Know Your Health: Costs Can Be Confusing. Let’s Talk About Them

What is a Deductible, Copay, Coinsurance, Out-of-Pocket Max and Premium?

By Network Health marketing and communications team
2/27/2022

In our previous Know Your Health issue, we covered the difference between the two types of health plans – HMO and PPO. You can read about that topic by clicking here.

The type of health care plan you choose is only part of your decision. In this article, we’ll help explain different health care costs included in a plan and what to consider when choosing one that is right for you. 

Understanding your health plan coverage is important to us at Network Health. Our goal is help you find a plan you understand and fits within your budget. Here are some terms you may hear when figuring out health plan costs per month, annually and time-of-service costs.

What is a health insurance premium?

A premium is how much you pay every month for your health insurance coverage. If you pick a plan with a $35-per-month premium, you pay $35 every month for continued access to the health insurance services and benefits.

Premiums can be influenced by external factors. For instance, if you qualify for a Medicare Advantage plan with Network Health, you could have access to$0-per-month premium plans that are funded by the federal government.

Similarly, people who purchase individual or family health insurance plans and who qualify for the federal health insurance tax credit (a product of the 2010 Affordable Care Act), can apply for a federal subsidy, to reduce most or all of the monthly premium.

Because your premium is an agreed-upon rate, it remains consistent through the duration of your coverage year. Premiums can change each year. If they do, health insurance companies, like Network Health, send members notices letting them know what new benefits they have access to, whether or not their premiums have changed and by how much.

What is a health insurance deductible?

A deductible is the amount you pay out of pocket each year for covered medical care before your health plan begins to pay.. Once you meet the deductible, you usually pay a copay and/or coinsurance (both explained further in the next section).

This means if your plan has a $4,500 annual deductible for in-network coverage, you pay the first $4,500 of covered services yourself before the health company begins to pay.

Deductibles are often split into in-network and out-of-network deductibles, with the latter often having a higher financial level you must reach.

What is coinsurance?

Coinsurance is the percentage of costs you pay for your covered care once your plan’s deductible has been met. For instance, if your coinsurance is 80/20, your health insurance plans pay 80 percent of medical costs when you need care and you‘ll pay 20 percent. To illustrate, if you met your deductible and had a $300 procedure, your health insurance plan would pay $240 (80 percent of the total cost) and you would pay $60 (20 percent of the total cost).

What is a health insurance copay?

 A copay is a set amount you pay for services, procedures, medications, visits and other health services stated on your policy disclosures when you enroll.

For instance, your plan may include an annual checkup for a $25 copay. It may also include a prescription medication copay for drugs on certain tiers of the health insurance plan’s drug list.

What is an out-of-pocket maximum?

While a deductible is how much you must pay out-of-pocket before your health insurance begins to cover care, your health insurance plan’s out-of-pocket maximum is how much you will pay in a term (usually a year) before your health insurance plan pays 100% of your covered services.

This amount includes what you would pay as your share of the coinsurance once your deductible has been met giving a health insurance plan a bracket-like structure. Consider the following example of a plan with a $1,500 deductible, 20% coinsurance and a $4,500 out-of-pocket maximum.

Why is $16,500 the dollar amount in this case? Assuming there were no copay services or products that contributed to the out-of-pocket maximum, $16,500 is the $1,500 deductible plus twenty percent of $15,000 ($3,000). It’s a bit of math to get there, but essentially, at this point, you have paid the maximum amount of money required for your health insurance.

Keep in mind, if you have copays, they will count toward the out-of-pocket maximum or $4,500 and could affect your percentages.

Know your health and make positive decisions about your care

At Network Health, we do what’s right not because it’s easy. It’s who we are. Health insurance is what we do. If you’re looking for further information about your health insurance plans or want to learn more about maximizing your coverage, contact us today.