Transcript
Health insurance in the U.S. is notoriously confusing. Let's break down eight common terms.
Premium: This is the monthly amount paid to the insurance company for coverage, regardless of whether you get care or not. With job-based insurance, premium payments are usually taken straight out of the employee’s paycheck.
Out-of-pocket costs: These are any upfront costs to getting care separate from your monthly premium share. These costs come in several shapes and sizes, including ...
Deductible: This is the annual amount you agree to pay before the insurance company pitches in. It can range from $0 to over $10,000 for an individual, depending on your plan. Preventive care, such as checkups, vaccinations, or cancer screenings, are typically free — even if you haven't met your deductible. Another out-of-pocket cost ...
Copay: This is a fixed amount you pay for a covered service with insurance footing the rest. You might recognize this as a $15 charge when you pick up a prescription or a $25 charge for an office visit. With some plans, a copay typically applies only after you've met your deductible. That means you might owe the full bill.
Coinsurance: This is a percentage of a bill you're responsible for after you've met your deductible. So, let's say you need an MRI. Your insurance policy says you have 20% coinsurance for imaging. And the hospital charges $1,000 for the scan. You're responsible for paying 20% of the bill or $200. Insurance covers the rest.
Out-of-pocket limits: This is probably the most you'll have to pay for your health care in a year beyond your premium payments. After you reach this limit, your plan covers any remaining costs. Copays and coinsurance no longer apply. But there are some important caveats. Which brings us to ...
Out-of-network vs. in-network: Your insurance company negotiates rates with different hospitals and medical offices. Out-of-network means no negotiated rates, so you're usually on the hook for the full amount. Your plan and the type of care determine whether insurance will cover any of your bill. If the practice has negotiated a contract with your plan, they'll be listed as in-network. These are the doctors you want to see to avoid any surprise bills. You can find in-network doctors on your insurance company's website, or by calling the number on the back of your card.
And that brings us to our final limitation to watch out for.
- Prior authorization: Sometimes insurance needs to approve a drug or treatment recommended by your doctor before you receive it. Without that sign-off, you might be on the hook for the full cost.
To learn more about health insurance, head to kffhealthnews.org.
KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF — an independent source of health policy research, polling, and journalism.
