Health Insurance 101 For First-Time Buyers

Buying health insurance for the first time can be daunting. There are so many different plans to choose from and many vocabulary words unique to the subject – it can be challenging to decide what’s best for you and your family. This health insurance 101 guide can help make buying health insurance less intimidating.

What is health insurance?

Health insurance, also known as medical insurance or healthcare insurance, refers to a contract that requires an insurer to pay a portion or all of an individual’s health care costs in exchange for a premium. [1] Health insurance typically pays for expenses obtained through medical, surgical and prescription drug needs, reimbursing the policyholder – you – or the insurer for expenses caused by illness or injury.

Why is owning health insurance important?

There are more advantages to owning health insurance than not owning health insurance. Medical expenses often accumulate to hundreds, thousands, or even tens of thousands of dollars if the medical issue is severe enough to require costly procedures and continuous treatment. If you don’t have health insurance and end up needing costly medical care, you can accumulate an overwhelming amount of medical bills. Screening and stabilization offered by a hospital emergency department are the only guaranteed services available to you if you are uninsured. [2]

Your health is one of the most important, valued aspects of your life. Ensuring that you are able to afford medical care during trivial illnesses, the most serious medical emergencies and everything in between is just as important. Having health insurance will give you peace of mind, knowing you will have an easier time maintaining or recovering your health.

What are health insurance terms you should know?

There are many health insurance terms that may leave first-time buyers confused. Knowing these essential terms will aid you in choosing a policy that best suits your needs.

Coinsurance: The percentage you pay for health care services after you’ve paid your deductible. [3]

For example: if you’ve paid your deductible and the cost of a prescription is $100, you will only have to pay 25% of that cost, which is $25. The insurance company pays the rest. If you have not met your deductible, you will be required to pay the full amount, $100.

Co-pay: Copay is a shortened form of “copayment.” A copayment is the fixed out-of-pocket amount you pay for health care – again, after you’ve paid your deductible. This fixed rate varies depending on the services within your chosen plan, such as doctor visits, prescriptions, lab tests, and more. [4]

Deductible: The amount you pay for health care services before your health insurance plan begins to pay for services. If your deductible is $1,000, then you pay for the first $1,000 of health care services yourself.

Out-of-Pocket Costs: The amount you pay for medical care that isn’t reimbursed by insurance. This includes coinsurance, copays and deductibles. [5]

Premium: This is the monthly payment you make to your health insurance provider. [6]

What are the types of health insurance plans?

There are many different types of heals insurance plans offered by your state’s Marketplace and insurance brokers – all of which are designed to meet different needs. These health plans are categorized by the amount of coverage they offer: bronze (60%), silver (70%), gold (80%) and platinum (90%). [7]

In addition to this, each insurance brand may offer certain common types of plans:

Exclusive Provider Organization (EPO): Services are covered only if you use doctors, specialists or hospitals in the plan’s network except in the case of an emergency. [8]

Health Maintenance Organization (HMO): Restricts coverage to care from doctors who work exclusively with the HMO, either through employment or contract. Like EPOs, there is an exception in the case of an emergency.

Point of Service (POS): If you use doctors and other health care providers that belong to the plan’s network, you will pay less. This plan requires your primary care doctor to send a referral in order for you to seek further treatment from a specialist.

Preferred Provider Organization (PPO): You pay less if you use doctors and other health care providers that are within the plan’s network. This plan does not require you to select a primary care physician nor does it require a referral from a primary care physician in order for you to use health care providers outside of the plan’s network. [9]

How much does health insurance cost?

According to the Kaiser Family Foundation, the average health insurance premium as of 2021 is approximately $450 per month, which amounts to about $5,400 per year. [10]

How much the insurance covers depends on how much the policyholder pays and the policy details explaining specific rules that apply to some plans. The main factors include your premium, deductible, coinsurance, copayment, and maximum out-of-pocket expenses. Other factors may include your age, annual income, the amount of coverage you want, and the number of family members you would like to include.

Don’t be afraid to ask your insurance provider about different types of plans that will better suit your financial budget. There’s a health insurance plan for everyone.

Is health insurance required by law?

Essentially, no. As of January 2019, health insurance is no longer required at the federal level. However, some states, including the District of Columbia (Washington D.C.), may have individual mandates that require you to own health insurance coverage in order to avoid tax penalties. [11]

These states include:



New Jersey

Rhode Island


The District of Columbia (Washington D.C.) also requires you to have health insurance at the state level or face a tax penalty. As of 2019, the penalty for not owning health insurance is nearly $700 for each uninsured adult and half that amount for each child, reaching a maximum of just over $2,000 or 2.5% of the annual household income – whichever is higher. However, you can file for an exemption in certain cases, such as financial hardship or pregnancy. [12]

The other five states mentioned above have similar tax penalties. While most states may not require you to own health insurance, it is recommended. You will save money during a catastrophic emergency.

Where can I buy health insurance?

You can speak with one of our health insurance experts. It's our passion to make sure individuals, businesses and families are protected from unexpected medical circumstances. In five easy steps, we can help you find a plan that best suits your medical needs, whether you're searching for insurance to fit your individual life, your family or your business.

Step 1: Fill out a form so we can begin matching you with an advisor

Step 2: Schedule a time to speak with the advisor you matched with

Step 3: Tell the advisor what you're looking for in a health insurance plan

Step 4: Once your advisor gets all the info he/she needs to begin their search, they will find plans that best fit your needs and stay within your budget

Step 5: If you decide you want to sign up for one of the plans our experts found for you, your advisor will help you complete the application progress

The best part? You won't have to pay a dime for our services! You can schedule a free consultation with one of our health experts to start personalizing your health insurance plan today!