Health insurance jargon is confusing on purpose — or at least it feels that way. But you only need to understand a handful of terms to compare plans and figure out what a doctor visit or hospital stay will really cost you.
Premium
What you pay every month to have the insurance, whether you use it or not. If you get coverage through work, it’s usually deducted from your paycheck.
Deductible
The amount you pay for covered care each year before your insurance starts paying its share. If your deductible is $2,000, you pay the first $2,000 of covered costs (with exceptions below). Family plans often have both an individual and a family deductible.
Important exception: most plans cover certain preventive care — like annual checkups, many screenings, and vaccines — at no cost when you use in-network providers, even before you meet the deductible.
Copay
A flat fee for a specific service, like $30 for a primary care visit or $10 for a generic prescription. On some plans, copays apply even before you’ve met your deductible; on others, they kick in only after.
Coinsurance
Your percentage share of costs after you meet the deductible. With 20% coinsurance, the plan pays 80% and you pay 20%.
Out-of-pocket maximum
The most you’ll pay for covered, in-network care in a plan year. Once you’ve hit it through deductibles, copays, and coinsurance, the plan pays 100% of covered costs for the rest of the year. Premiums don’t count toward it. ACA-compliant plans have a federal cap on how high this can be, adjusted yearly.
This is arguably the most important number on your plan. It’s your worst-case scenario for a bad year, and it’s a good benchmark for how big your emergency fund should be.
Putting it together: an example
Sam’s plan has a $1,500 deductible, 20% coinsurance, and a $6,000 out-of-pocket max. Sam has a covered in-network surgery that costs $20,000 (after the insurer’s negotiated rate).
- Sam pays the first $1,500 (deductible).
- Of the remaining $18,500, Sam pays 20%, which would be $3,700.
- Total: $5,200 — under the $6,000 max, so that’s what Sam owes.
If the surgery had cost $40,000, Sam’s 20% share would push past the cap, so Sam would pay $6,000 and the plan would cover the rest.
In-network vs. out-of-network
In-network providers have agreed to discounted rates with your insurer. Out-of-network care usually costs much more, may have a separate (higher) deductible, and may not count toward your out-of-pocket max — or may not be covered at all on HMO plans. Federal protections under the No Surprises Act limit surprise bills in many emergency situations.
Plan types in brief
- HMO: lower costs, in-network only (except emergencies), usually requires referrals.
- PPO: more flexibility, some out-of-network coverage, higher premiums.
- EPO: in-network only like an HMO, but often no referrals.
- HDHP: higher deductible, lower premium, and eligible for an HSA.
How to compare plans
- Add up yearly premiums.
- Estimate a “normal” year of care and what you’d pay out of pocket.
- Look at the out-of-pocket max for a bad year.
- Check that your doctors and prescriptions are covered.
Our open enrollment checklist walks through this step by step. For marketplace plans, HealthCare.gov’s glossary defines dozens more terms.
Bottom line
The premium is what you pay to have coverage; the deductible, copays, and coinsurance are what you pay when you use it; and the out-of-pocket max is your ceiling. Once you see your plan in those terms, comparing options — and budgeting for health costs — gets a lot easier. If a medical bill still looks wrong, see our tips on negotiating bills, including medical ones.
