What is a premium?
A premium is the recurring fee you pay to have health insurance.
Usually, people pay their premiums each month, but it can vary. If you have health insurance through your employer, your share of premium is deducted out of your paycheck. If you buy directly from an insurance company or have a marketplace health insurance plan, you may choose how to set up your payments.
What is a copay?
A copay is a set price that you pay to health care providers for each office visit.
Note: You may be responsible for more than a copay after a visit.
The cost of those services isn’t included in your copay, and they’ll be billed separately. Copays do not count toward your health plan’s annual deductible.
What is a Deductible?
A deductible is the amount you must pay toward your health care costs before your health insurance starts sharing the cost of care. Your health insurance deductible is an annual expense of your health insurance plan.
Because health insurance is a way to manage the financial risks of illness and injury, your plan’s deductibles are one of the ways for you to choose how much of that risk you’re willing to manage.
What is coinsurance?
A very common question people have when comparing health insurance plans is “What does coinsurance mean?” Coinsurance means sharing. When you see coinsurance on a plan description, it means that you will share costs with the health insurance company for covered services and claims.
Once your out-of-pocket spending for covered medical expenses has reached your annual deductible (see What is a deductible? above) amount, coinsurance starts paying a portion of your remaining covered medical expenses for the year.
You’ll see coinsurance shown as a percentage on a plan description.
A 10 percent coinsurance, for example, means your insurer pays 90 percent of covered costs—but only after you’ve paid enough of your health care bills to meet your annual deductible. After you meet your deductible, your insurer pays 90 percent and you pay 10 percent.
Generally, the more you pay for your premiums, the lower the coinsurance that you have to pay out of pocket for health care bills.
What is a covered service?
A covered service refers to a drug, office visit, supply, test, equipment or course of treatment that your health insurance covers.
Some health insurance plans cover medical services that other plans don’t. One example is a group plan where the employer decides which benefits to cover and which to exclude. One group might consider bariatric surgery medically necessary and cover that service. Another group may decide not to cover bariatric surgery because adding benefits means increasing the premium for everyone.
There are several reasons why a service might not be covered. One reason is that the latest scientific evidence suggests that a particular service has limited medical value or perhaps has not been proven as effective as other treatment options.
Other medical services aren’t covered because, while they might improve your well-being, they don’t present a direct benefit to your physical health. Examples include cosmetic surgery and certain reproductive medicine procedures.
What is an out-of-pocket expense?
Health insurance plans are not designed to pay for every medical expense you’ll have during the year. The difference between what the insurance pays toward your health care costs and the total amount owed for your health care costs is what you have to pay—that’s your out-of-pocket expense.
Here are some examples of out-of-pocket expenses:
Pre-deductible expenses: At the start of the year, most of your health care spending is not paid—until you’ve reached your annual deductible. Your out-of-pocket expenses on covered services count toward your deductible.
Coinsurance: Once your spending has reached your annual deductible, a percentage of your covered health care expenses is paid by your health insurance plan. This is called coinsurance. For example, if your plan covers 80 percent, then you are responsible for 20 percent of expenses. Your percentage is an out-of-pocket expense.
Non-covered services. Some health care expenses—like chiropractic, vision and alternative care—may not be covered by your health insurance plan. In those cases, you’re fully responsible for paying out-of-pocket for those services.