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What we call health insurance is a contract. When you get health insurance, you (or somebody on your behalf) are agreeing to a contract with a health insurance company – a contract where they agree to do certain things for you in exchange for money. So a health insurance plan is a contract between the insurance company and the customer (you).
For simplicity, I will use the term health plan to mean the actual contract – the specific health insurance product – you get from a health insurance company. (It sounds less weird than saying "an insurance" and is shorter to type than "a health insurance plan".)
One of the things this clarifies is that one health insurance company can have a bunch of different contracts (health plans) to sell. This is the same as how you may have more than one internet company that could sell you an internet connection to your home, and each of those internet companies might have several different package deals they offer with different prices and terms. In exactly that way, there are multiple different health insurance companies, and they each can sell multiple different health plans with different prices and terms.
A lot of people confuse the company with the health plan. This is not really their fault when there are health insurance companies out there giving themselves names like "Tufts Health Plan, Inc." which is not a health plan but an insurance company which sells health plans, of which they have like a dozen, with names like "Tufts Health Direct Bronze 2900" and "Tufts Health Together with UMass Memorial Health".
So it's understandable if a lot of people out there confusing the companies with the health plans. They talk about "having Blue Cross" or ask doctors if they "take UHC". But Blue Cross and UHC are companies, not health plans, and they are companies that have many different health plans (contracts for insurance) they sell. What price and terms those contracts have – such as which doctors "take" them – can vary a whole lot among the different plans from the same insurance company. It actually matters what specific health plan (contract) you have with your insurance company when discussing almost anything about it.
This brings us to the next thing that knowing a health plan is a contract gets us. One of the things about contracts is that they are a bunch of specific, detailed agreements that two (or more) participants agree to be legally bound to. And here we come to one of the things that's a cause of a lot of confusion. One specific word.
The word term comes up a lot when discussing contracts, including health insurance. And, unfortunately, it's the cause of a whole lot of confusion, because, actually, it's three different words:
1) "Term" meaning word. When we talk about a word (or phrase) being a health insurance "term", we mean it's health insurance jargon.
2) "Term" meaning duration. The "term" of a contract is the span of time when it is in force. "Term" is the insurance industry term for when a contract is for.
3) "Term" meaning agreement. When we talk about the "terms" of a contract, we mean the specific contractual details that are being agreed to. For instance, one of the terms of a contract are what its term will be.
That seems unfair, doesn't it? Surely they could have come up with three different words. But unfortunately, we're stuck with them, and we're going to have to discuss – and use – all three of these, er, terms. Because a health plan is a contract between an insurance company and the customer, and that contract has a bunch of terms, including its term, which are all expressed in insurance industry terms.
It is not surprising that this is confusing, is it?
What knowing that a health plan is a contract gets us is that contracts of all types tend to have some basic kinds of terms (agreements). These include:
• The "term" (duration) of the contract, meaning when it begins being in effect and when it ends,
• The legal location it is in and/or jurisdiction it is under, meaning where it happens, which are specified as terms (agreements) of the contract, and,
• The terms (agreements) of who pays what, under what circumstances.
In other words, a health plan, being a contract, has a period, a place, and a price.
A health plan is a contract with a fixed and limited term (duration), a fact which is widely taken for granted and rarely actually just up and said. But, yes, health plans have a standard duration: it lasts for one year. Then it's over and you have to get a fresh one.
In this way, a health plan is like a lease on an apartment: it's a contract for one year, and then it's up. If you want to continue to have a lease with this landlord or a health plan with this insurer, you have to sign a new one.
Maybe nobody has ever pointed this out to you. A lot of people get caught by surprise by this: health insurance expires.
Annually.
This fact is largely obscured by how common it is that when a health plan expires, whomever arranged it for the customer automatically signs them up for another health plan without the customer necessarily having to do anything.
If you get ACA marketplace insurance from a state that uses the Federal marketplace (healthcare.gov), they will do this for you, signing you up for the plan most similar to the one you are presently on when your current one expires. Independent state market places may also do this – I'm not sure if it's required of them or not.
Nor did I turn up anything that indicates employers are required to do this. Employers over a certain size are legally required to offer their employees health insurance, but they're certainly not required to make them take it. Of course not: employees who get a better deal on insurance through a parent, a spouse, the VA, or any other source, or who just daringly decide to use some non-insurance alternative, or just entirely go without, are free to do that instead. So while some employers do automatically line up another similar plan for their employees, maybe some don't. Certainly, they didn't all use to.
So whomever is getting you insurance, whether an employer or a state, they might do you the favor (or maybe it's not as much of a favor as it seems – more on this below) of setting you up to be automatically signed up to the same or most similar plan if you don't do anything to change it.
But maybe they don't, and if you you get to the end of the year without taking action – picking your next year's plan, doing what is necessary to sign up for it – you could find yourself uninsured when your present plan reaches its natural end.
Something to notice here is that the insurance company rather badly wants you to sign up to buy more of their product next year, so is super motivated to auto-sign you. But, in contrast, your employer is (maybe, often) on the hook to pay for your health insurance, and it's rather a lot of money, so they're actually financially motivated to... not ensure you are signed up for insurance through them. The law might say they have to offer it to you, but they don't have to be happy about it. Some employers might care very much about making sure their employees stay insured out of enlightened self-interest, but unfortunately, enlightened self-interest is not as widespread as one might hope. Meanwhile, different states have different attitudes about their state ACA marketplaces and their citizens buying insurance on them. Some state governments regard them as a terrible federal imposition and will do nothing to make them good or convenient except where they are forced to. Other state governments are on a monomaniacal crusade to ensure every breathing human in their borders is insured, and bend over backwards to make it happen.
So some of the forces involved in your getting insurance might want to make sure you stay insured – and are motivated to take care of it when your health plan expires – and other forces involved in your getting insurance might actually rather prefer you wind up uninsured, or be indifferent to whether you are insured and thus unwiling to do anything to make it happen for you.
The good part of someone else signing you up automatically for your next health plan is that it prevents you accidentally winding up uninsured – you won't have a coverage gap. In a sense it spares you the paperwork. If you don't manage to do sign-up paperwork you're covered anyways. Unfortunately there's also some bad parts. One of those bad parts is that it can effectively hide from you the fact that your health plan is a contract with an end date, and that turns out to be an important fact.
Why this is important: Your health plan having an expiration date is important to know for a bunch of reasons, starting with the fact that maybe somebody else will take care of making sure you get a new one, and maybe they will not, and you should check up on that yourself to make sure you don't find yourself with no health plan at all.
You should expect your health plan (health insurance contract) to expire every year and it should not be a surprise that it does. You should expect to have to review your choices and have to sign up for a fresh health plan (more on which below) once a year, every year. Like doing your taxes, this is now just part of being an American or living in America.
Why are health plans a one year contract? In part, to protect you. This is another way they're like a lease. A lease keeps a landlord from raising the rent on you any old time they like. If there's a lease, a landlord can only raise the rent on the next lease you sign; they can't raise it during the term (duration) of the lease you're in the middle of. Health plans work the same way: the insurance company can't raise the price of your insurance on you in the middle of its term (the year it is in force), because they signed a contract with you that specifies the price. They can only raise the price on a new contract, meaning on your next year's plan.
But this means that when you go to get your next year's health plan, the price might go up, or there could be other ways they've altered the deal. Terms can be different in your next health plan, even if it's from the same insurance company and has the same name and is "substantially similar" to the one you have that's expiring.
So even if you are automatically signed up for a health plan for the next year with the same name as the one you are currently in and from the same company, you might want to review the new plan (contract) to see if they're changing it on you, and if so, what the changes are.
So, sure, the health insurance company you are currently getting health insurance from might be really, really motivated to sign you up automatically because they want your money, but that might not be in your best interests. Of course they want to sign you up automatically, without you being involved. If you were to think about it, and review your options, you might decide to buy a different health plan, maybe from a different company.
Likewise, states that are hot to make sure everyone has health insurance care that you have insurance. They don't really care which insurance. They kinda can't concern themselves whether the insurance you have is the best for your needs. How would they even know what your needs are? Even though their motives might come from the most noble of places, they can't really concern themselves with the particulars of your budget, your preference in doctors, your prescriptions, your medical needs. That is all up to you. So the pragmatic upshot is that as well-meaning as it is that they try to prevent coverage gaps, it can wind up with you being railroaded into a choice you would have made differently, if only you had realized you had a choice to make – and a deadline by which to make it.
And that brings us to the next reason it's important to be aware that a health plan has an expiration date.
The insurance company term (jargon) for the term (duration) of a health plan is its plan year.
One way a health plan is not like a lease is that you can get a lease that starts any time. Not so, most health plans.
The vast majority of health plans are offered on a fixed schedule, and that schedule is the calendar year. That is, an insurance company might only offer health plans (contracts) that have a plan year (term (duration) is in force) from January 1st to December 31st. That's the schedule the great majority of health plans are on.
But not all of them.
Some odd-ball employers, the health plans they offer their employees keep to some other schedule, like running from July 1st to June 30th the following year. It's still one year long, but it's not the same as the calendar year. No, I don't know why they would do that; you'd have to ask them.
Colleges offer insurance to their students, and I gather that's usually, sensibly enough, synced up to the school year. Their plan year is often something like from Sept 1 to Aug 31 the following year.
Also, I think that if someone buys health insurance entirely independently of the state ACA marketplaces, they might be able to get some other schedule. But I mostly just mention for completeness sake, so if you encounter someone else doing that, you know what's up with that. I don't recommend trying to buy insurance for yourself not through the official state ACA marketplaces. The official state ACA marketplaces have consumer protections you don't get going off-marketplace.
For the vast, vast majority of employer-offered plans and as far as I know all the plans offered on the state ACA marketplaces, the plan year is the calendar year. It starts January 1st and it ends December 31st.
And that means for a huge number of Americans their insurance expires at the same time: December 31st.
Why this is important: Knowing when your plan year ends is step one in being able to plan for it happening.
Important to know: If you sign up for a health plan after the plan year starts – say, because you get a new job and sign up for employer-offered insurance in the middle of the plan year – then it still expires at the end of the plan year (not a year after you signed up).
This means that if you are hired in June by a company that offers health plans with a plan year that's Jan 1 to Dec 31, and sign up for a health plan they offer starting July 1, it will still end on Dec 31 like those of all the other employees. Likewise if you sign up for a health plan through your state ACA marketplace July 1, it will also still end on Dec 31 like those of everyone who signed up for a health plan for the complete year.
This makes sense. Whomever you are getting insurance through, whether an employer or a state ACA marketplace, they have a whole lot of people getting insurance through them. It is logistically easier for them if all the contracts beging and end at the same time. And for you, the customer, it's easier for you to keep track of the deadlines if you and everyone around you are all dealing with expiration and renewal at the same time.
The insurance industry term for signing up for a health plan is enrolling. When you pick a plan and do the paperwork to agree to that contract, you are said to have enrolled in a health plan.
You cannot sign up for insurance any time you like. There is a limited time during the year when you can choose your next year's plan from an employer or on your state's ACA marketplace and enroll in it. Because that time window is when anyone can enroll in insurance, that time window is called the open enrollment period.
Open enrollment is the insurance-industry term (jargon) for the limited period each year when you are free to pick the health plan that you would like for the next plan year. Open enrollment is typically a couple of months long. Crucially, it happens some time before the new plan year starts.
Why this is important: If you miss open enrollment, you could not only find yourself uninsured when your current health plan expires, you could find yourself uninsurable. Seriously. Because you can only enroll during open enrollment and open enrollment is only a limited span of time, if you miss open enrollment, you might very well have to wait until next year's open enrollment to sign up for health insurance – which then typically won't kick in for an additional couple of months, when the new plan year starts.
For instance, if you miss the open enrollment for 2026 (which is right now for millions of Americans) you won't be able to sign up for a (new) health plan until October or November of 2026, and then it won't start until the beginning of 2027.
Exceptions to having to be in open enrollment to enroll in a health plan: To be allowed to sign up for health insurance outside of open enrollment you have to have special extenuating circumstances. The term (jargon) used by state ACA marketplaces for these special extenuating circumstances is a "Qualifying Life Event" (QLE), and having a QLE opens up a "Special Enrollment Period" (SEP), which is like a little personal open enrollment.
What extenuating circumstances allow you to enroll outside of open enrollment? Depends. For state ACA marketplace plans, the list of QLEs depends on the state laws. For employer plans, there may also be state laws about it, and the employer might have their own rules and if they offer plans with different insurance companies, well, different insurance companies might have different rules.
That said, a common example of such an extenuating circumstance is having just been hired: if you get hired somewhere that offers insurance, you don't have to wait until open enrollment comes around to enroll in a health plan they offer. Getting hired is a qualifying life event (QLE). You'll get a personal window of time, like a little personal open enrollment, to sign up. But, again, if you miss that window, you could find yourself uninsured until the next open enrollment rolls around.
It is incredibly important if you want insurance not to miss your enrollment period, whether that's open enrollment or a special enrollment period you've personally qualified for. Some of the saddest questions one can see in places like Reddit's r/healthinsurance are those from people who needed new insurance and, for one reason or another, missed their open enrollment or special enrollment period. Maybe they thought they knew when the period ended and that they had more time, but were mistaken. Maybe they were sick or dealing with a family crisis and things got away from them. Maybe they thought some other insurance was covering them and they didn't need the offered health plan, and then learned they were mistaken. Maybe they spaced out and forgot to do it. Maybe they thought they had done all the things necessary to sign up but hadn't actually. Maybe they were young or new to this country, and didn't know about open enrollment and that you can't just get insurance whenever you want. All these people – and sometimes their spouses and kids – are well and truly stuck. Some will be stuck with continuing to be on health plans that do not cover astronomically expensive life-saving care they need. Others will be entirely uninsured. They will continue to be stuck for the rest of the year – unless something else happens that's a qualifying life event.
Above, I explained how the fact a health plan is a contract protects you from willy-nilly price hikes and other changes to the insurance plan, but that means when your contract expires and you are signing up for a new one is the point at which your insurance company will change things on you. This means open enrollment is likely your only opportunity to change to another plan if the one you were on has been changed in a way that you don't like – or if your personal circumstances have changed to make your old choice no longer suitable. For instance, if your current insurance isn't going to cover your doctor or a medication you need, open enrollment is the only opportunity you have to shop for another insurance that does cover what you want and sign up for it for the next plan year.
Important to know: Being diagnosed with cancer or other catastrophically expensive medical condition is never a QLE. This is fundamental to how insurance, all insurance, works. Discovering your current health plan is inadequate to your needs is never considered a justification for an employer or state ACA marketplace to let you get a new health plan outside of open enrollment.
This is why I said above that it's maybe not as much a favor as it sounds like for bosses and the marketplaces to set you up with a new plan like your old plan without asking you. If there are any choices for you to make, open enrollment is your limited window of opportunity to re-evaluate those choices and make different ones. By telling you that you don't need to make a choice, they'll make it for you, they're encouraging you to let them take a choice away from you that you might very much want to make for yourself. And open enrollment is the only time ordinarily available to you when you are free to make that choice, from among the health plans (contracts) available for you for the next plan year.
And once open enrollment closes, you're locked into your choice. As explained above, you can always cancel a health plan. And if you fail to pay your bill, the insurance will cancel it for you. But what you can't do is just go get a fresh health plan whenever you want. You can only (with exceptions) sign up in open enrollment.
Important to know: Typically open enrollment happens a few months before the end of the plan year so you have a chance to pick a new plan for the new plan year before it actually begins. If you wait until your current plan is about to expire, you might miss your open enrollment period.
Because most Americans' plan year is the calendar year, most Americans' open enrollment is more or less around November. As of this writing, some vast number of Americans are in open enrollment right now. Which is why there's so much about health insurance in the news.
If an employer (or school) has a plan year that's not a calendar year, open enrollment will be adjusted accordingly.
For employers that have a plan year that is the calendar year, open enrollment will be scheduled by the employer, probably to start some time in early or mid fourth quarter. Employers often like to have things nailed down a bit earlier than the state, and end open enrollment before the current plan year ends.
For state ACA marketplaces, the start of open enrollment is usually November 1 for the following plan year. It depends on the individual states, and may change in future years, but here in 2025 all states' open enrollment started November 1st except Idaho which opened theirs Oct 15th. [Source for dates: BCBS.com] So we're in open enrollment for the marketplaces right now.
A special note about the state ACA marketplaces' open enrollment: When the state ACA marketplaces' open enrollment ends also depends on the state, and can and has changed year to year. This year (2025) for most states it ends January 15th, but in CA, NJ, NY, RI, and DC, it's January 31st, in Idaho it's December 15th, and here in Massachusetts, it's January 23rd. [Source ibid.]
But just because they'll let you wait until January to choose a health plan doesn't mean it's a good idea to do that. Remember what I said above, about how if you sign up for a health plan after the plan year starts, you do not get the whole year. The marketplaces only start plans on the first of months. If you sign up for a health plan after January 1st, it won't start until February 1st.
It's actually worse than that, because the actual deadlines are some time in December for plans to start January 1st. See: Choosing Health Insurance: Two Unobvious Marketplace Deadlines for details.
So why on earth do most state ACA marketplaces stretch into January, if most people need insurance that starts January 1? Because of that thing where they do you the favor of signing you up for an allegedly reasonably similar plan if you don't make a choice for yourself. People find themselves on the health plans that they were auto-enrolled in, and discover there's some horrifying change or inadequacy to them, and, understandably, freak all the way out. That's one reason. Having open enrollment stretch into January means people can change their choice of health plan, after it starts. So if you belatedly discover that, e.g. your entire home wound care team will no longer be covered by your health plan in the new plan year (example, alas, not made up), you have a little time to at least try to go find another plan that does, and switch to it if you succeed. It will start February 1st.
This is also a benefit for people who do participate in open enrollment, and discover only after they have onboarded with a new plan they have enrolled in that it's got some problem, and they want to escape from it. This can be because they failed to read or understand the terms of the contract, but it can also be because not all the terms of the contract are necessarily shared with you before you enrolled. For instance, how long you'll be on hold if you call an insurance company's customer service number, or how well-informed their customer service agents are, or empowered to solve problems they are, isn't generally something you can figure out in advance of being a customer. Also some financial details involving the costs and coverage of service – details that are typically easy to look up on the customer website once you enroll and become their customer – are information many (most?) insurers consider confidential trade secrets and aren't willing to post on the open internet for just anybody to see.
(Personally, I think there oughta be a law requiring them to make this information publically available, but there isn't.)
So anybody who for any reason finds out they've gotten enrolled in a marketplace health plan that doesn't work for them, if they're somewhere open enrollment stretches into January, they have a very limited window to fix their choice of plan.
Health insurance is state-specific. If you are in California, you get California insurance. If you are in Arkansas, you get Arkansas insurance. When you get a health plan (contract for health insurance from an insurance company) you get – or are supposed to get – an insurance plan for your state.
There are three big reasons for this. One is that an insurance company has to be licensed in a state to sell insurance there. Insurance company licensing is state-by-state. If an insurance company gets in too much trouble, they'll get kicked out of a state by the state government. If an insurance company decides that the laws in a state mean they can't earn enough money there or can't get away with certain shenanigans, they'll decide they don't want to do business there. The up-shot is not all insurance companies operate in all states.
Second, there's the fact that each state has its own laws on health insurance, so any health plan (contract) a health insurance company offers for sale in a state has to comply with that state's specific laws. For instance, catastrophic health plans aren't legal in all 50 states. Whether or not they can sell you one on your state ACA marketplace depends on what state you live in.
Finally, part of the contract – part of the terms (agreements) of the contract – is just which doctors and hospitals and other health care providers will be covered by that health plan. Health plans usually have a limited roster of doctors and hospitals that they'll cover, called a "network" (this will be discussed in much more detail, in a later part). Different health plans have different networks. These networks are tied to geographical regions, most usually states. A health plan might have a provision among its terms (agreements) for providers in other states to be covered... or it might not.
And the network of a health plan (the doctors and hospitals it covers) might be limited to a smaller area than a state. Like a county. Or even just a city.
This is why when you go to your state ACA marketplace to look at your options or apply for insurance, one of the first questions they ask you is what your zip code is. This is why they need to know. They will show you only those insurance plans which serve the area you live in.
Why is this important: You aren't a tree, rooted to one place. People move. Not only do they move house, they move around. They travel for fun and for business and to care for sick family. They commute daily to other locations for work and for school, and sometimes they even cross state lines when they do. And sometimes while they are doing these things they need medical care.
Before you sign a contract with an insurance company, you had better make sure it covers health care services in the locations that will matter to you!
Some cases where it becomes a big deal include:
1) College students (or boarding school students of any age) who are young enough to still be on their parents' insurance in their state of origin, going to school in another state. For instance, if a student is on their parents' Arizona insurance but goes to school in Minnesota, they may not be able to get health care covered if they get seriously sick at school.
2) People who live in one of those pokey little northeastern states where folks are crossing state boundaries all the time, and people living in cities with a state boundary right along it (DC) or through its middle (Kansas City). It might be that the most accessible health care to you – just down the road or just over the bridge – isn't covered by your health plan because there's a geographic boundary there.
3) People with long commutes, even if it doesn't cross state lines. A lot of doctors' offices are only open during conventional business hours, so going to the doctor means going there from work not from where you live. If all the doctors covered by your insurance contract are only where you live, and not where you work, this could make it hard for you to see a doctor, logistically. This is of particular concern for people who opt into hyper-local insurance because it's cheaper than the alternatives that cover larger areas, but are thus also people who are least able to take extra time off work to see the doctor.
(If you are wondering how local a health plan could be, at one point Massachusetts had a Medicaid plan where all the doctors were in Boston. Not the "Greater Boston Area". The city limits of Boston. And not even all of Boston: 90% of them were in the Boston Medical Center hospital complex, which has a geographical foot print of like six city blocks. That health plan was a contract to get all your medical care at BMC. This is no longer the case, but it remains an informative example.)
4) Remote workers getting insurance from a company they work for that is headquartered in another state. For instance, if you are in Montana and take a fully remote job with an employer in California, the health plans that employer offers might be California specific, such that you might not be able to use their plans in Montana.
5) People whose jobs have them on the road a lot. For instance if you spend part of the year following a herd of cattle across state lines, or on a fishing vessel in the Bering Sea, or teaching people to ski at a seasonal resort, or if your work has you following crops' harvest seasons up and down the country, or you work as a salesperson covering a 10-state sales district: all these people need health insurance that works for them in places that aren't just the place they officially live.
6) People who have to spend substantial time out of state caring for family members. This comes up mostly for people who live in another state from their elderly parents, and travel often, or for long periods of time, to stay with those parents and look after them.
This is why it's important that when shopping health plans, you check where they're good for. You want to make sure that it will be good for wherever you'll actually be spending a lot of time.
Important to know: a health plan's official documents may tell you that it covers your state or county or other geographical areas you care about, but you may also want to check up on what they tell you. You might want to look up where the doctors they cover actually are. States are big places, even the small ones. The insurance company might cheerfully tell you that they cover the whole state but it turns out most of their physicians clump in one corner that's not useful for you, or they only have one relevant specialist near you and you know that guy sucks because you tried him already.
For this reason, not taking the airy assurances of the insurance paperwork at face value and instead digging a little can be helpful. Spending some time with a health plan's online doctor finder website can be... informative.
Another reason this is important: Because health insurance is to tied to geography, it means when you ask a question on the internet – for instance on social media or in a forum – about insurance shopping or usage, you have to specify what state you (and your plan) are in, so anyone answering knows which state's laws apply and so forth. This is especially important if asking for recommendations.
It's especially important that you know how geographically bound health insurance is, because there are lots of well-meaning people out there who don't know, who will confidently answer your questions out of their own personal experience, wholly oblivious to the fact their answers are completely irrelevant to you, because they're about some place far away with different insurance companies, different laws, and different health plans on offer.
Important to know: If you need a health plan that is going to work in multiple states, you will need a plan that has special terms (agreements). We'll be discussing how to identify such plans in a later section, but you may need to call up someone at the insurance company for each plan you're considering and asking them which of their products (health plans) would meet your specific needs. The information on state ACA exchanges is often insufficient to tell whether there's out of state coverage as part of a plan, and sometimes the information employers provide employees about their choices is likewise inadequate.
A health plan is a contract between you and the insurance company that says for the term (duration) of that contract (the plan year) they'll give you insurance so long as you pay them each month. This is another way it's like a lease on an apartment: you have a monthly payment.
You know how when you rent an apartment there's a special rental industry term (jargon) for that monthly payment – they call the payment "rent"? The insurance industry has its own term (jargon) for it. The insurance term (jargon) for the monthly fee is the premium. The premium is the monthly price of the insurance, like the rent is the monthly price of a lease.
Another way to think of it is that a health plan is a subscription, like a streaming service or a newspaper, and the premium is the monthly fee you have to pay to keep it on.
Why this is important: Dealing with health insurance, discussing how the money works and how much it costs you is one of the places things get really confusing, and it actually really helps to have a special word like "premium".
The word premium means something more precise than "how much the health plan costs". It means "how much you have to pay to the insurance company to keep this health plan." You might think, "But isn't that the same thing as what it costs?" Well, no. Because this is health insurance. The point of health insurance is by paying the insurance company some, you sometimes pay doctors and hospitals less. So when we talk about the cost of a health plan, we often are talking about the combination of both how much you have to pay the insurance company for the plan (the premium) and how much you are left by the insurance company paying the doctors and the hospitals yourself. Using the term "premium" instead of just saying "cost" makes it clear that you're just talking about that monthly subscription fee you pay to the insurance company to have the health plan.
When you buy insurance for yourself on your state ACA marketplace, you pay the premium yourself out of your own wallet. If you earn below a certain threshold, you get a break on your taxes for how much premiums you have paid for health insurance. This is called the Premium Tax Credit. It is only available for plans bought through the state ACA marketplaces. It is not available to people who get insurance through an employer, through a government program, or by buying it off-marketplace. You can get that tax credit in advance: when you do that, the way it works, your premiums are reduced. This is called the Advance Premium Tax Credit. The marketplaces do it automatically for you if you let them. Also if you earn below a certain threshold, you might get a further discounts on your premiums. Depends on your state.
Important to know: If you do not pay your premium bill on time, the insurance company will eventually just cancel your health plan. Possibly retroactively to the date they stopped being paid. They do have to offer you a grace period, usually of no less than a month. However, how much of a grace period you get depends on a combination of federal law, local state law, the specific terms (agreements) of your contract with them, and other things like whether you get the APTC (below) and have already paid for at least one month. [Source: Healthcare.gov].
If your employer gives you health insurance, then they pay the premium for you. At least they make the actual payments to the health insurance company for you. Some employers pay the premium out of their own money, some pay part of the premium and require you to pay for the rest of the premium by taking it out of your paycheck.
Still others don't chip in for your premium at all, requiring you pay the whole premium out of your paycheck. What good is an employer plan they offer but don't pay for? It might still be, in some sense, a better deal than you could get on your state ACA marketplace. They might have gotten you a spiffier plan or they might have gotten you a cheaper one (though these days, that's vanishingly rare.) And in can be more convenient: they spare you the trouble of having to remember to make the payment yourself or to set up some sort of autopay yourself.
Generally speaking, the better the insurance plan, the higher its premiums. Makes sense, right? Better things often cost more.
If better plans have higher premiums, what makes one plan better than another?
Their terms. Meaning the specific agreement details of the contract between the insurance company and you, their customer. More favorable terms for the customer generally cost the customer more in premiums.
Which terms are those? The terms that spell out the nitty-gritty of just what you will get for your premiums.
We can call the kinds of better terms which cost more in premiums "premium features". That's not an industry term. I just made it up. But for our conversation, it will make things easier.
Premium features are better terms (agreements) in health plans that usually you have to pay more in premiums (monthly fee) to get.
They can be lumped into two piles: premium features that affect the cost you pay for health care and premium features that affect the quality of the health care you get.
In the next section, we'll talk about the second big idea of health insurance, and the premium features that affect the cost you pay for health care.
You might be wondering, "Hang on, what do you mean affect the cost I pay for health care? I'm paying for insurance. Aren't they going to be the ones paying for my health care? Isn't that the purpose of paying for health insurance in the first place?"
Not quite....
On to the second important idea: The Three-Stage Model
This is part of Understanding Health Insurance
- Introduction
- A Health Plan is a Contract ⇐ You are here
- The Three-Stage Model
Health Insurance is a Contract
What we call health insurance is a contract. When you get health insurance, you (or somebody on your behalf) are agreeing to a contract with a health insurance company – a contract where they agree to do certain things for you in exchange for money. So a health insurance plan is a contract between the insurance company and the customer (you).
For simplicity, I will use the term health plan to mean the actual contract – the specific health insurance product – you get from a health insurance company. (It sounds less weird than saying "an insurance" and is shorter to type than "a health insurance plan".)
One of the things this clarifies is that one health insurance company can have a bunch of different contracts (health plans) to sell. This is the same as how you may have more than one internet company that could sell you an internet connection to your home, and each of those internet companies might have several different package deals they offer with different prices and terms. In exactly that way, there are multiple different health insurance companies, and they each can sell multiple different health plans with different prices and terms.
A lot of people confuse the company with the health plan. This is not really their fault when there are health insurance companies out there giving themselves names like "Tufts Health Plan, Inc." which is not a health plan but an insurance company which sells health plans, of which they have like a dozen, with names like "Tufts Health Direct Bronze 2900" and "Tufts Health Together with UMass Memorial Health".
So it's understandable if a lot of people out there confusing the companies with the health plans. They talk about "having Blue Cross" or ask doctors if they "take UHC". But Blue Cross and UHC are companies, not health plans, and they are companies that have many different health plans (contracts for insurance) they sell. What price and terms those contracts have – such as which doctors "take" them – can vary a whole lot among the different plans from the same insurance company. It actually matters what specific health plan (contract) you have with your insurance company when discussing almost anything about it.
This brings us to the next thing that knowing a health plan is a contract gets us. One of the things about contracts is that they are a bunch of specific, detailed agreements that two (or more) participants agree to be legally bound to. And here we come to one of the things that's a cause of a lot of confusion. One specific word.
Terms, Terms, Terms
The word term comes up a lot when discussing contracts, including health insurance. And, unfortunately, it's the cause of a whole lot of confusion, because, actually, it's three different words:
1) "Term" meaning word. When we talk about a word (or phrase) being a health insurance "term", we mean it's health insurance jargon.
2) "Term" meaning duration. The "term" of a contract is the span of time when it is in force. "Term" is the insurance industry term for when a contract is for.
3) "Term" meaning agreement. When we talk about the "terms" of a contract, we mean the specific contractual details that are being agreed to. For instance, one of the terms of a contract are what its term will be.
That seems unfair, doesn't it? Surely they could have come up with three different words. But unfortunately, we're stuck with them, and we're going to have to discuss – and use – all three of these, er, terms. Because a health plan is a contract between an insurance company and the customer, and that contract has a bunch of terms, including its term, which are all expressed in insurance industry terms.
It is not surprising that this is confusing, is it?
What knowing that a health plan is a contract gets us is that contracts of all types tend to have some basic kinds of terms (agreements). These include:
• The "term" (duration) of the contract, meaning when it begins being in effect and when it ends,
• The legal location it is in and/or jurisdiction it is under, meaning where it happens, which are specified as terms (agreements) of the contract, and,
• The terms (agreements) of who pays what, under what circumstances.
In other words, a health plan, being a contract, has a period, a place, and a price.
The Period: Health insurance is a one year contract
A health plan is a contract with a fixed and limited term (duration), a fact which is widely taken for granted and rarely actually just up and said. But, yes, health plans have a standard duration: it lasts for one year. Then it's over and you have to get a fresh one.
In this way, a health plan is like a lease on an apartment: it's a contract for one year, and then it's up. If you want to continue to have a lease with this landlord or a health plan with this insurer, you have to sign a new one.
Maybe nobody has ever pointed this out to you. A lot of people get caught by surprise by this: health insurance expires.
Annually.
This fact is largely obscured by how common it is that when a health plan expires, whomever arranged it for the customer automatically signs them up for another health plan without the customer necessarily having to do anything.
If you get ACA marketplace insurance from a state that uses the Federal marketplace (healthcare.gov), they will do this for you, signing you up for the plan most similar to the one you are presently on when your current one expires. Independent state market places may also do this – I'm not sure if it's required of them or not.
Nor did I turn up anything that indicates employers are required to do this. Employers over a certain size are legally required to offer their employees health insurance, but they're certainly not required to make them take it. Of course not: employees who get a better deal on insurance through a parent, a spouse, the VA, or any other source, or who just daringly decide to use some non-insurance alternative, or just entirely go without, are free to do that instead. So while some employers do automatically line up another similar plan for their employees, maybe some don't. Certainly, they didn't all use to.
So whomever is getting you insurance, whether an employer or a state, they might do you the favor (or maybe it's not as much of a favor as it seems – more on this below) of setting you up to be automatically signed up to the same or most similar plan if you don't do anything to change it.
But maybe they don't, and if you you get to the end of the year without taking action – picking your next year's plan, doing what is necessary to sign up for it – you could find yourself uninsured when your present plan reaches its natural end.
Something to notice here is that the insurance company rather badly wants you to sign up to buy more of their product next year, so is super motivated to auto-sign you. But, in contrast, your employer is (maybe, often) on the hook to pay for your health insurance, and it's rather a lot of money, so they're actually financially motivated to... not ensure you are signed up for insurance through them. The law might say they have to offer it to you, but they don't have to be happy about it. Some employers might care very much about making sure their employees stay insured out of enlightened self-interest, but unfortunately, enlightened self-interest is not as widespread as one might hope. Meanwhile, different states have different attitudes about their state ACA marketplaces and their citizens buying insurance on them. Some state governments regard them as a terrible federal imposition and will do nothing to make them good or convenient except where they are forced to. Other state governments are on a monomaniacal crusade to ensure every breathing human in their borders is insured, and bend over backwards to make it happen.
So some of the forces involved in your getting insurance might want to make sure you stay insured – and are motivated to take care of it when your health plan expires – and other forces involved in your getting insurance might actually rather prefer you wind up uninsured, or be indifferent to whether you are insured and thus unwiling to do anything to make it happen for you.
The good part of someone else signing you up automatically for your next health plan is that it prevents you accidentally winding up uninsured – you won't have a coverage gap. In a sense it spares you the paperwork. If you don't manage to do sign-up paperwork you're covered anyways. Unfortunately there's also some bad parts. One of those bad parts is that it can effectively hide from you the fact that your health plan is a contract with an end date, and that turns out to be an important fact.
Why this is important: Your health plan having an expiration date is important to know for a bunch of reasons, starting with the fact that maybe somebody else will take care of making sure you get a new one, and maybe they will not, and you should check up on that yourself to make sure you don't find yourself with no health plan at all.
You should expect your health plan (health insurance contract) to expire every year and it should not be a surprise that it does. You should expect to have to review your choices and have to sign up for a fresh health plan (more on which below) once a year, every year. Like doing your taxes, this is now just part of being an American or living in America.
Why are health plans a one year contract? In part, to protect you. This is another way they're like a lease. A lease keeps a landlord from raising the rent on you any old time they like. If there's a lease, a landlord can only raise the rent on the next lease you sign; they can't raise it during the term (duration) of the lease you're in the middle of. Health plans work the same way: the insurance company can't raise the price of your insurance on you in the middle of its term (the year it is in force), because they signed a contract with you that specifies the price. They can only raise the price on a new contract, meaning on your next year's plan.
But this means that when you go to get your next year's health plan, the price might go up, or there could be other ways they've altered the deal. Terms can be different in your next health plan, even if it's from the same insurance company and has the same name and is "substantially similar" to the one you have that's expiring.
So even if you are automatically signed up for a health plan for the next year with the same name as the one you are currently in and from the same company, you might want to review the new plan (contract) to see if they're changing it on you, and if so, what the changes are.
So, sure, the health insurance company you are currently getting health insurance from might be really, really motivated to sign you up automatically because they want your money, but that might not be in your best interests. Of course they want to sign you up automatically, without you being involved. If you were to think about it, and review your options, you might decide to buy a different health plan, maybe from a different company.
Likewise, states that are hot to make sure everyone has health insurance care that you have insurance. They don't really care which insurance. They kinda can't concern themselves whether the insurance you have is the best for your needs. How would they even know what your needs are? Even though their motives might come from the most noble of places, they can't really concern themselves with the particulars of your budget, your preference in doctors, your prescriptions, your medical needs. That is all up to you. So the pragmatic upshot is that as well-meaning as it is that they try to prevent coverage gaps, it can wind up with you being railroaded into a choice you would have made differently, if only you had realized you had a choice to make – and a deadline by which to make it.
And that brings us to the next reason it's important to be aware that a health plan has an expiration date.
Plan Year
The insurance company term (jargon) for the term (duration) of a health plan is its plan year.
One way a health plan is not like a lease is that you can get a lease that starts any time. Not so, most health plans.
The vast majority of health plans are offered on a fixed schedule, and that schedule is the calendar year. That is, an insurance company might only offer health plans (contracts) that have a plan year (term (duration) is in force) from January 1st to December 31st. That's the schedule the great majority of health plans are on.
But not all of them.
Some odd-ball employers, the health plans they offer their employees keep to some other schedule, like running from July 1st to June 30th the following year. It's still one year long, but it's not the same as the calendar year. No, I don't know why they would do that; you'd have to ask them.
Colleges offer insurance to their students, and I gather that's usually, sensibly enough, synced up to the school year. Their plan year is often something like from Sept 1 to Aug 31 the following year.
Also, I think that if someone buys health insurance entirely independently of the state ACA marketplaces, they might be able to get some other schedule. But I mostly just mention for completeness sake, so if you encounter someone else doing that, you know what's up with that. I don't recommend trying to buy insurance for yourself not through the official state ACA marketplaces. The official state ACA marketplaces have consumer protections you don't get going off-marketplace.
For the vast, vast majority of employer-offered plans and as far as I know all the plans offered on the state ACA marketplaces, the plan year is the calendar year. It starts January 1st and it ends December 31st.
And that means for a huge number of Americans their insurance expires at the same time: December 31st.
Why this is important: Knowing when your plan year ends is step one in being able to plan for it happening.
Important to know: If you sign up for a health plan after the plan year starts – say, because you get a new job and sign up for employer-offered insurance in the middle of the plan year – then it still expires at the end of the plan year (not a year after you signed up).
This means that if you are hired in June by a company that offers health plans with a plan year that's Jan 1 to Dec 31, and sign up for a health plan they offer starting July 1, it will still end on Dec 31 like those of all the other employees. Likewise if you sign up for a health plan through your state ACA marketplace July 1, it will also still end on Dec 31 like those of everyone who signed up for a health plan for the complete year.
This makes sense. Whomever you are getting insurance through, whether an employer or a state ACA marketplace, they have a whole lot of people getting insurance through them. It is logistically easier for them if all the contracts beging and end at the same time. And for you, the customer, it's easier for you to keep track of the deadlines if you and everyone around you are all dealing with expiration and renewal at the same time.
Open Enrollment
The insurance industry term for signing up for a health plan is enrolling. When you pick a plan and do the paperwork to agree to that contract, you are said to have enrolled in a health plan.
You cannot sign up for insurance any time you like. There is a limited time during the year when you can choose your next year's plan from an employer or on your state's ACA marketplace and enroll in it. Because that time window is when anyone can enroll in insurance, that time window is called the open enrollment period.
Open enrollment is the insurance-industry term (jargon) for the limited period each year when you are free to pick the health plan that you would like for the next plan year. Open enrollment is typically a couple of months long. Crucially, it happens some time before the new plan year starts.
Why this is important: If you miss open enrollment, you could not only find yourself uninsured when your current health plan expires, you could find yourself uninsurable. Seriously. Because you can only enroll during open enrollment and open enrollment is only a limited span of time, if you miss open enrollment, you might very well have to wait until next year's open enrollment to sign up for health insurance – which then typically won't kick in for an additional couple of months, when the new plan year starts.
For instance, if you miss the open enrollment for 2026 (which is right now for millions of Americans) you won't be able to sign up for a (new) health plan until October or November of 2026, and then it won't start until the beginning of 2027.
Exceptions to having to be in open enrollment to enroll in a health plan: To be allowed to sign up for health insurance outside of open enrollment you have to have special extenuating circumstances. The term (jargon) used by state ACA marketplaces for these special extenuating circumstances is a "Qualifying Life Event" (QLE), and having a QLE opens up a "Special Enrollment Period" (SEP), which is like a little personal open enrollment.
What extenuating circumstances allow you to enroll outside of open enrollment? Depends. For state ACA marketplace plans, the list of QLEs depends on the state laws. For employer plans, there may also be state laws about it, and the employer might have their own rules and if they offer plans with different insurance companies, well, different insurance companies might have different rules.
That said, a common example of such an extenuating circumstance is having just been hired: if you get hired somewhere that offers insurance, you don't have to wait until open enrollment comes around to enroll in a health plan they offer. Getting hired is a qualifying life event (QLE). You'll get a personal window of time, like a little personal open enrollment, to sign up. But, again, if you miss that window, you could find yourself uninsured until the next open enrollment rolls around.
It is incredibly important if you want insurance not to miss your enrollment period, whether that's open enrollment or a special enrollment period you've personally qualified for. Some of the saddest questions one can see in places like Reddit's r/healthinsurance are those from people who needed new insurance and, for one reason or another, missed their open enrollment or special enrollment period. Maybe they thought they knew when the period ended and that they had more time, but were mistaken. Maybe they were sick or dealing with a family crisis and things got away from them. Maybe they thought some other insurance was covering them and they didn't need the offered health plan, and then learned they were mistaken. Maybe they spaced out and forgot to do it. Maybe they thought they had done all the things necessary to sign up but hadn't actually. Maybe they were young or new to this country, and didn't know about open enrollment and that you can't just get insurance whenever you want. All these people – and sometimes their spouses and kids – are well and truly stuck. Some will be stuck with continuing to be on health plans that do not cover astronomically expensive life-saving care they need. Others will be entirely uninsured. They will continue to be stuck for the rest of the year – unless something else happens that's a qualifying life event.
Above, I explained how the fact a health plan is a contract protects you from willy-nilly price hikes and other changes to the insurance plan, but that means when your contract expires and you are signing up for a new one is the point at which your insurance company will change things on you. This means open enrollment is likely your only opportunity to change to another plan if the one you were on has been changed in a way that you don't like – or if your personal circumstances have changed to make your old choice no longer suitable. For instance, if your current insurance isn't going to cover your doctor or a medication you need, open enrollment is the only opportunity you have to shop for another insurance that does cover what you want and sign up for it for the next plan year.
Important to know: Being diagnosed with cancer or other catastrophically expensive medical condition is never a QLE. This is fundamental to how insurance, all insurance, works. Discovering your current health plan is inadequate to your needs is never considered a justification for an employer or state ACA marketplace to let you get a new health plan outside of open enrollment.
This is why I said above that it's maybe not as much a favor as it sounds like for bosses and the marketplaces to set you up with a new plan like your old plan without asking you. If there are any choices for you to make, open enrollment is your limited window of opportunity to re-evaluate those choices and make different ones. By telling you that you don't need to make a choice, they'll make it for you, they're encouraging you to let them take a choice away from you that you might very much want to make for yourself. And open enrollment is the only time ordinarily available to you when you are free to make that choice, from among the health plans (contracts) available for you for the next plan year.
And once open enrollment closes, you're locked into your choice. As explained above, you can always cancel a health plan. And if you fail to pay your bill, the insurance will cancel it for you. But what you can't do is just go get a fresh health plan whenever you want. You can only (with exceptions) sign up in open enrollment.
Important to know: Typically open enrollment happens a few months before the end of the plan year so you have a chance to pick a new plan for the new plan year before it actually begins. If you wait until your current plan is about to expire, you might miss your open enrollment period.
Because most Americans' plan year is the calendar year, most Americans' open enrollment is more or less around November. As of this writing, some vast number of Americans are in open enrollment right now. Which is why there's so much about health insurance in the news.
If an employer (or school) has a plan year that's not a calendar year, open enrollment will be adjusted accordingly.
For employers that have a plan year that is the calendar year, open enrollment will be scheduled by the employer, probably to start some time in early or mid fourth quarter. Employers often like to have things nailed down a bit earlier than the state, and end open enrollment before the current plan year ends.
For state ACA marketplaces, the start of open enrollment is usually November 1 for the following plan year. It depends on the individual states, and may change in future years, but here in 2025 all states' open enrollment started November 1st except Idaho which opened theirs Oct 15th. [Source for dates: BCBS.com] So we're in open enrollment for the marketplaces right now.
A special note about the state ACA marketplaces' open enrollment: When the state ACA marketplaces' open enrollment ends also depends on the state, and can and has changed year to year. This year (2025) for most states it ends January 15th, but in CA, NJ, NY, RI, and DC, it's January 31st, in Idaho it's December 15th, and here in Massachusetts, it's January 23rd. [Source ibid.]
But just because they'll let you wait until January to choose a health plan doesn't mean it's a good idea to do that. Remember what I said above, about how if you sign up for a health plan after the plan year starts, you do not get the whole year. The marketplaces only start plans on the first of months. If you sign up for a health plan after January 1st, it won't start until February 1st.
It's actually worse than that, because the actual deadlines are some time in December for plans to start January 1st. See: Choosing Health Insurance: Two Unobvious Marketplace Deadlines for details.
So why on earth do most state ACA marketplaces stretch into January, if most people need insurance that starts January 1? Because of that thing where they do you the favor of signing you up for an allegedly reasonably similar plan if you don't make a choice for yourself. People find themselves on the health plans that they were auto-enrolled in, and discover there's some horrifying change or inadequacy to them, and, understandably, freak all the way out. That's one reason. Having open enrollment stretch into January means people can change their choice of health plan, after it starts. So if you belatedly discover that, e.g. your entire home wound care team will no longer be covered by your health plan in the new plan year (example, alas, not made up), you have a little time to at least try to go find another plan that does, and switch to it if you succeed. It will start February 1st.
This is also a benefit for people who do participate in open enrollment, and discover only after they have onboarded with a new plan they have enrolled in that it's got some problem, and they want to escape from it. This can be because they failed to read or understand the terms of the contract, but it can also be because not all the terms of the contract are necessarily shared with you before you enrolled. For instance, how long you'll be on hold if you call an insurance company's customer service number, or how well-informed their customer service agents are, or empowered to solve problems they are, isn't generally something you can figure out in advance of being a customer. Also some financial details involving the costs and coverage of service – details that are typically easy to look up on the customer website once you enroll and become their customer – are information many (most?) insurers consider confidential trade secrets and aren't willing to post on the open internet for just anybody to see.
(Personally, I think there oughta be a law requiring them to make this information publically available, but there isn't.)
So anybody who for any reason finds out they've gotten enrolled in a marketplace health plan that doesn't work for them, if they're somewhere open enrollment stretches into January, they have a very limited window to fix their choice of plan.
The Place: Health insurance is tied to geography
Health insurance is state-specific. If you are in California, you get California insurance. If you are in Arkansas, you get Arkansas insurance. When you get a health plan (contract for health insurance from an insurance company) you get – or are supposed to get – an insurance plan for your state.
There are three big reasons for this. One is that an insurance company has to be licensed in a state to sell insurance there. Insurance company licensing is state-by-state. If an insurance company gets in too much trouble, they'll get kicked out of a state by the state government. If an insurance company decides that the laws in a state mean they can't earn enough money there or can't get away with certain shenanigans, they'll decide they don't want to do business there. The up-shot is not all insurance companies operate in all states.
Second, there's the fact that each state has its own laws on health insurance, so any health plan (contract) a health insurance company offers for sale in a state has to comply with that state's specific laws. For instance, catastrophic health plans aren't legal in all 50 states. Whether or not they can sell you one on your state ACA marketplace depends on what state you live in.
Finally, part of the contract – part of the terms (agreements) of the contract – is just which doctors and hospitals and other health care providers will be covered by that health plan. Health plans usually have a limited roster of doctors and hospitals that they'll cover, called a "network" (this will be discussed in much more detail, in a later part). Different health plans have different networks. These networks are tied to geographical regions, most usually states. A health plan might have a provision among its terms (agreements) for providers in other states to be covered... or it might not.
And the network of a health plan (the doctors and hospitals it covers) might be limited to a smaller area than a state. Like a county. Or even just a city.
This is why when you go to your state ACA marketplace to look at your options or apply for insurance, one of the first questions they ask you is what your zip code is. This is why they need to know. They will show you only those insurance plans which serve the area you live in.
Why is this important: You aren't a tree, rooted to one place. People move. Not only do they move house, they move around. They travel for fun and for business and to care for sick family. They commute daily to other locations for work and for school, and sometimes they even cross state lines when they do. And sometimes while they are doing these things they need medical care.
Before you sign a contract with an insurance company, you had better make sure it covers health care services in the locations that will matter to you!
Some cases where it becomes a big deal include:
1) College students (or boarding school students of any age) who are young enough to still be on their parents' insurance in their state of origin, going to school in another state. For instance, if a student is on their parents' Arizona insurance but goes to school in Minnesota, they may not be able to get health care covered if they get seriously sick at school.
2) People who live in one of those pokey little northeastern states where folks are crossing state boundaries all the time, and people living in cities with a state boundary right along it (DC) or through its middle (Kansas City). It might be that the most accessible health care to you – just down the road or just over the bridge – isn't covered by your health plan because there's a geographic boundary there.
3) People with long commutes, even if it doesn't cross state lines. A lot of doctors' offices are only open during conventional business hours, so going to the doctor means going there from work not from where you live. If all the doctors covered by your insurance contract are only where you live, and not where you work, this could make it hard for you to see a doctor, logistically. This is of particular concern for people who opt into hyper-local insurance because it's cheaper than the alternatives that cover larger areas, but are thus also people who are least able to take extra time off work to see the doctor.
(If you are wondering how local a health plan could be, at one point Massachusetts had a Medicaid plan where all the doctors were in Boston. Not the "Greater Boston Area". The city limits of Boston. And not even all of Boston: 90% of them were in the Boston Medical Center hospital complex, which has a geographical foot print of like six city blocks. That health plan was a contract to get all your medical care at BMC. This is no longer the case, but it remains an informative example.)
4) Remote workers getting insurance from a company they work for that is headquartered in another state. For instance, if you are in Montana and take a fully remote job with an employer in California, the health plans that employer offers might be California specific, such that you might not be able to use their plans in Montana.
5) People whose jobs have them on the road a lot. For instance if you spend part of the year following a herd of cattle across state lines, or on a fishing vessel in the Bering Sea, or teaching people to ski at a seasonal resort, or if your work has you following crops' harvest seasons up and down the country, or you work as a salesperson covering a 10-state sales district: all these people need health insurance that works for them in places that aren't just the place they officially live.
6) People who have to spend substantial time out of state caring for family members. This comes up mostly for people who live in another state from their elderly parents, and travel often, or for long periods of time, to stay with those parents and look after them.
This is why it's important that when shopping health plans, you check where they're good for. You want to make sure that it will be good for wherever you'll actually be spending a lot of time.
Important to know: a health plan's official documents may tell you that it covers your state or county or other geographical areas you care about, but you may also want to check up on what they tell you. You might want to look up where the doctors they cover actually are. States are big places, even the small ones. The insurance company might cheerfully tell you that they cover the whole state but it turns out most of their physicians clump in one corner that's not useful for you, or they only have one relevant specialist near you and you know that guy sucks because you tried him already.
For this reason, not taking the airy assurances of the insurance paperwork at face value and instead digging a little can be helpful. Spending some time with a health plan's online doctor finder website can be... informative.
Another reason this is important: Because health insurance is to tied to geography, it means when you ask a question on the internet – for instance on social media or in a forum – about insurance shopping or usage, you have to specify what state you (and your plan) are in, so anyone answering knows which state's laws apply and so forth. This is especially important if asking for recommendations.
It's especially important that you know how geographically bound health insurance is, because there are lots of well-meaning people out there who don't know, who will confidently answer your questions out of their own personal experience, wholly oblivious to the fact their answers are completely irrelevant to you, because they're about some place far away with different insurance companies, different laws, and different health plans on offer.
Important to know: If you need a health plan that is going to work in multiple states, you will need a plan that has special terms (agreements). We'll be discussing how to identify such plans in a later section, but you may need to call up someone at the insurance company for each plan you're considering and asking them which of their products (health plans) would meet your specific needs. The information on state ACA exchanges is often insufficient to tell whether there's out of state coverage as part of a plan, and sometimes the information employers provide employees about their choices is likewise inadequate.
The Price: Health insurance is a subscription with a monthly fee
A health plan is a contract between you and the insurance company that says for the term (duration) of that contract (the plan year) they'll give you insurance so long as you pay them each month. This is another way it's like a lease on an apartment: you have a monthly payment.
You know how when you rent an apartment there's a special rental industry term (jargon) for that monthly payment – they call the payment "rent"? The insurance industry has its own term (jargon) for it. The insurance term (jargon) for the monthly fee is the premium. The premium is the monthly price of the insurance, like the rent is the monthly price of a lease.
Another way to think of it is that a health plan is a subscription, like a streaming service or a newspaper, and the premium is the monthly fee you have to pay to keep it on.
Why this is important: Dealing with health insurance, discussing how the money works and how much it costs you is one of the places things get really confusing, and it actually really helps to have a special word like "premium".
The word premium means something more precise than "how much the health plan costs". It means "how much you have to pay to the insurance company to keep this health plan." You might think, "But isn't that the same thing as what it costs?" Well, no. Because this is health insurance. The point of health insurance is by paying the insurance company some, you sometimes pay doctors and hospitals less. So when we talk about the cost of a health plan, we often are talking about the combination of both how much you have to pay the insurance company for the plan (the premium) and how much you are left by the insurance company paying the doctors and the hospitals yourself. Using the term "premium" instead of just saying "cost" makes it clear that you're just talking about that monthly subscription fee you pay to the insurance company to have the health plan.
Who actually pays and who does the paying
When you buy insurance for yourself on your state ACA marketplace, you pay the premium yourself out of your own wallet. If you earn below a certain threshold, you get a break on your taxes for how much premiums you have paid for health insurance. This is called the Premium Tax Credit. It is only available for plans bought through the state ACA marketplaces. It is not available to people who get insurance through an employer, through a government program, or by buying it off-marketplace. You can get that tax credit in advance: when you do that, the way it works, your premiums are reduced. This is called the Advance Premium Tax Credit. The marketplaces do it automatically for you if you let them. Also if you earn below a certain threshold, you might get a further discounts on your premiums. Depends on your state.
Important to know: If you do not pay your premium bill on time, the insurance company will eventually just cancel your health plan. Possibly retroactively to the date they stopped being paid. They do have to offer you a grace period, usually of no less than a month. However, how much of a grace period you get depends on a combination of federal law, local state law, the specific terms (agreements) of your contract with them, and other things like whether you get the APTC (below) and have already paid for at least one month. [Source: Healthcare.gov].
If your employer gives you health insurance, then they pay the premium for you. At least they make the actual payments to the health insurance company for you. Some employers pay the premium out of their own money, some pay part of the premium and require you to pay for the rest of the premium by taking it out of your paycheck.
Still others don't chip in for your premium at all, requiring you pay the whole premium out of your paycheck. What good is an employer plan they offer but don't pay for? It might still be, in some sense, a better deal than you could get on your state ACA marketplace. They might have gotten you a spiffier plan or they might have gotten you a cheaper one (though these days, that's vanishingly rare.) And in can be more convenient: they spare you the trouble of having to remember to make the payment yourself or to set up some sort of autopay yourself.
How much is the premium
Generally speaking, the better the insurance plan, the higher its premiums. Makes sense, right? Better things often cost more.
If better plans have higher premiums, what makes one plan better than another?
Their terms. Meaning the specific agreement details of the contract between the insurance company and you, their customer. More favorable terms for the customer generally cost the customer more in premiums.
Which terms are those? The terms that spell out the nitty-gritty of just what you will get for your premiums.
We can call the kinds of better terms which cost more in premiums "premium features". That's not an industry term. I just made it up. But for our conversation, it will make things easier.
Premium features are better terms (agreements) in health plans that usually you have to pay more in premiums (monthly fee) to get.
They can be lumped into two piles: premium features that affect the cost you pay for health care and premium features that affect the quality of the health care you get.
In the next section, we'll talk about the second big idea of health insurance, and the premium features that affect the cost you pay for health care.
You might be wondering, "Hang on, what do you mean affect the cost I pay for health care? I'm paying for insurance. Aren't they going to be the ones paying for my health care? Isn't that the purpose of paying for health insurance in the first place?"
Not quite....
On to the second important idea: The Three-Stage Model
Understanding Health Insurance
- Introduction
- A Health Plan is a Contract
- The Three-Stage Model
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Comment catcher: Understanding Health Insurance: A Health Plan is a Contract
Date: 2025-12-08 12:54 pm (UTC)Re: Comment catcher: Understanding Health Insurance: A Health Plan is a Contract
Date: 2025-12-08 10:14 pm (UTC)My brain noped out of trying to make sense of things about halfway through your descriptions (I'm neurodiverse, it does that) and it made me very aware of how very straightforward and simple the Australian system is for someone like me. I go to the doctor. Most of the time they bulk-bill me. If I need to go to the hospital, I just head there. I buy medication from the pharmacy, and the medications I'm on are covered by the Pharmaceutical Benefits Scheme (which means they're purchased in bulk from the suppliers by the Australian Government, and sold to me at a regulated price - I think it's about $45 per prescription for the two meds I'm on regularly, and about the same for the one I take as needed). If I want to get private health insurance here in Australia, I can, although at my age (I'm 55 next birthday) and on my (low) income, it's not worth the bother, since I'd have to be paying sky-high premiums for at least two years before I saw any benefit. About the only advantage of private health insurance here is that it covers the costs of ancillary care (physiotherapy, occupational therapy, etc) slightly better than the standard Medicare care plans.
From reading what you've written above, I know if I were living in the USA, I'd probably wind up uninsured, or at best on a plan which didn't cover me for anything useful or necessary. Yet another reason not to go there, I suppose.
Re: Comment catcher: Understanding Health Insurance: A Health Plan is a Contract
Date: 2025-12-09 10:56 am (UTC)Nicely articulated, thank you. I offer the following purely in the spirit of commiseration and agreement, fully understanding why Siderea's primer would result in "oh never*mind* then!" giving up:
The guide is excellent but it is the (comparatively) baby-easy portion of What You Must Know To Buy Insurance In The USA. This is (comparatively) the first day of kindergarten compared to the rest. Everything is (comparatively) straight-forward, easy to follow, only lightly obscured by jargon. Almost nothing here covers the bulk of why buying health insurance in the USA is a living nightmare that comprehensively makes the life of everyone involved much worse. This post merely stands at the door to the labyrinth, warning you there's a maze inside; but for now it's just an ominous door, not the maze itself.
Anyways, I'm sympathetic to everyone in other countries who experiences downsides to whatever system they use. They are always legitimate complaints! But I have more than once proven the wrong audience for someone trying to praise some aspect of what the USA medical system is doing. If I may indulge in a metaphor, I don't want to hear "it must be nice not worrying about windows in the house that refuse to close properly!" when instead of a house I'm obliged to live in a field of rubble such that finding shelter for the night is a matter of hunting through the debris to find an unassuming bit of plastic which, I pray, turns out to be a tarp with space under it. My life is better not worrying about windows that get stuck ajar, compared to not; I'm nevertheless going to produce a facial expression if cajoled to think about how it could be worse than what we've currently got.
Not to say you, kind Austrial stranger, did anything of the sort. It just jogged my memory of the time someone years ago tried to say it must be nice having the option to see a different doctor if your designated one sucks. Not unrelatedly, I've explained "medical bankruptcy" to more people than I'd like.
Re: Comment catcher: Understanding Health Insurance: A Health Plan is a Contract
Date: 2025-12-09 12:01 am (UTC)Re: Comment catcher: Understanding Health Insurance: A Health Plan is a Contract
Date: 2025-12-09 03:34 am (UTC)Another thing about networks is that some insurance plans cover out-of-network providers at a higher cost, and some do not cover them at all (except for emergency care). If you travel for work or to take care of family members or live near a border or all those other things you listed, you might want to check whether non-local care is "merely expensive" or not covered (so you will pay list price).
Even if the out-of-network cost is something extreme like "you pay 90%", merely being covered can lower the list price that you're paying 90% of. (I know that you,![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png)
siderea, know this, because I'm pretty sure you were the one who once explained it to me. This comment is for other readers.)
Re: Comment catcher: Understanding Health Insurance: A Health Plan is a Contract
Date: 2025-12-10 03:39 am (UTC)Re: Comment catcher: Understanding Health Insurance: A Health Plan is a Contract
Date: 2025-12-10 02:30 am (UTC)(Our school year actually runs through July, but in practice anyone working in July almost always started earlier in the school year.)
My two other school jobs (one independent school, one state university system) also had the plan date flip over the summer, and I think both of those were also July 1. (The argument for July and not August is that it divides the year into nice 6 month / 2 quarter chunks, which is apparently easier for some people to keep in their heads) And in these cases, also lined up with the fiscal year.
Re: Comment catcher: Understanding Health Insurance: A Health Plan is a Contract
Date: 2025-12-17 07:38 pm (UTC)I always work at a company whose plan year turns over at mid-year, but for rather different reasons. My understanding is that it was purely for administrative convenience: the company incorporated around the middle of the year, and they decided it would be easiest for them to just keep cycling on that schedule.
I don't love that (it has subtle implications with respect to deductibles and the ability to switch between my spouse's health plan and my own), but so far I've mostly shrugged at it.
Re: Comment catcher: Understanding Health Insurance: A Health Plan is a Contract
Date: 2025-12-17 07:59 pm (UTC)A couple of minor addenda:
This seems to be fairly universal jargon -- I've always heard the same terminology from private employers as well.
Also, a small but important detail: one's spouse's employment situation changing is generally a QLE. I'm not sure that's legally-required or universal, but I've gotten that sense from all the employers I've had. So if you were on the spouse's insurance, and they lose their job, you generally have the opportunity to switch to your own.
This is one of the laundry list of reasons why some employers simply refuse to hire in many states. (Along with, eg, not wanting to deal with the state's particular tax rules.) The US is Complicated.
(no subject)
Date: 2025-12-08 01:59 pm (UTC)By the way, some states refused to set up their own ACA exchange websites so in those states people just have to use healthcare.gov. That's the case in Oklahoma where I live.