What’s What…Understanding Premium, Deductible, and Out of Pocket Costs

Now that you have chosen a health insurance plan, it’s a good idea to know what you might find in your insurance documents. Over the years, we’ve found that there has been some confusion between a plan’s deductible and out-of-pocket limits.  


People often ask us, why are these amounts different, and how do they affect my health care costs? We know you might have a lot of questions, and today we are going to take a closer look at insurance premiums, deductibles, and out-of-pocket costs, to help alleviate any concerns that you might have about these important parts of your health insurance plan. Read on… 


Monthly Premium, Deductibles, & Out-Of-Pocket Costs  


First, here’s what each of these terms means: 


  • Deductible: This is how much you have to spend for covered health services BEFORE the insurance company pays anything. This excludes free preventative services. 
  • Copayments & Coinsurance: These are payments that you pay each time you go to the doctor or receive medical care after you have reached your deductible. 
  • Out-of-Pocket Maximum: This is the most that you have to spend on covered medical services in a year. After you have reached this amount, the insurance company will pay 100% for covered care.  


Miss Open Enrollment? McKnight & McKnight Insurance offers many individual health insurance plans that can meet your specific needs. Call us today for an individualized quote: (866) 525-0368 


Related: I Missed Open Enrollment, What Can I Do Now?  


What is a Deductible & Coinsurance? 


Your deductible is the amount that you will have to pay out-of-pocket for any covered medical care that you receive before your insurance company will start helping with the costs. This amount that your insurance company pays once you meet your deductible depends on your coinsurance percentage.  

Let’s look at an example 


Say you purchase a health insurance plan with a $2,000 deductible and 20% coinsurance. You go to the doctor and have a procedure that costs $1,000, and then another that costs $1,500. Based on your plan, you have to pay the first $1,000 out of pocket, and the $1,000 towards the other procedure. Then, based on your 20% coinsurance, you pay $100 of the remaining $500. The insurance company will cover the rest. If you need any other medical care for the rest of the year, you will pay 20% of the costs, your insurance covers the rest.  


If you look at it this way, the deductible represents the total that you must pay before your insurance company helps you to pay a percentage not the entirety of your covered care.  


Related: Is a High Deductible Plan A Good Option?  


At McKnight & McKnight Insurance Solutions, we can also assist with Medicare SupplementLife InsuranceDental/Vision plansDisabilityCritical Illness, and other Supplemental Insurances. Get your fast, free quote—CLICK HERE to schedule a phone appointment today!  


Out-of-Pocket Maximum 


If you are looking to figure out the maximum amount that you will have to pay for care in a given year, then this is the number that you will want to pay attention to!  

Think of the out-of-pocket maximum as your deductible, coinsurance, and copayments combined. Keep in mind, the premium that you pay monthly does not factor into your out-of-pocket maximum.  


How to Estimate Yearly Cost of Health Insurance  


To pick the best health care plan for you, you need to take some time to estimate the medical services that you might use in the year ahead. Of course, we know that it is impossible to predict the exact amount, but we recommend taking into account how often you go to the doctor, how many prescriptions you have, and how much care you are likely to need in the coming year.  


  • When you compare insurance plans you will be able to see an estimate of the total yearly cost which includes monthly premiums and -out-of-pocket costs based on your expected amount of care. 
  • If you don’t expect to go to the doctor very much and don’t take regular prescriptions, a plan with a high deductible and lower monthly premiums might be the way to go. (Keep in mind if you do need care, the insurance company will pay very little of the costs if you need care.)
  • If you expect to go to the doctor frequently or have multiple prescriptions, a plan with a higher premium will help you pay more for the costs of your care. 
  • Keep in mind that there might be subsidies, tax credits, and Cost-Sharing Reductions that you might be eligible for. 



Call Our Health Insurance Experts 


Understanding all the coverage terms in your policy can get confusing. We are here to answer any questions regarding your health care plan whenever you need helpOur local insurance agents take pride in being available for you when you need us! 

An independent agent at McKnight & McKnight Insurance can help you choose an individual health insurance plan based on your unique circumstances. Here, we believe in keeping the promise of affordable coverage. Fill out our online questionnaire or call us for an insurance quote today in minutes – (866) 525-0368!  

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Are you ready to save time, aggravation, and money? The team at McKnight & McKnight Insurance Solutions is here and ready to make the process as painless as possible. We look forward to meeting you!

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