Learn the six terms that explain most insurance bills
These are the definitions worth knowing before you read an EOB, compare providers, or try to guess what a service might cost.
Premium
The monthly amount you pay to stay insured, whether or not you use care that month.
A premium keeps the plan active, but it does not replace the other costs you may still owe when you receive care.
Deductible
The amount you pay yourself before many plan benefits begin sharing costs with you.
Early in the year, the deductible often explains why a bill feels higher than expected.
Co-pay
A flat fee charged for some visits or services, such as a fixed office-visit amount.
A copay is predictable, but it may apply alongside other costs on the same day of care.
Co-insurance
A percentage of the covered cost that you are responsible for after plan adjustments and, in many cases, after the deductible is met.
Coinsurance grows with the price of the service, so expensive imaging or hospital care can still leave you with a large share.
Out-of-pocket maximum
The most you pay for covered care in one plan year before the insurer begins paying 100% of covered in-network services.
This is the yearly ceiling that protects you from the worst-case cost of covered care, but it may reset every year and may be different for out-of-network care.
Network
The group of providers and facilities that have agreed to your plan's pricing rules.
In-network care usually costs less because the plan has negotiated rates, while out-of-network care can mean higher cost sharing or charges above the allowed amount.
- Example plan: $200 monthly premium and a $1,500 deductible.
- You keep paying the $200 premium each month as long as you stay enrolled in the plan.
- If you receive a $3,000 bill after breaking your arm, you pay the first $1,500 because that is the deductible.
- After the deductible is met, the insurer starts paying its portion according to the plan rules.
- The deductible usually resets each plan year, so a new year can mean starting the deductible over again.
- Doctor visit example: if the visit costs $150, a $25 copay plan means you pay $25, while a 20% coinsurance plan means you pay $30.
- Imaging example: if you see a doctor and the visit uses a $25 copay, you may still owe separate coinsurance for an MRI or scan ordered that day.
- If the insurer-adjusted MRI amount is $5,200 and your coinsurance is 20%, your share for the MRI would be $1,040 while the plan pays the rest of the adjusted amount.
- One visit can create more than one kind of patient cost, so it is normal to ask which part is a copay and which part is coinsurance.
Two terms that deserve a second look
- Your plan may have a separate out-of-pocket maximum for out-of-network care, so meeting the in-network maximum does not automatically mean out-of-network charges are fully covered.
- Out-of-pocket maximums often reset at the beginning of the year. Check the exact plan-year reset date for your coverage.
- In-network coverage is usually better because the plan's allowed amount is lower than the provider's list price.
- Out-of-network providers may charge above the allowed amount, which can leave you responsible for balance billing in addition to your plan's stated cost sharing.