Health Insurance Basics Becoming familiar with the following terms will help you understand how your health plan works, what you will have to pay, and what your insurance will pay. Premium The amount you pay for your health insurance every month. In addition to your premium, you usually have to pay other costs for your health care, including a deductible, copayments, and coinsurance. Deductible The amount you must pay for covered health care services each plan year before your insurance plan starts to pay. With a $2,000 deductible, you pay the first $2,000 of covered services yourself. After you pay your deductible, you usually pay only a copayment or coinsurance for covered services. Your insurance company pays the rest. Many plans pay for certain services, like a checkup or disease management programs, before you've met your deductible. Check your plan details. All comprehensive health plans newly issued after January 1, 2014 pay the full cost of certain preventive benefits even before you meet your deductible. Some plans have separate deductibles for certain services, like prescription drugs. Family plans often have both an individual deductible, which applies to each person, and a family deductible, which applies to all family members. Generally, plans with lower monthly premiums have higher deductibles. Plans with higher monthly premiums usually have lower deductibles. Copayment A fixed amount ($20, for example) you pay for a covered health care service after you've paid your deductible. For example, if your allowable cost for a doctor's office visit is $100 and your copayment for a doctor visit is $20: If you've already paid your deductible, you pay $20, usually at the time of the visit. If you haven't met your deductible, you pay $100, the full allowable cost for the visit. Copayments, also called copays, can vary for different services, such as drugs, lab tests, and visits to specialists. Generally, plans with lower monthly premiums have higher copayments. Coinsurance A percentage you pay (20%, for example) of the costs for a covered health care service after you've paid your deductible. For example, if your health insurance plan's allowable cost for a doctor's office visit is $100 and your coinsurance is 20%: If you've paid your deductible, you pay 20% of $100, or $20. The insurance company pays the rest. If you haven't met your deductible, you pay $100, the full allowable amount for the visit. Generally, plans with low monthly premiums have higher coinsurance. Example of Coinsurance with High Medical Costs Let's say the following amounts apply to your plan and you need a lot of treatment for a serious condition. Allowable costs are $12,000. Deductible: $3,000 Coinsurance: 20% Out-of-pocket maximum: $6,850 You'd pay all of the first $3,000 (your deductible). You'll pay 20% of the remaining $9,000, or $1,800 (your coinsurance). So your total out-of-pocket costs would be $4,800 (your $3,000 deductible plus your $1,800 coinsurance). If your total out-of-pocket costs reach $6,850, you'd pay only that amount, including your deductible and coinsurance. The insurance company would pay for all covered services for the rest of your plan year. Out-of-Pocket Limit The most you have to pay for covered services in a plan year. After you spend this amount on deductibles, copayments, and coinsurance, your health plan pays 100% of the costs of covered benefits. The out-of-pocket limit doesn't include your monthly premiums. It also doesn't include anything you may spend for services your plan doesn't cover. The maximum out-of-pocket limit for any 2016 Marketplace plan is $6,850 for an individual plan and $13,700 for a family plan. Generally, plans with lower monthly premiums have higher out-of-pocket limits. Example of Out-of-Pocket Maximum with High Medical Costs Let's say you need surgery with allowable costs of $20,000 and the following figures apply to your health insurance plan. Deductible: $1,300 Coinsurance: 20% Out-of-pocket maximum: $4,400 You pay the first $1,300 of covered medical expenses (your deductible). Your 20% coinsurance on the rest of the costs ($18,700) comes to $3,740. So your total costs would be $5,040. That's $1,300 (your deductible) plus $3,740 (coinsurance). But your out-of-pocket maximum is $4,400. Your insurance company pays all covered costs above $4,400 - for this surgery and for any covered care you get for the rest of the plan year. Allowed Amount The maximum amount a plan will pay or base payment on for a covered health care service. May also be called eligible expense, payment allowance, or negotiated rate. If your provider charges more than the plan's allowed amount, you may have to pay the difference.