Understanding Your Health Insurance Costs | Consumer Reports

You're deciding which insurance plan to purchase, and want to know, how much is it going to cost. Well, it's not so simple. Sometimes, you pay money toward your health care. Sometimes, the insurance company pays money. But when? To figure it all out, there are three main ideas you need to know. Premiums, deductibles, and out-of-pocket maximum. It may sound complicated, but stay with us. It's not as hard to understand as you think. First, premiums. Think of your insurance as a monthly membership. Every month, you pay the same amount in order to be a member. That amount is your premium. With your premium, say, $200 a month, you get some preventive care for free. This includes care like vaccines and screening for diabetes, cholesterol, and breast cancer. This care is covered by your premium. But what if you need more than just preventive care?

If you need a health service beyond preventive care-- illnesses, a broken leg, emergency room visits-- you usually need to pay extra. How much? Well, that changes over time. There are three main stages. First, you pay. Then, your insurance pays some, and you pay some. And finally, your insurance pays everything. So how does this work? In the first stage, at the beginning of the year, you pay for most of your health care until you reach your deductible. Remember that word? Deductible. A deductible is the amount of money you have to pay for your care before the insurance company will share the costs. So let's say your deductible is $500. That means, almost every time you get health services, you will pay for all those services, until you've paid a total of $500. It's like you're filling up a bucket. Once you add enough to that bucket

so that you pay your whole deductible, then everything changes. Then, you enter into the second stage. Now, every time you get health services, your insurance company will share the cost of those services. How much? That depends on your plan. Usually, you pay part of the cost-- fees called co-pays, or coinsurance-- and your insurance pays the rest. But the second stage doesn't go on forever. If you reach a certain amount, you won't have to pay for any services. Remember that bucket? Every time you fill it with co-pays and coinsurance, your insurance company is keeping track. If you fill that bucket up to the top, everything changes again. You enter stage three. From this point on, your insurance company pays everything for the rest of the year. That's right. Every dollar of your health services paid by your insurance company. So what's at the top of that bucket?

It's called your out-of-pocket maximum. This is the most money you will pay for your health care over an entire year. So let's say your out-of-pocket maximum is $2,000. After you pay your $500 deductible, and if you pay an additional $1,500 for various health services, you've hit your out-of-pocket maximum. From then on, you don't pay a penny more for covered health care services. It's important to know that every year, this starts over. So next year, you go back to stage one and need to meet your deductible yet again. So let's review. You pay a monthly premium to get into the club, and get many preventive services free. You pay for other services until you meet your deductible. Then, you and your insurance company share the costs of health services. You pay co-pays or coinsurance, and your insurance pays the rest, until you hit your out-of-pocket maximum.

After that, your insurance company pays everything. So how much does your insurance cost? You will at least pay for your monthly premiums. And, at most, you will pay for your monthly premiums plus your out-of-pocket maximum. It all depends on the plan you choose and the care that you and your family need. You can get free help from a healthcare.gov assistor to choose the plan that's right for your family.