Five terms to help you better understand your health plan

Understanding your health plan may be confusing at times but familiarizing yourself with financial terms related to your health coverage can eliminate a lot of that uncertainty. These terms related to your health coverage are important for planning and budgeting purposes.

When making cents of your health plan is your priority, making sense of it is ours.

Whether you're enrolling in a new health plan or just need a refresher, knowing the following health coverage terms will be beneficial.

  1. Premium

    A premium is what you pay each month for the plan itself and is the cost you pay to keep your health coverage. When searching for a plan, it's important to remember that if you need a lot of health care, a plan with a higher premium but lower deductible may save you money.

    Real-world example: Rachel is shopping for an Individual health plan and she enrolls in a plan where she pays a monthly premium of $100. This is the cost to keep her coverage; every month Rachel is required to pay her $100 monthly premium or her plan will be terminated.
  2. Deductible

    A deductible is the amount you pay before the health plan begins paying for your health services. Once you've paid your deductible, your costs are typically just copays and coinsurance. Your insurance company pays the rest.

    Real-world example: Stacy has just received a medical bill for $2,000. Her health insurance has a $1,000 deductible so she would be responsible for paying the first $1,000 in full before her copay or coinsurance benefits kick in.
  3. Copay

    A copay is a flat fee you pay at the time you receive a health care service or prescription after you've paid your deductible. Copayments may change for different services within the same plan. Plans with higher monthly premiums generally have lower copayments.

    Real-world example: Jordan has paid his deductible and his copay for a doctor visit is $40. When he is done with his appointment, the doctor hands him a bill for $90. Jordan is only responsible for paying $40 and his health insurance will pay the other $50.
  4. Coinsurance

    Coinsurance is like a copay that you pay at the time you receive your health care service or prescription. However, it is a percentage of the total bill you will be responsible for.

    Real-world example: If Jessica has paid her deductible and her office visit is $200 and her coinsurance is 20%, she would only be responsible for paying $40 (20% of $200.) Her health plan would pay the rest.
  5. Out-of-pocket maximum

    The out-of-pocket maximum is the most you will pay over a year. Once you've reached your out-of-pocket maximum, the plan pays for covered benefits and services in full without a copay. The out-of-pocket maximum does not include your monthly premiums, services your plan does not cover, out-of-network care or costs above the allowed amount for a service.

    Real-world example: Henry's health plan has a $5,000 deductible and a $10,000 out-of-pocket maximum. Once Henry has paid $10,000 out-of-pocket for health care services, he would pay nothing more for medical care for the rest of his plan year.

Learn more

To learn about more health terms related to your health coverage, visit our Learning Center. There are many articles related to Individual and family health plans that are useful for learning more about health coverage, how to save on health coverage and choosing the right plan for you.