How Health Insurance Works | What is a Deductible? Coinsurance? Copay? Premium?



If you have health insurance or are in the market for an insurance plan, you may be feeling terminology overload. What is a deductible? What is coinsurance? How does a Co-pay work? What is an insurance Premium? Individual out of pocket maximum? In this video, we’re going to break down these essential health insurance terms, explain how the costs work for both you and your insurance company, and hopefully help you feel more confident about how your plan works.

Table of Contents:
=============================
0:00 – Intro
0:30 – Overview
1:01 – Your Expenses
1:28 – Insuranace Premium
1:43 – What is a Deductible?
3:13 – What is Copay?
3:50 – FREE Services
4:03 – What is Coinsurance?
4:40 – Individual Out of Pocket Maximum (OOP)
5:00 – Family OOP Max
5:08 – Review

There are 3 levels of health care costs. The higher your costs for the year, the higher up you go. Level 1, You’re paying everything. When your healthcare expenses get to a certain point, you enter Level 2, where you and your insurance company share the costs. If the money you’re paying out of your pocket hits your plan’s cap, you enter Level 3, where your insurance will cover everything further. We’ll circle back to this at the end and it’ll all make more sense.

Now, whether your health insurance is provided through your employer plan, by someone else’s employer plan, self-pay, or a government-issued plan like Medicare or Medicaid, they all have set amounts for premiums, deductibles, co-pay, and co-insurance. These are all terms that represent your out of pocket costs.

🔵 Premium. Think of your Premium like a monthly subscription fee. This is how much you pay each month to keep your insurance active. You pay this even if you never go to a doctor.

🔵 Deductible. Your deductible is an amount specified by your plan that you have to pay in a given year before your insurance pays a dime. For example, if your deductible is set at $4000, and the bill for your visit to the hospital was $2000, you have to pay 100% of that bill. Bummer.
But if your deductible is set at $4000 and the hospital bill is $8000, insurance would kick in to help cover half of that bill. Notice that I said it will “help cover” half of that bill…”help.” More on that later. Once you have paid that amount toward covered medical expenses, you’re good until your plan renews. (Usually January 1st)

🔵 Co-Pay. Your co-pay is a set cost you pay for a covered health care service, such as visiting an in-network doctor, a specialist, or buying drugs. Let’s say you go to see your doctor, who charges $250 for an office visit, but your insurance has a co-pay of $50 for doctor’s visits. You pay the $50 and your insurance picks up the rest.

🔵 Co-Insurance. Remember when I said that insurance will “help cover” costs that exceed your deductible? That’s where co-insurance comes in. Co-insurance is a shared cost between you and the insurance company. So, depending on your policy, it may say that after your deductible you pay 20% and your insurance company pays 80%. That’s called an 80/20 policy.

🔵 Individual Out of Pocket (OOP) Maximum: The amount of money that you pay through co-pays, co-insurance, and deductibles. This is your plan’s cap on how much you have to personally pay toward your healthcare costs. After that, 100% is covered by your insurance.

🔵 Family out of pocket max: A cap on the medical costs for a family. After that, your insurance covers the rest for the entire family.

Now let’s bring back the 3 levels example from the beginning. You start on level 1, paying basically everything out of pocket…that is until you reach your deductible. That’s when you go to level 2, where you split the cost with your insurance company through Co-Insurance. If your medical expenses get so high that the total of what you paid reaches your yearly out of pocket maximum, you move to level 3 where all further healthcare expenses for the rest of the year are 100% covered by your insurance plan. When your plan resets for the year, you start back at the beginning.

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36 Comments

  1. I know all the other comments say this… but thank you, this is THE BEST explanation for health insurance I have come across and I have just watched like 50 videos. I was tyring to become a pharmacy technician so I wanted that understanding and you nailed it on the head, I completely understand now… THANKS AGAIN!!!

  7. I signed up to use Athena and I have waited 34 days to get it but I called and wanted to know why I hadn't got the OTC card now I got the first card they sent and they cancelled it so I have to wait for the next card they sent to replace it and I will probably lose the money on it which proves they lie and I will probably have to wait another month to get the right one and if it takes 34 days I will lose 225 so they are just screwing people with out caring 1 damn bite and proves that they don't care about people don't make the same mistakes I did

  8. I hope this helps make sense of our fabulous American healthcare system.
    I pay $488 a month for the “premium”
    The insurance won’t kick in until I meet the “deductible” of $7500. It will restart at the beginning of the new year.
    Each time i visit the ER or Urgent Care it’s a $150 “copay”.

    Where do my $488 go? Profits for Kaiser. Oh which will go up with the new year as well. OH and where does a third of my paycheck go? Boeing, Israel, Ukraine, PG&E

  16. The biggest fucking scam in America is Medicare. What the heck are Part A, Part B, Part C, Part D, Part E, and Part F? Some cover hospital admission, some cover doctor's office visit, some cover drugs, some don't cover your teeth, vision, or hearing. It is a total mess of partial coverage. Just give us one Medicare card and cover all medical costs. We have already paid into the system for 30-40 years. The insurance companies administering Medicare benefits are profiting from the complexity. United Healthcare's CEO got a 2 billion dollar bonus! That is pure robbery of taxpayer money. Nationalize all healthcare now. The only people benefiting from the current system are insurance company CEOs. Healthcare is so foundational for the people of a nation, we cannot allow it to be in the hands of private profiteers. Just like the military, the highways, railroads, and police, we need collective ownership of healthcare. Not for companies that profit from denying you healthcare.

  24. Let me explain to you how this really works You pay the insurance company You finally go to a doctor have to pay a deductible and all that money you paid the insurance company You could have saved up and had several doctor visits

  25. Isnt it fun to live in a world, where a $4000 deductible could be catastrophic….because you need to see a GI specialist, and a few tests and procedures could EASILY cost $4,000, in which you have to pay, swipe that credit card, because $4,000 is more than MOST people make in an entire MONTH….BEFORE TAXES! So you may have to work 160 HOURS just to make the $4,000 before taxes to pay for an hour or two of tests.

  27. Everything changes every year.. i cant figure out what my insurance covers or not..or if im in or out of network? 🤷 but i can tell you my insurance premiums are more than my mortgage.

  31. What confuses me is the ones that have a $0.00 per month cost but still mentions the pay ceilings?

    Why is it listed as $0? and the ones I look at like that from multiple providers seem to have a better coverage list than the paid ones?

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