A Quick and Simple Guide to Health Insurance Costs and Assistance
Types of health insurance costs include: monthly premiums and out-of-pocket costs / cost sharing (copays, coinsurance, deductible, out-of-pocket maximum). Here the premium is what one pays for the policy, and then cost sharing is a reference to the part of the costs the plan covers vs. your out-of-pocket costs.
The Affordable Care Act offers assistance on all costs via the Marketplace and Medicaid/CHIP to families making under 400% of the poverty level without access to Medicare or employer-based coverage. Further benefits can be obtained by utilizing an HSA. Regardless of the assistance you qualify for, the plan you pick, or how you fund your care it is important to understand the basics of health insurance costs to ensure the best care per-dollar for you and your family.
Here is a simple but complete explanation of health insurance costs including: premiums, copays, coinsurance, deductibles, and out-of-pocket maximums, and an explanation of how ObamaCare assistance works for each. These are all the major costs associated with health insurance.
TIP: This page is focused on costs only, see our page on “How Does Health Insurance Work?” for more details on how insurance works with the ACA.
- Health Insurance Premiums: The amount you pay every month to keep your plan going. You can get lower costs through Marketplace Premium Tax Credits taken in advance, in part or in full, or on your taxes based on family size and household income (between 100% – 400% of the poverty level). This amount does have to be repaid if income changes. Premium tax credits are based on average plan price in your state. Premiums are typically free through Medicaid or CHIP, see eligibility here. Get tips on choosing the best health plan.
- Health Insurance Out-of-Pocket Costs / Cost Sharing: Out-of-pocket costs are costs incur beyond your premium when accessing covered services (your cost sharing of services that are covered in-network under your plan, or out-of-network with cost sharing as per the terms of your contract), they include: copays, coinsurance, deductible, out-of-pocket maximum. Marketplace Cost Sharing Reduction assistance is offered in advance on all marketplace plans based on family size and household income (based on the Federal Poverty Level and MAGI). This reduces all costs by a set %. This amount does not have to be repaid if income changes. Medicaid / CHIP cover most costs and eliminate most cost sharing (benefits and eligibly can differ by state in states that didn’t expand Medicaid under the ACA).
- Health Insurance Copay: The amount you pay per service upfront each time you access a service subject to a copay. The amount owed can change per the terms of your contract, for instance you may have a limit on the amount of times you can access a specific service at a specific copay amount.
- Health Insurance Deductible: The amount you must pay out-of-pocket before your health plan starts paying coinsurance. All in-network deductibles are capped by the ACA.
- Health Insurance Coinsurance: The % split between what you owe and the insurer owes for a service. Typically a service will have a copay or coinsurance. The higher the deductible the less the coinsurance matters and the more the copay matters, as you are less likely to hit the deductible on higher deductible plans.
- Health Insurance Out-of-Pocket Maximum: The maximum dollar amount you can pay in out-of-pocket costs each calendar year before all in-network services are covered, the plan may also cover out-of-network services at a % after your maximum his hit. Typically there is a different maximum for in-network and out-of-network. All in-network maximums are capped by the ACA.
TIPS: Know the difference between a HMO and PPO, it can make a difference as to your doctor network. Always check with a plan to ensure your family doctor and other preferred providers are in your network. Make sure to check your summary of benefits and coverage sheet and drug schedule to better understand your cost sharing amounts, when in doubt ask the insurer directly.comparing health plans, health plan types, and buying a health plan.