Insurance & Billing Education

A premium is the amount you pay for your health insurance plan, typically billed monthly. You pay your premium regardless of whether you use healthcare services during that period. Premiums can be paid by you, your employer, or split between both. A plan with a lower premium often has higher out-of-pocket costs when you receive care, and vice versa.

A deductible is the amount you must pay out-of-pocket for covered healthcare services before your insurance begins to pay. For example, if your deductible is $1,500, you pay the first $1,500 of covered services yourself. After you meet your deductible, your insurance begins to share costs through copays or coinsurance. Preventive services are often covered before you meet your deductible. Deductibles reset annually, typically on January 1.

A copay is a fixed amount you pay for a covered healthcare service at the time of the visit. For example, you might pay a $30 copay for a primary care visit or $50 for a specialist visit. Copays can vary by service type and are separate from your deductible. Some plans require you to meet your deductible before copays apply, while others have copays from the start.

Coinsurance is your share of the cost of a covered service, calculated as a percentage. For example, if your plan has 20% coinsurance, you pay 20% of the allowed amount and your insurance pays 80%. Coinsurance typically applies after you have met your deductible. Unlike a copay (which is a flat fee), coinsurance varies based on the total cost of the service.

The out-of-pocket maximum is the most you have to pay for covered services in a plan year. After you reach this amount through deductibles, copays, and coinsurance, your insurance pays 100% of covered services for the remainder of the year. This provides a financial safety net in case of serious illness or injury. Premiums do not count toward your out-of-pocket maximum.

In-network providers have a contract with your insurance company to provide services at negotiated rates, resulting in lower costs for you. Out-of-network providers do not have such agreements, and you typically pay significantly more for their services. Some plans (like HMOs) may not cover out-of-network care at all except in emergencies. PPO plans usually cover out-of-network care but at higher cost-sharing. Always verify that a provider is in your network before scheduling an appointment.

An Explanation of Benefits (EOB) is a statement from your insurance company that explains what services were provided, what was billed, what the insurance paid, and what you may owe. An EOB is not a bill. It helps you understand how your claim was processed. Review your EOBs carefully to check for errors and compare them with any bills you receive from your provider.

Prior authorization (also called preauthorization or precertification) is a requirement by some insurance plans that your provider obtains approval from the insurer before performing certain services, procedures, or prescribing certain medications. Without prior authorization, the insurance may deny the claim, leaving you responsible for the full cost. Your provider's office typically handles the prior authorization process, but it is wise to confirm that authorization has been obtained before your scheduled service.