Understanding Health Insurance Costs: Copays, Deductibles, Premiums, and More

Health insurance can be confusing, especially when it comes to understanding the different costs you might have to pay. Knowing the terms—copay, deductible, coinsurance, premium, and out-of-pocket maximum—can help you plan for medical expenses and avoid unexpected bills. Here’s what each of these costs means and how they affect your healthcare budget.

1. Premium: The Cost of Having Insurance

A premium is the amount you pay every month to keep your health insurance active. Think of it like a subscription fee—you pay it whether or not you use medical services.

• Higher premiums usually mean lower out-of-pocket costs (like deductibles and copays).
• Lower premiums often come with higher deductibles and coinsurance, meaning you’ll pay more when you get care.
• If you get insurance through an employer, they often cover part of your premium.

Example:

If your monthly premium is $300, you’ll pay that amount every month, even if you don’t visit a doctor.

2. Deductible: What You Pay Before Insurance Kicks In

A deductible is the amount you have to pay for healthcare services before your insurance starts covering costs.

• If your deductible is $1,500, you must pay $1,500 out of pocket before your insurance helps cover most costs.
• Some plans have separate deductibles for medical care and prescriptions.
• Preventive services, like annual check-ups and screenings, are often covered before you meet your deductible.

Example:

If you get an MRI that costs $1,200 and your deductible is $1,500, you’ll pay the full amount. If you need another MRI later in the year, insurance will start sharing costs since you’ve already paid toward your deductible.

3. Copay: A Fixed Fee for Services

A copay is a set amount you pay each time you receive a medical service. It applies even after you meet your deductible.

• Copays are common for doctor visits, prescriptions, and emergency room visits.
• The amount varies by service—seeing a specialist usually costs more than a primary care visit.

Example:

Your insurance might require a $30 copay for primary care visits, a $50 copay for specialists, and a $10 copay for generic prescriptions.

4. Coinsurance: Your Share of the Costs After the Deductible

Coinsurance is the percentage of costs you pay after you’ve met your deductible. Unlike a copay (which is a fixed amount), coinsurance is a percentage of the total bill.

• A 20% coinsurance means you pay 20% of the bill, while insurance covers 80%.
• Higher coinsurance means you pay more out of pocket, while lower coinsurance means insurance pays more.

Example:

If a hospital stay costs $10,000, and your insurance plan has 20% coinsurance, you would pay $2,000, and insurance would cover $8,000—but only if you’ve already met your deductible.

5. Out-of-Pocket Maximum: The Most You’ll Pay in a Year

Your out-of-pocket maximum (OOP max) is the highest amount you’ll pay for covered services in a year. Once you hit this limit, your insurance covers 100% of additional medical costs for the rest of the year.

• It includes deductibles, copays, and coinsurance but not your monthly premium.
• After reaching your OOP max, you won’t owe anything for covered services.

Example:

If your out-of-pocket maximum is $7,500, once you’ve spent that amount on medical costs in a year, your insurance will pay 100% of covered expenses for the rest of the year.

How These Costs Work Together

Here’s a breakdown of how these costs might apply in real life:

1. You pay your premium every month to keep your insurance active.
2. If you need care, you first pay out of pocket until you meet your deductible.
3. After that, you start paying coinsurance or copays for services.
4. If your medical bills add up and you reach your out-of-pocket maximum, your insurance pays 100% of covered services for the rest of the year.

Final Thoughts: Choosing the Right Plan

When selecting a health insurance plan, consider:

• Low premium, high deductible – Good for healthy people who rarely visit the doctor.
• High premium, low deductible – Better if you expect regular medical expenses.
• Copays vs. coinsurance – If you prefer predictable costs, look for a plan with low copays.

Understanding these costs helps you budget for medical expenses, avoid surprise bills, and make informed decisions about your healthcare.

Learn more about selecting and using your health insurance following a cancer diagnosis from Triage Cancer.