How insurance works

How does health insurance work?

Health insurance helps you pay for health care services such as visits to the doctor or prescription drugs. When you buy a health insurance plan, you enter into an agreement with your insurance company. You pay a modest monthly payment called a "premium" and, in exchange, they agree to help you pay a portion of your medical bills.

Although we are fortunate to have great doctors in America, our healthcare system is one of the most expensive in the world. Getting sick or injured can lead to crippling medical bills that the average American can't afford. Health insurance takes the financial risk off of your shoulders, so if you get sick, you can get the care you need at a reasonable price.

Here's a simple example: A small cut on your hand needs a few stitches from the doctor. In many situations, this service would cost over $1,500 without insurance. The exact amount you would pay with insurance varies based on your plan, but in most cases these stitches cost as little as $150 with insurance (or, if you're lucky, they might be completely free!). Most people see the doctor at least a couple times per year and need the occasional treatment or vaccine, so the bills can add up quickly if you go uninsured for even a short time period.

Insurance is social

There are three main players in the game of American healthcare: the insurance companies, the providers (doctors, nurses, and hospitals), and subscribers (individuals like you). How do all these moving pieces interact?

Basically, it's strength in numbers:
  1. Insurance companies bring together a community of subscribers. Insurers represent everyone who purchases their plans. To reduce their costs, these companies create "networks" of doctors, nurses and hospitals, and haggle (literally, haggle… just ask your doctor) to set the price of medical services with each group. By promising to deliver a large number of patients, insurance companies get steep discounts for their subscriber customers.

  2. Insurance companies pool our money together and distribute it as needed. Insurers cover the high cost of health care and provide benefits to everyone on their plan. If you stay healthy, your monthly payments (premiums) will go towards paying for someone else's care. But if you get sick, their premiums will cover your bills. It's a social thing.

  3. One last thing to keep in mind: Every insurance plan is different. Some have restrictions on which doctors and specialists you can see. Others allow you a little more freedom to choose. Many insurance companies offer unique "benefits" and services like discounts on gym memberships—it just depends on what you buy. Lucky for you, Stride makes it easy to compare options, so you can find the perfect plan.

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