What is is called when a specific amount of money a patient must pay out of pocket before the insurance carrier begins paying?

Deductibles

What is a deductible?

A deductible is the amount you pay each year for most eligible medical services or medications before your health plan begins to share in the cost of covered services. For example, if you have a $2,000 yearly deductible, you'll need to pay the first $2,000 of your total eligible medical costs before your plan helps to pay.

Benefits Information

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Deductibles for family coverage and individual coverage are different. Even if your plan includes out-of-network benefits, your deductible amount will typically be much lower if you use in-network doctors and hospitals.

How do I decide what deductible amount to choose?

If you're mostly healthy and don't expect to need costly medical services during the year, a plan that has a higher deductible and lower premium may be a good choice for you.

On the other hand, let's say you know you have a medical condition that will need care. Or you have an active family with children who play sports. A plan with a lower deductible and higher premium that pays for a greater percent of your medical costs may be better for you.

What is the difference between a deductible and a copay?

Depending on your health plan, you may have a deductible and copays.

A deductible is the amount you pay for most eligible medical services or medications before your health plan begins to share in the cost of covered services. If your plan includes copays, you pay the copay flat fee at the time of service (at the pharmacy or doctor's office, for example). Depending on how your plan works, what you pay in copays may count toward meeting your deductible.

What is coinsurance?

Coinsurance is a portion of the medical cost you pay after your deductible has been met. Coinsurance is a way of saying that you and your insurance carrier each pay a share of eligible costs that add up to 100 percent.

For example, if your coinsurance is 20 percent, you pay 20 percent of the cost of your covered medical bills. Your health insurance plan will pay the other 80 percent. If you meet your annual deductible in June, and need an MRI in July, it is covered by coinsurance. If the covered charges for an MRI are $2,000 and your coinsurance is 20 percent, you need to pay $400 ($2,000 x 20%). Your insurance company or health plan pays the other $1,600. The higher your coinsurance percentage, the higher your share of the cost is. You are also responsible for any charges that are not covered by the health plan, such as charges that exceed the plan’s Maximum Reimbursable Charge.

What is an out-of-pocket maximum?

Out-of-pocket maximum is the most you could pay for covered medical expenses in a year. This amount includes money you spend on deductibles, copays, and coinsurance. Once you reach your annual out-of-pocket maximum, your health plan will pay your covered medical and prescription costs for the rest of the year.

Here’s an example.** You have a plan with a $3,000 annual deductible and 20% coinsurance with a $6,350 out-of-pocket maximum. You haven’t had any medical expenses all year, but then you need surgery and a few days in the hospital. That hospital bill might be $150,000.

You will pay the first $3,000 of your hospital bill as your deductible. Then, your coinsurance kicks in. The health plan pays 80% of your covered medical expenses. You'll be responsible for payment of 20% of those expenses until the remaining $3,350 of your annual $6,350 out-of-pocket maximum is met. Then, the plan covers 100% of your remaining eligible medical expenses for that calendar year.

Depending on your plan, the numbers will vary—but you get the idea. In this scenario, your $6,350 out-of-pocket maximum is much less than a $150,000 hospital bill!

What's the difference between copays and coinsurance?

Use this chart to compare copays and coinsurance to better understand the differences.

Benefits Information

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The percentage of costs of a covered health care service you pay (20%, for example) after you've paid your deductible.

Let's say your health insurance plan's

for an office visit is $100 and your coinsurance is 20%.

• If you've paid your : You pay 20% of $100, or $20. The insurance company pays the rest.
• If you haven't met your deductible: You pay the full allowed amount, $100.

Example of coinsurance with high medical costs

Let's say the following amounts apply to your plan and you need a lot of treatment for a serious condition. Allowable costs are $12,000.

• Deductible: $3,000
• Coinsurance: 20%
• Out-of-pocket maximum: $6,850

You'd pay all of the first $3,000 (your deductible).

You'll pay 20% of the remaining $9,000, or $1,800 (your coinsurance).

So your total out-of-pocket costs would be $4,800 — your $3,000 deductible plus your $1,800 coinsurance.

If your total out-of-pocket costs reach $6,850, you'd pay only that amount, including your deductible and coinsurance. The insurance company would pay for all covered services for the rest of your plan year.

Generally speaking, plans with low monthly

have higher coinsurance, and plans with higher monthly premiums have lower coinsurance.

Related content

• Learn how deductibles and coinsurance affect your total costs of care

What's the correct name for the amount of money that a patient must pay before the insurance company begins to pay?

What's the correct name for the amount of money that a patient must pay before the insurance company begins to pay use letter keys to select choices?

What is the term for the amount of money that the insured pays?

Is a term that means you must pay for medical services out of pocket?