get coverage through your job or a family member's job
  • Get coverage through public programs like Medicaid and Medicare.

Buying Health Insurance on Your Own - Individual Market

When you or your family purchase health insurance and are not part of a group that gets health coverage together (like an employer), you're considered to have 'individual market' coverage. Many people choose to buy individual market coverage provided through the Affordable Care Act (ACA) Health Insurance Marketplace, on either or Buying coverage through the ACA Marketplace allows those who qualify to get premium tax credits to help with the cost of their coverage. An insurance agent or broker can help you choose an individual market plan, or your state may have health insurance 'navigators' or other community-based assisters to help you.

While the ACA Marketplace only offers health insurance (and dental coverage) that meets certain requirements for benefits and coverage, other types of health insurance are also available to purchase on your own. These other types of insurance cover a more limited set of health care services and may choose not to cover you or charge you more if you have a pre-existing health condition.

The Affordable Care Act (ACA)

Enacted in 2010, the Affordable Care Act (ACA) expanded health insurance coverage to more than 20 million people by increasing benefits and lowering health insurance costs to make coverage more affordable.
Consumer protections and benefits provided by the ACA include:

  • Providing coverage for people with pre-existing conditions
  • Eliminating annual and lifetime dollar limits on health insurance coverage
  • Providing free preventive care
  • Allowing young adults to remain on their parents’ plans until they are 26 years old
  • Allowing people to compare health insurance coverage options before selecting a plan
  • Providing premium tax credits to people who qualify to help lower health insurance costs
  • Increasing access to Medicaid

Full text of the Affordable Care and Reconciliation Act - PDF

Qualified Health Plans (QHPs)
Qualified Health Plans are insurance plans certified by the ACA Health Insurance Marketplace.
QHPs provide Essential Health Benefits, follow established limits on cost-sharing (such as deductibles, copayments and out-of-pocket maximum amounts), and meet other requirements of the ACA.


Employer-based Coverage

Most nonelderly Americans get health care coverage through employment, either through their own job or a family member's. Employees and their families usually have a chance to sign up for coverage when starting a new job and once each year during an enrollment period.
State insurance regulators help to oversee insurance plans that employers purchase, often when the employer has fewer than 50 employees. But many employers choose to ‘self-insure' rather than purchase health insurance. The U.S. Department of Labor generally provides oversight of self-insured employer plans. Other agencies, including the Office of Personnel Management, the Defense Health Agency, and the Centers for Medicare and Medicaid Services, provide oversight when the employer is a government agency.

Public Coverage

Many people get health coverage through public programs like Medicaid and Medicare.

  • The Illinois Department of Health and family Services (HFS) provides healthcare coverage for adults and children who qualify for Medicaid.
  • The federal Medicare program pays most medical expenses for people age 65 or older and for individuals under 65 receiving Social Security disability benefits. However, Medicare does not pay all expenses. As a result, some Medicare-eligible individuals choose to buy a Medigap policy that helps pay for certain expenses, including deductibles not covered by Medicare. In Illinois, the Senior Health Insurance Program (SHIP) – Illinois Department on Aging provides free health insurance counseling services for Medicare beneficiaries and their caregivers.

Other Types of Health Insurance

Short-Term, Limited Duration Insurance (STLD)

This insurance is not required to meet ACA requirements or offer a full set of essential health benefits. This insurance covers some of the same types of services as comprehensive health insurance, but the plans typically cover a smaller share of the cost of services than comprehensive health insurance. That means you may pay less in premiums, but enrollees pay more when they need health care services. The plans may deny applicants or charge them more if they have pre-existing health conditions.

Basic Hospital Expense Coverage

This insurance covers a period of usually not less than 31 days of continuous in-hospital care and certain hospital outpatient services.

Basic Medical-Surgical Expense Coverage

This insurance covers costs associated with a necessary surgery, including a certain number of days of in-hospital care.

Hospital Confinement Indemnity Coverage

This insurance pays a fixed amount for each day that you are in a hospital.

Accident Only Coverage

This pays a lump sum when the enrollee experiences death, dismemberment, disability, or hospital and medical care caused by an accident.

Specified Disease Coverage

This insurance covers diagnosis and treatment of a specifically named disease or diseases, such as cancer.

Long-term Care Insurance

Long-term care insurance usually pays for skilled, intermediate and custodial care in a nursing home, as well as care in other settings, such as the home, adult day care center, or assisted living facility. The policy usually pays a fixed amount per day while a person is receiving care.

Other Limited Coverage

You may purchase insurance covering only dental or vision or other specified care.

Other Coverage That is Not Insurance

Health Care Sharing Ministries

Under these arrangements, members pay a monthly fee. When they have health care expenses, members can request that the ministry or other members share part of the cost. However, the ministry is not legally obligated to pay for members' health care costs. NOTE: State insurance regulators generally do not provide oversight of health care sharing ministries.