How Insurance Works

When you shopped for health insurance on the Marketplace, you chose a coverage level based on your needs and your budget: Bronze, Silver, Gold or Platinum. Depending on the coverage level you chose, your costs will vary including your monthly premium, and whether you pay or how much you pay in copays or coinsurance.

Here’s an Example of How Insurance Works

In the example, look out for words like deductible, coinsurance and out-of-pocket to learn more about how they cover your costs in relation to your coverage level. Let’s say you have an insurance plan that has these basics:

  • $5,000 deductible
  • 20% coinsurance
  • Out-of-pocket maximum of $6,000

Under this plan, you will be responsible for paying for the first $5,000 of covered medical expenses (deductible). After that, your plan covers 80% of the covered expenses and you pay the remaining 20% (coinsurance). When the amount of coinsurance you’ve paid reaches $6,000 (out-of-pocket maximum), the plan covers 100% of your eligible medical costs until your “plan year” renews. A plan is good for one year. At the beginning of the next plan year, the $5,000 deductible and 20% coinsurance will start again.

Other Expenses That Affect Your Total Health Insurance Cost

Your total health insurance cost can also be affected by your out-of-pocket expenses. There’s the copayment, which is usually a small fixed amount you pay per visit to in-network doctors. This is different than coinsurance. Coinsurance is the percentage of costs you may be responsible for within your plan, once you reach your deductible.

For example, let’s say you’ve met your annual deductible, so your plan now pays for benefits. You may wonder what you will have to pay if you visit your doctor. The answer depends on the percentage your provider pays for medical services that are covered under the plan.

For example, you bruise your hip in a fall and you need an X-ray. Your plan covers 80% of an X-ray. Here’s how the costs might break down:

  • The X-ray costs $200
  • Your plan covers 80%, which is $160
  • Your out-of-pocket cost, or coinsurance, is $40 for the X-ray

You also need to consider your out-of-pocket expense limits. The out-of-pocket expense limit represents the maximum amount you are responsible for each year. Once the out-of-pocket expense limit is reached, insurance covers 100% of eligible expenses.

When you understand some of the costs of buying and using health insurance, it’s easier to find the plan that fits best for you and your family. Best of all, you’ll be able to get the most out of the plan you choose.