The price of a health plan isn’t just the monthly premium. Understanding five key terms shows what you’d really pay when you need care.
Key points
- The premium is what you pay each month to keep coverage, whether or not you use care.
- The deductible is what you pay for covered care before the plan starts sharing costs.
- Copays are flat fees; coinsurance is a percentage of the cost.
- The out-of-pocket maximum caps what you pay for covered in-network care in a year.
- Compare plans by premiums plus the costs you’re likely to face, not premiums alone.
Health plans use specific terms to describe who pays what. Once you know them, comparing plans becomes much easier.
The five key terms
| Term | What it means |
|---|---|
| Premium | Your monthly payment to keep the plan active |
| Deductible | What you pay for covered care before the plan begins to pay its share |
| Copay | A fixed amount for a service, such as $30 for a doctor visit |
| Coinsurance | Your percentage of the cost after the deductible, such as 20% |
| Out-of-pocket maximum | The most you’ll pay for covered in-network care in a year |
How they work together
Imagine a plan with a $2,000 deductible, 20% coinsurance and a $7,000 out-of-pocket maximum, and a $10,000 covered hospital bill:
- You pay the first $2,000 (the deductible).
- You pay 20% of the remaining $8,000, which is $1,600.
- Your total is $3,600, and the plan pays the rest.
If your costs reached the out-of-pocket maximum, the plan would pay 100% of covered in-network care for the rest of the plan year. You’d still pay your premiums.
Helpful tip
Before choosing a plan, check whether your doctors are in its network and whether your regular prescriptions are on its drug list, called a formulary.
Networks matter
Plans have networks of doctors and hospitals. HMOs usually require you to use the network and get referrals; PPOs usually let you go out of network at a higher cost. Using in-network care keeps your costs predictable.
Comparing plans
Add up:
- Twelve months of premiums.
- Your likely costs: regular prescriptions, planned visits and any expected procedures.
- The worst case: the out-of-pocket maximum.
A plan with low premiums and a high deductible can cost more overall if you need a lot of care, and vice versa.
Next steps
If you buy your own coverage, our guide to the ACA marketplace explains how enrollment and subsidies work. If you have a high-deductible plan, see our guide to health savings accounts.
Frequently asked questions
Do preventive services count toward my deductible?
Most ACA-compliant plans cover many preventive services, such as certain screenings and vaccines, at no cost when you use an in-network provider.
Does the premium count toward the out-of-pocket maximum?
No. The out-of-pocket maximum counts deductibles, copays and coinsurance for covered care, not monthly premiums.
What happens if I see an out-of-network provider?
Depending on the plan, you may pay more or the plan may not pay at all. Federal surprise billing protections cover some situations, such as most emergency care.
Is a low-deductible plan always better?
Not necessarily. It usually has higher premiums, so it tends to suit people who expect to use a lot of care.
This guide is general information, not insurance, tax or legal advice. Rules, limits and deadlines change each year, so check HealthCare.gov, Medicare.gov or your insurer for your situation.