Health insurance

What It Means

Health insurance is a plan that pays part of the cost of covered medical care in return for a premiumInsurance premiumThe amount you pay to keep an insurance plan, such as health insurance, in force, usually monthly, quarterly or yearly, whether or not you use any care. See more. You carry your own share through the deductible, copaymentsCopayA fixed dollar amount, such as $20, that you pay for a covered health care service under your health insurance plan. See more and coinsuranceCoinsuranceYour share of the cost of a covered health care service, set as a percentage such as 20%, that you pay after meeting your deductible. See more, and HealthCare.gov treats those out-of-pocket costs plus the premium as your total cost of care. When your spending on deductibles, copays and coinsurance for covered in-networkIn-networkDescribes a doctor, hospital or other provider that has a contract with your health plan, so you usually pay less for covered care than you would outside the network. See more care reaches the plan's out-of-pocket maximumOut-of-pocket maximumThe most you pay in a plan year for covered in-network care through deductibles, copays and coinsurance, after which the plan pays covered benefits in full. See more, the plan picks up the full cost of covered benefitsBenefits packageEverything an employer offers on top of wages, such as health insurance, paid leave and a retirement plan, which can be worth thousands of dollars a year. See more.

How People Say It

• "Open enrollment's coming, we need to pick a plan."
• "The cheap plan has a huge deductible, though."
• "Is that doctor even covered on our insurance?"

The Breakdown

Worked example. Two example plans, compared at three levels of covered medical billsMedical debtMoney owed for health care, such as hospital, doctor, lab or ambulance bills; unpaid bills can go to collections and, in some cases, onto credit reports. See more in a year:

How the $10,000 row works. Plan A: $1,500 deductible plus 20% of the other $8,500 ($1,700) is $3,200, added to $4,800 in premiums for $8,000. Plan B: $5,000 deductible plus 30% of the other $5,000 ($1,500) is $6,500, added to $3,000 in premiums for $9,500.

What the result means. In a light year the low-premium plan wins, because you pay little beyond the premium. With moderate bills, Plan A's lower deductible and coinsurance make it cheaper. At $40,000 both plans hit their out-of-pocket maximum, so the gap comes down to premiums plus each plan's cap. Run the year you expect, then a bad year, before you decide.

Good to Know

HealthCare.gov notes that all Marketplace plans cover certain preventive benefits in full before you meet the deductible, and many plans pay for some services, such as a checkup, before the deductible as well. The out-of-pocket maximum tallies what you spend on deductibles, copays and coinsurance for covered in-network care. This calculator is a simplified model; a real plan adds copays, separate in-network and out-of-networkOut-of-networkDescribes a provider that has no contract with your health plan, so the plan pays less or nothing for the care and you may be billed more. See more rules and services covered before the deductible, so read each plan's own details before choosing.

Related Terms and Categories

• Health insurance deductible

  What you pay on your own for covered health care before your health insurance plan begins sharing the cost.

• Copay

  A fixed dollar amount, such as $20, that you pay for a covered health care service under your health insurance plan.

• Coinsurance

  Your share of the cost of a covered health care service, set as a percentage such as 20%, that you pay after meeting your deductible.

• Out-of-pocket maximum

  The most you pay in a plan year for covered in-network care through deductibles, copays and coinsurance, after which the plan pays covered benefits in full.

• Insurance premium

  The amount you pay to keep an insurance plan, such as health insurance, in force, usually monthly, quarterly or yearly, whether or not you use any care.

• In-network

  Describes a doctor, hospital or other provider that has a contract with your health plan, so you usually pay less for covered care than you would outside the network.

Planning and life admin