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Breaking down the costs surrounding health insurance
Breaking down the costs surrounding health insurance

Let’s get to the bottom of the costs surrounding insurance to help you navigate the world of healthcare with confidence.

Updated over a week ago

3-minute read

The concept of health insurance is easy enough to understand, right? You pay a monthly fee for coverage so you can get professional healthcare when you need it.

But jargon like deductibles, premiums, and out-of-pocket maximum can make things confusing.

So, let’s break down the terms involved to help you navigate the world of health insurance with confidence.

What is a premium?

A premium is the amount of money – typically billed monthly – the policyholder pays for insurance coverage. If you have health insurance through your work, your employer probably pays part of your premium, and you cover the rest through payroll deduction (paid out of your earnings). If you have a personal or family medical plan, you’ll need to pay the premium yourself.

What is a copayment or copay?

A copayment is the set fee you pay when you visit a doctor or fill a prescription. Most insurance cards have the copay amount listed on them, so you’ll know what you owe ahead of time. You pay the same flat fee for routine visits and medications, as long as you see a doctor in your insurance network. If you visit a provider outside your insurance network, your copay will likely be higher. It’s important to note that copayments, while contributing toward your out-of-pocket maximum, typically do not count toward your deductible.

What is a deductible?

A deductible is the amount of money you need to pay toward healthcare expenses before your insurance provider starts to contribute. Let’s say your deductible is $2,500. That means you would need to pay the first $2,500 worth of healthcare costs before your insurance starts chipping in.

The good news is that once you reach your deductible for the benefit year, you and your insurance provider will transition to the coinsurance payment agreement.

What is Coinsurance?

Coinsurance is the way you and your insurance provider agree to split medical costs. While a copay is a fixed amount of money you pay for certain services, coinsurance is the percentage of total healthcare costs that you’re responsible for —and it only kicks in once you’ve met your deductible.

So, let’s say you have 20% coinsurance and you get a medical bill for $100. Assuming you’ve already met your deductible, that means you’re responsible for paying $20, and your insurance will cover the remaining $80.

This coinsurance arrangement applies until you meet your out-of-pocket maximum.

What is an out-of-pocket maximum?

This term is a little more straightforward. Your out-of-pocket maximum is the absolute most you would need to pay for medical expenses in a benefit year. That includes copayments, coinsurance, prescription costs and any other eligible medical expenses. Once you’ve paid that amount, your insurance will cover 100% of all remaining expenses for that benefit year.

So if your out-of-pocket maximum is $6,000, you will never pay more than that. Once you reach the $6,000 maximum, your insurance provider is responsible for any additional medical costs in that benefit year.

Move forward with confidence.

Hopefully, that helps clear up some of the intricacies of health insurance. Now that you have a better grasp on some of the key terms related to costs, you can feel more at ease navigating and making informed decisions about your healthcare coverage.

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