The monthly premium is only part of what a health plan costs. What you pay when you use it depends on four things: the deductible, copays, coinsurance, and the out-of-pocket maximum. Here's what each one means, with an example.
The four terms
- Premium. What you pay every month to have the plan, whether or not you use it.
- Deductible. What you pay for covered care before the plan starts sharing the cost. Some services, like certain preventive care, are covered before you meet it.
- Copay. A flat fee for a service, such as a set amount for a doctor visit or a prescription.
- Coinsurance. A percentage of the bill you pay after the deductible. With 20% coinsurance, you pay 20% and the plan pays 80%.
- Out-of-pocket maximum. The most you pay in a year for covered, in-network care. Once you reach it, the plan pays 100% of covered costs for the rest of the year. Premiums don't count toward it.
A worked example
These numbers are made up to show how it works. Your plan will differ. Say your plan has a $1,500 deductible, 20% coinsurance, and a $6,000 out-of-pocket maximum, and you have a $10,000 hospital bill for covered, in-network care:
- You pay the first $1,500 (the deductible).
- The remaining $8,500 is split. You pay 20%, which is $1,700.
- Your total is $3,200, which is below your $6,000 maximum, so the maximum doesn't come into play this time.
Your premiums for the year are on top of that.
What a $0 deductible plan changes
A $0 deductible plan starts sharing costs from the first dollar. You'll usually pay copays or coinsurance instead of paying the full bill up front, and there's still an out-of-pocket maximum. The monthly premium is typically higher.
It tends to suit people who see doctors or fill prescriptions regularly, since they'd hit a deductible early in the year anyway. If you rarely use care, a higher-deductible plan with a lower premium may cost less over the year.
How to compare two plans
Add up the year, not the month. For each plan, estimate:
- 12 months of premiums
- What you'd pay for the care you expect: regular visits, prescriptions, any planned procedure
- What you'd pay in a bad year, which is the out-of-pocket maximum
The cheaper plan on paper isn't always cheaper in practice. The best plan is usually the one where the expected cost and the bad-year cost both fit your budget.
Network matters too
All of these limits generally apply to in-network care. Out-of-network costs can be higher, may have a separate deductible, and sometimes don't count toward your maximum. See our guide on checking a doctor's network.
This article is general information, not a guarantee of coverage or pricing. Plan availability, benefits, and eligibility vary by state and individual. Some private plans are medically underwritten and do not include all ACA essential health benefits.