Most people pay health insurance premiums for years without fully understanding what they've bought — until a big bill arrives and none of it makes sense. This post walks through the five cost-sharing terms that determine what you actually owe when you get care.
Jump to what matters to you
- Your premium is what you pay to have coverage — it doesn't reduce what you owe for care Premium →
- Your deductible is what you pay out of pocket before your plan starts sharing costs Deductible →
- Copays are flat fees that often apply regardless of whether you've met your deductible Copays →
- After your deductible, you split remaining costs with your plan — that split is coinsurance Coinsurance →
- Your out-of-pocket maximum is the most you'll pay in a year — after that, your plan pays 100% OOP Max →
- See how all five work together in a real scenario Real Example →
Your premium: the cost of having coverage
Your premium is the monthly amount you pay to keep your health insurance active — whether you use it or not. If you get coverage through an employer, your employer usually pays part of it; you pay the rest through payroll deduction.
The premium is not a credit toward your care. It doesn't reduce your deductible, your copays, or anything else you owe at the point of service. Think of it like a gym membership: you pay monthly to have access, but you still pay separately for a personal trainer.
Premiums matter most when comparing plans. Lower-premium plans almost always have higher deductibles and cost-sharing — so the tradeoff is paying less now versus paying more when you actually need care. Neither is inherently better; which makes sense depends on how much care you expect to use.
Your deductible: what you pay first
Your deductible is the amount you pay out of pocket each year before your insurance starts sharing the cost of care. If your deductible is $2,000, you pay the first $2,000 in covered medical bills every year — then your plan kicks in.
A few important details:
Not everything applies to the deductible. Copays often don't count toward it. Preventive care — annual physicals, recommended screenings — is typically covered at 100% before the deductible under ACA-compliant plans. Out-of-network care may not count either, depending on your plan.
Family plans have two deductibles. There's typically an individual deductible and a family deductible. Once any one family member hits their individual limit, the plan kicks in for them — even if the family total hasn't been reached yet.
The deductible resets every year. Usually January 1st, though some plans use a different plan year. If you're approaching a major expense — surgery, a new specialty medication — timing can matter significantly. A procedure in December that pushes you past your deductible does you no good once January resets the clock.
Copays: the flat fee at the door
A copay is a fixed dollar amount you pay for a specific service — typically $20–$50 for a primary care visit, more for specialists or urgent care, and a flat amount per prescription fill on many plans.
Copays are straightforward: you pay the set amount, your plan covers the rest for that service. They usually apply whether or not you've met your deductible, which means even before you've paid a dollar toward a $2,000 deductible, you might pay only a $30 copay to see your doctor.
Not every plan uses copays for everything. Some plans apply coinsurance instead — meaning you owe a percentage of the bill, not a flat fee, for many services. Check your plan's Summary of Benefits and Coverage document to know which services have copays and which go to coinsurance after the deductible.
Coinsurance: splitting the bill
Coinsurance is a percentage of the cost you pay after your deductible is met. An 80/20 plan means your insurance pays 80% and you pay 20%. A 70/30 plan means you pay 30%. These percentages apply to the allowed amount — what the insurer has agreed the service is worth — not necessarily what a provider bills.
If you have a $2,000 deductible and 80/20 coinsurance, here's how an $8,000 hospital bill works:
| Step | Amount | Who pays |
|---|---|---|
| Deductible (you pay first) | $2,000 | You |
| Remaining balance | $6,000 | — |
| Your 20% coinsurance | $1,200 | You |
| Plan pays 80% | $4,800 | Insurance |
| Total out of pocket for this bill | $3,200 | You (before OOP max kicks in) |
Coinsurance adds up quickly on expensive services. This is exactly why the out-of-pocket maximum matters so much.
Out-of-pocket maximum: the ceiling
Your out-of-pocket maximum (OOP max) is the most you will pay for covered, in-network services in a plan year. Once you hit it, your plan pays 100% of covered costs for the rest of the year.
The OOP max typically counts your deductible, copays, and coinsurance together — so all the payments in the example above count toward it. In 2025, federal law caps OOP maximums for ACA-compliant plans at $9,200 for individuals and $18,400 for families.
Two important limits on what the OOP max covers:
It only applies to covered, in-network services. Out-of-network care, non-covered services, and anything your plan excludes doesn't count toward your OOP max — no matter how much you spend on it.
Premiums don't count. What you pay monthly to maintain coverage is entirely separate from your OOP max calculation.
How it all works together: a real scenario
Say you have a plan with a $1,500 deductible, 80/20 coinsurance, $30 primary care copay, and a $6,000 OOP max.
You pay the $30 copay. Your deductible balance doesn't change. The $30 does count toward your $6,000 OOP max.
You haven't paid anything toward your deductible yet. You pay $1,500 (the full deductible), then 20% of the remaining $900 = $180. Total out of pocket for the MRI: $1,680. Your deductible is now fully met for the year.
Your deductible is already met. You now owe 20% coinsurance on the surgery charges. But once your total payments for the year — copays, deductible, coinsurance — reach $6,000, the plan covers 100% of covered in-network costs through December 31st.
What doesn't count toward your OOP max
This is where patients get surprised by bills they didn't expect. The following generally do not count toward your out-of-pocket maximum, no matter how much you spend:
- Out-of-network charges
- Services your plan excludes (vision and dental on standard medical plans, for example)
- Monthly premiums
- Balance billing from out-of-network providers
- Medications on formulary tiers that aren't subject to cost-sharing limits
Understanding which services and medications your plan actually covers matters far more than comparing premium prices alone. The next post in this series covers plan types, networks, formularies, and care exclusions — and when a high-deductible plan might actually be the right choice.
Sources
- Centers for Medicare & Medicaid Services. Out-of-Pocket Maximum/Limit. HealthCare.gov Glossary. healthcare.gov
- Internal Revenue Service. Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans. irs.gov
- Kaiser Family Foundation. 2024 Employer Health Benefits Survey. kff.org
- U.S. Department of Health & Human Services. Preventive Care Benefits for Adults. healthcare.gov