Deductibles, Copays and Coinsurance, Explained Simply

Health insurance paperwork is full of terms that sound similar but affect your costs very differently. Here's what each one actually means.

Deductible

Your deductible is the amount you pay for covered care each year before your plan starts sharing costs. For example, if your plan has a $1,500 deductible, you generally pay the first $1,500 of covered medical expenses yourself. Preventive care is often covered before the deductible is met, but most other services are not.

Copay

A copay is a fixed dollar amount you pay for a specific service, such as $25 for a primary care visit or $50 for a specialist. Copays are often required even after you've met your deductible, and they don't usually change based on the actual cost of the visit.

Coinsurance

Coinsurance is your share of costs after the deductible is met, expressed as a percentage. For example, with 20% coinsurance, your plan pays 80% of the covered cost and you pay the remaining 20%. This continues until you reach your plan's out-of-pocket maximum.

Out-of-pocket maximum

This is the most you'll pay in a plan year for covered services, combining deductible, copays and coinsurance. Once you hit this limit, your plan typically covers 100% of covered costs for the rest of the year.

Putting it together

Imagine a plan with a $1,500 deductible, 20% coinsurance and a $6,000 out-of-pocket maximum. For a $10,000 medical bill, you'd typically pay the first $1,500 (deductible), then 20% of the remaining $8,500 (about $1,700) — unless that pushes you past your out-of-pocket maximum, at which point your payments would stop for the rest of the plan year. Lower-premium plans usually carry higher deductibles and out-of-pocket maximums, so it's worth weighing your monthly budget against how much medical care you expect to need.