Premium: A monthly amount you pay for your insurance coverage, whether you use services or not. It’s your regular payment to keep your insurance active.

Deductible: The amount you pay for covered services each year before your insurance plan begins to pay.

Coinsurance: It is a portion of the medical cost you pay after your deductible has been met. It is always expressed as a percentage. Coinsurance is a way of saying that you and your insurance carrier each pay a share of eligible costs that add up to 100%. For example, in an 80/20 coinsurance plan, your insurance pays 80% of the cost of covered medical bills, and you pay the remaining 20%.

Copay: A fixed, out-of-pocket amount you pay for a specific covered service, like a doctor’s visit or a prescription. Copays typically apply each time you receive the service. Depending on your plan, copays may or may not count toward your deductible.

Here, fixed copay means: Rather than paying the entire cost, you pay the fee that your insurance company negotiated for the service provided by the in-network providers.

Out-of-Pocket: This is the portion of the medical bill/or service availed that the patient pays directly, either as a deductible, copay, or coinsurance. Note: Premium payments are not part of the out-of-pocket cost.

Out-of-Pocket Maximum: This is the most you will have to pay for covered services in a year. Once you reach this limit, your insurance plan will pay 100% of the costs for all covered medical services for the rest of the year.

---

Let’s understand these terms with an example:

Imagine you have a health insurance plan with the following terms:

• Premium: $0 per month (to keep your insurance active)
• Deductible: $1,200
• Coinsurance: 20%
• Out-of-Pocket Maximum: $5,000

Visit 1: You have a routine doctor’s visit. Let’s assume the cost of the visit is $300. Since your deductible has not been met, you pay the full $300. Your deductible is now at $300.

Visit 2: You have an ENT doctor visit. The total cost is $1,000. Your deductible is currently at $300, so you need to pay $900 to meet the $1,200 deductible ($1,200 – $300 = $900). After you pay that $900, the remaining cost of the visit is $100 ($1,000 – $900 = $100). Now that your deductible has been met, your coinsurance kicks in. You pay 20% of the remaining $100, which is $20. The insurance pays the other 80%, which is $80.

• Total paid by you for Visit 2: $900 (to meet deductible) + $20 (coinsurance) = $920
• Your total yearly spend so far: $300 (Visit 1) + $920 (Visit 2) = $1,220

Visit 3: You have another routine doctor’s visit, and the cost is $300. Since you have already met your deductible, your coinsurance applies. You pay 20% of the cost, which is $60 ($300 * 0.20 = $60). Your insurance pays the remaining $240.

• Total paid by you for Visit 3: $60
• Your total yearly spend so far: $1,220 + $60 = $1,280

Visit 4: Let’s say you undergo a surgery, and the total cost is $20,000. Since you have met your deductible, you are responsible for your 20% coinsurance. Your expected payment would be 20% of $20,000, which is $4,000.

• Your total spend so far: $1,280
• Your Out-of-Pocket Maximum: $5,000

You are still $3,720 away from meeting your Out-of-Pocket Maximum ($5,000 – $1,280 = $3,720). Therefore, you will pay the remaining $3,720 of the cost, and your insurance will cover the rest of the bill for this surgery. After this payment, you will have reached your $5,000 Out-of-Pocket Maximum.

• Total paid by you for Visit 4: $3,720
• Your total yearly spend so far: $1,280 + $3,720 = $5,000

From Visit 5 onwards, you don’t need to pay anything for covered medical services for the rest of the year because you have reached your annual Out-of-Pocket Maximum. Your insurance will pay 100% of all covered costs.

---

Comparing Insurance Plans

Basis of Difference	High-Deductible/Low Premium Health Plan	Low-Deductible/High Premium Health Plan
Out-of-Pocket Expenses	Higher out-of-pocket costs before insurance pays a significant portion	Lower out-of-pocket costs, as insurance coverage starts sooner
Ideal for	People who are generally healthy and do not expect frequent medical visits.	People with ongoing health conditions, who have frequent doctor visits, or who require major medical treatments or surgeries.

Important Note: The annual period to choose a health plan, known as the Open Enrollment Period, typically runs from November 1 to January 15 in the United States, with coverage beginning on January 1st of the following year.