Posted July 03, 2025 by Anupreet Kaur, M.D., FAAFP, Medical Director, Care Management and Population Health
Let’s face it. Health insurance pricing can be confusing. At first glance, it looks straightforward with a monthly fee for coverage on the health services you need. But throw in terms like deductibles, copays and out-of-pocket maximums, and it can be difficult to determine what you’re expected to pay each year.
Yet, health insurance is a vital expense to help you pay for your healthcare costs. Just like car and home insurance, it provides crucial financial protection if you’re involved in a severe accident or get seriously ill. Even if you’re not sick or injured, health insurance can help keep your medical expenses down by offsetting costs for preventative services.
The good news? By more clearly understanding how health insurance costs are structured, you can make informed decisions when comparing plans or receiving care, avoid unexpected expenses and take better control of your coverage.
So, whether you’re comparing plans or looking to maximize coverage, while managing expenses, SummaCare breaks down health insurance costs to help you better understand what you’re expected to pay. Balancing the monthly premium against potential out-of-pocket costs is important to ensure affordability — and give you peace of mind for the year ahead.
Here’s how health insurance costs work and terms you need to know to estimate what you’re expected to pay each year:
This is the fixed amount you’ll pay for plan coverage each month, regardless of how many services you use. To get your annual premium costs, multiply the monthly premium by 12. For example, if your monthly plan premium is $400, you’ll pay $4,800 for health insurance for the year.
Deductible
This is the amount of money you’ll pay out-of-pocket per calendar year before your insurance coverage kicks in and starts sharing costs. For example, if your deductible is $1,500, your plan won’t pay anything until you have paid $1,500 for covered healthcare services. Typically, lower deductibles mean higher premiums and vice-versa.
After the Deductible is met, two types of costs apply to each service:
This is your percentage share of the costs of a covered healthcare service after you reach your deductible. Unlike copays that are fixed amounts, coinsurance depends on the total cost of service.
For example, if your coinsurance is 20 percent and an emergency room visit costs $1,000, you’ll pay $200. Your health insurer will cover the remaining $800, assuming you’ve already reached your deductible. You’ll pay coinsurance until you reach your plan’s out-of-pocket maximum.
This is a fixed dollar amount you’ll pay when you visit an in-network provider or fill a prescription after you’ve paid your deductible. Copays — usually paid at the time of service — can range in price, depending on the service, from $0 to $15 to $45 for outpatient doctor visits to as high as $200 to $300 for emergency room visits.
Maximum you will pay for services in a year - out-of-pocket maximum
This is the most you’ll pay out-of-pocket during a coverage period (usually one year) for your share of the costs for covered (in-network) medical services. This can include deductibles, copays and coinsurance. After you reach this limit, the plan will pay 100 percent of covered services for the remainder of the year. So if your out-of-pocket maximum is $6,000, you’ll never pay more than that for that benefit year. However, this doesn’t include monthly premiums and prescription drug costs.
This is the most a health insurance plan will pay for a covered medical service. It’s a predetermined negotiated amount that your insurer considers reasonable for a service, regardless of what the provider is charging.
Why is it important for you to know?
Because it works differently for in-network versus out-of-network providers.
For example, if your in-network provider charges $200 for a service, but your maximum allowable charge is $125, the provider will get paid the allowed amount and will have to write off remaining $75. You won’t have to make up the difference between the actual amount billed and the allowable charge. However, if you receive service from an out-of-network provider, insurance will pay $125 out of $200, and you may be responsible for the rest of the balance.
If you get services during an office visit from an in-network provider and your health plan’s allowed amount for an office visit is $100, you’ll pay $100 for that visit—if you haven’t met your deductible, and the visit is subject to the deductible.
If you’ve met your deductible, you’ll pay your coinsurance or copayment amount instead, if applicable.