When you get medical care, you and your health plan share the costs. Your health insurance pays for some of the costs, and you pay for the rest. You will usually pay one, or more, of these:
You pay a certain amount of money each month for your health insurance. This payment is called the premium. The amount of your premium is based on your age, where you live, and if you use tobacco.
A deductible is what you must pay every year before your health plan will pay for most of your medical bills, supplies, or other services covered by your plan. Keep in mind that some services, like preventative care, do not require you to meet your deductible. For example, if your deductible is $500, your health plan won’t pay anything until you’ve paid $500 yourself.
Some plans have more than one deductible. For example, you may have to pay one deductible for in-network care and another for out-of-network care. If your plan covers your family, you will have a separate deductible for each family member and a deductible for the family as a whole.
A copay is the fixed amount you must pay for a service covered by your plan. Your health plan will tell you the amount of your copay for different services. For example, your health plan may require you to pay $25 to see your primary care physician (PCP) or $40 to see a specialist. Plans usually don’t count copays toward your deductible.
Coinsurance is the percentage of the medical cost you pay after you have met your deductible. For example, your health plan may require you to pay 40% of the cost and it will pay the other 60% of covered services until you meet your out-of-pocket maximum. Coinsurance may be higher for out-of-network services or supplies.
Using the cost-sharing graphic below, let’s look at three examples of medical costs and how cost-sharing works in each situation.
Example 1: Lab work
You go to the doctor and get lab work done. Your doctor bills $300. If your deductible is $500 and you have not paid it, you will pay the entire $300 yourself.
Example 2: Surgery
You need surgery that will cost $10,000. You’ve already met your $500 yearly deductible. That means you will only pay part of your medical costs – your coinsurance. Keeping in mind the graphic to the right, you will pay 20%, or $2,000, and your health plan will pay the other 80%, or $8,000.
Example 3: Out-of-pocket maximum
Health plans have limits. Once you reach your health plan’s out-of-pocket maximum, you won’t have to pay out-of-pocket. Let’s say your out-of-pocket maximum is $5,000. After you’ve paid that amount, your health plan will begin paying 100% of your in-network medical costs instead of the 80% they were paying before. Keep in mind that only the portion of medical costs you pay counts towards your out-of-pocket maximum, not the total amount of any medical costs. For instance, in the previous example (example 2), only $2,000 counts towards your out-of-pocket limit, even though your surgery costs $10,000.
Comparing cost-sharing when shopping for health insurance
It’s important to compare how you share costs with the health plan when you’re shopping for health insurance. There is usually a tradeoff between paying more up front or paying more later.
- If you get a health plan with a higher deductible, you will usually have a lower premium. However, it can cost you more in the long term if you go to the doctor a lot.
- On the other hand, if you get a health plan with a lower deductible, you will usually have a higher premium. This will cost you less in the long term if you go to the doctor a lot.