Health Insurance Terms Made Simple: Deductible, Premium, Copay
The handful of words that decide what a health plan really costs you, defined with HealthCare.gov and CMS, and one official example of how they fit together.
Key points
- The premium is what you pay to have the plan. The deductible, copays and coinsurance are what you pay when you use it.
- The out-of-pocket maximum caps your share of covered, in-network costs for the year. For 2026 Marketplace plans it can be no more than $10,600 for one person.
- A low premium usually means a higher deductible, and the reverse. Compare the total you could pay in a year, not the monthly price alone.
- Many preventive services are covered without a copay or coinsurance, even before you meet the deductible, when you use an in-network provider.
A health plan has two prices. One you pay every month just to have it; the other you pay when you use it, in pieces with different names. Most of the confusion about health insurance comes from those pieces. Once you know five or six terms, you can read any plan's summary and see what a bad year would cost you.
All the definitions below come from HealthCare.gov, the federal Marketplace, and from CMS, the agency that runs it. Hover over or tap an underlined term to see the official wording.
The price of having the plan: the premium
The premium"A monthly amount you pay for coverage whether you get services or not." (HealthCare.gov) is what you pay to keep the coverage, usually monthly, whether or not you see a doctor. On the Marketplace, a premium tax credit can reduce it.
For 2026 that credit is again limited by income. The IRS explains that the temporary expansion that removed the upper limit covered tax years 2021 through 2025; for 2026, eligibility generally runs from 100% to 400% of the federal poverty line. If you receive more credit in advance than you qualify for, you repay the difference at tax time, and from 2026 there is no cap on that repayment.
The premium is the one cost that never counts toward your deductible or your out-of-pocket maximum. That is why a cheap monthly price can hide an expensive year.
The price of using it: deductible, copay and coinsurance
| Term | What it is | When you pay it |
|---|---|---|
| Premium | The price of having the plan | Every month, whether or not you get care |
| Deductible | What you pay for covered care before the plan starts to pay | At the start of the year, until you reach it |
| Copayment | A fixed amount for a service, like $30 | At each visit or prescription, depending on the plan, sometimes even before the deductible |
| Coinsurance | A percentage of the allowed amount, like 20% | After the deductible, until the out-of-pocket maximum |
| Out-of-pocket maximum | The cap on your share of covered, in-network costs | Once reached, the plan pays 100% of covered costs for the rest of the year |
The premium never counts toward the deductible or the out-of-pocket maximum. Source: HealthCare.gov glossary; CMS Uniform Glossary.
The deductible"How much you'll pay for certain covered services and items each year before your plan starts to pay (except free preventive services)." (HealthCare.gov) is the amount you pay for covered care each year before the plan starts to pay its share. HealthCare.gov's definition carries an important exception: free preventive services, which the plan covers even before you reach it.
A copayment"A fixed amount you pay for a plan-covered service, like $30." (HealthCare.gov) is a fixed amount per service, like $30 for a doctor visit or a set price for a prescription. With coinsurance"A percentage of the cost that you pay for each plan-covered service, like 20%." (HealthCare.gov) you pay a percentage instead, like 20% of the cost, and it usually starts once the deductible is met. Coinsurance is calculated on the allowed amount"The maximum amount a plan will pay for a covered health care service. May also be called 'eligible expense,' 'payment allowance,' or 'negotiated rate.'" (HealthCare.gov), the price your plan has agreed to pay, not on whatever the provider lists.
Then there is the out-of-pocket maximumThe most you could pay in a coverage period for your share of covered services; after that the plan usually pays 100% of the allowed amount. It never includes the premium. (CMS Uniform Glossary). It is the most you pay in a year for covered, in-network care; after that, the plan pays in full. For Marketplace plans it can be no more than $10,600 for one person or $21,200 for a family in 2026, and CMS has set $12,000 and $24,000 for 2027. Plans can set lower limits: the CMS sample plan below uses $2,500. The CMS glossary lists what it never includes: the premium, balance-billed charges and care the plan doesn't cover.
How the pieces work together
HealthCare.gov uses one example to show the whole year. Jane's plan has a $1,500 deductible, 20% coinsurance and a $5,000 out-of-pocket maximum, and she needs the same $125 office visit at three different moments.
| When | Stage | Jane pays | Plan pays |
|---|---|---|---|
| February | Deductible not yet reached | $125 | $0 |
| May | Deductible reached, coinsurance applies | $25 | $100 |
| After October | Out-of-pocket maximum reached | $0 | $125 |
Illustration from HealthCare.gov. Jane also pays her premium every month, which is not counted in these figures. Source: HealthCare.gov, "Your total costs for health care".
Read the table from top to bottom and you have the life of a plan year: first you pay everything, then a share, then nothing. What changes between plans is where those two turning points fall.
The official sample Summary of Benefits and Coverage published by CMS shows the same logic on real-looking cases. For a hypothetical plan with a $500 deductible and a $2,500 in-network out-of-pocket limit, a pregnancy with a total cost of $12,700 leaves the patient paying $2,560, and a simple fracture costing $2,800 leaves $1,100. CMS is explicit that these are not cost estimates. Summaries built on the same template show coverage examples in the same format, which makes them a useful way to compare plans side by side.
Networks, and why they change the price
A plan's network"The facilities, providers and suppliers your health insurer or plan has contracted with to provide health care services." (HealthCare.gov) is the set of doctors, hospitals and pharmacies it has contracts with. Stay inside it and the allowed amounts and the out-of-pocket maximum protect you. Step outside and you may pay much more, or everything.
HealthCare.gov describes the main types. An HMO usually covers only care from its network except in an emergency. An EPO covers services only in the network, except in an emergency. A PPO lets you go out of network without a referral, at an extra cost. A POS plan charges less in the network and requires a referral from your primary care doctor to see a specialist.
Out of network, a provider may also bill you for the difference between its charge and the allowed amount. HealthCare.gov's example: if the charge is $100 and the allowed amount is $70, the provider may bill you the remaining $30. Federal law now limits that in several situations. Under the No Surprises Act, in effect since January 1, 2022, CMS explains that you are protected from unexpected out-of-network bills for emergency room visits, for non-emergency care at an in-network hospital or surgical center, and for air ambulances. Ground ambulances generally aren't included.
Two more terms decide whether a covered service is actually paid. prior authorization"Approval from a health plan that may be required before you get a service or fill a prescription in order for the service or prescription to be covered by your plan." (HealthCare.gov) means the plan must approve certain services or drugs in advance. The formulary"A list of prescription drugs covered by a prescription drug plan or another insurance plan offering prescription drug benefits. Also called a drug list." (HealthCare.gov) is the plan's list of covered prescription drugs. After care, the plan sends an Explanation of BenefitsA notice from your health plan, not a bill, that shows the services you got, what the plan agrees to pay and what you owe, if anything. (CMS), which CMS stresses is not a bill: compare it with the bill before you pay.
Metal levels and what they tell you
Marketplace plans come in levels named after metals. They describe how costs are split on average, not the quality of the doctors.
| Level | Plan pays | You pay | Deductible |
|---|---|---|---|
| Bronze | 60% | 40% | High |
| Silver | 70% | 30% | Moderate |
| Silver with extra savings | 73% to 96% | 6% to 27% | Low |
| Gold | 80% | 20% | Low |
| Platinum | 90% | 10% | Low |
Averages across a population, not what you will pay. "Extra savings" are cost-sharing reductions, available on Silver plans to people who qualify by income. Source: HealthCare.gov, health plan categories.
A Bronze plan usually has the lowest premium and the highest deductible; a Platinum plan the reverse. The right balance depends on how much care you expect to use. The one fixed point is that a Silver plan is the only level where people who qualify by income get the extra savings of cost-sharing reductions.
HSAs and high-deductible plans
A health savings account lets you set money aside tax-free for medical costs, but only if your plan qualifies as a high-deductible health plan. The IRS sets the numbers every year.
| Limit | 2026 | 2027 |
|---|---|---|
| Marketplace out-of-pocket maximum, one person / family | $10,600 / $21,200 | $12,000 / $24,000 |
| HSA contribution limit, self-only / family | $4,400 / $8,750 | $4,500 / $9,000 |
| HSA-eligible plan: minimum deductible, self-only / family | $1,700 / $3,400 | $1,750 / $3,500 |
| HSA-eligible plan: out-of-pocket maximum, self-only / family | $8,500 / $17,000 | $8,700 / $17,400 |
Marketplace limits from CMS guidance of January 29, 2026; HSA figures from IRS Revenue Procedures 2025-19 and 2026-24. Since 2026, Bronze and Catastrophic Marketplace plans also count as HSA-eligible (IRS Notice 2026-5).
The 2026 figures come from IRS Revenue Procedure 2025-19. A recent change widened eligibility: from 2026, every Bronze and Catastrophic plan sold on a Marketplace counts as HSA-eligible.
When a claim is denied
A denial is not the last word. HealthCare.gov explains that you can ask the plan to reconsider through an internal appeal, which you must file within 180 days of the denial notice. The plan must decide within 30 days for a service you haven't received yet and within 60 days for one you have.
If the plan still says no, you can ask for an external review by an independent reviewer, generally within four months of the final denial. Standard reviews are decided within 45 days and urgent ones within 72 hours, and the insurer must accept the reviewer's decision. When the federal process is used there is no charge; otherwise the fee can't be more than $25.
What to consider before choosing
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How much care do you expect to use next year?
If you rarely see a doctor, a lower premium with a higher deductible may cost less in total. If you have a planned surgery, a pregnancy or a chronic condition, the out-of-pocket maximum matters more than the premium.
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Are your doctors and hospitals in the network?
Check each one by name in the plan's own directory, not only the insurer's name. Out-of-network care may not be covered at all, and doesn't count toward the in-network out-of-pocket maximum.
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Are your prescriptions on the formulary?
Look up each drug and its tier. A drug that isn't on the list, or needs prior authorization, can change the real cost of the plan.
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Could you pay the whole deductible if you had to?
A deductible you couldn't cover in a bad month isn't really a saving. Compare it with what you have set aside.
Questions to ask before you sign
Ask the insurer, the Marketplace or your employer's benefits office these questions, and check the answers in the plan's Summary of Benefits and Coverage:
- What is the premium, and how much of it will be covered by my employer or a tax credit?
- What is the deductible, and which services are covered before I meet it?
- What are the copays and coinsurance for the services I use most: doctor visits, specialists, my prescriptions?
- What is the in-network out-of-pocket maximum, and what doesn't count toward it?
- Are my doctors, hospital and pharmacy in the network, and is this an HMO, EPO, PPO or POS plan?
- Are my drugs on the formulary, at which tier, and do any need prior authorization?
- Does the plan qualify for an HSA?
- How do I appeal a denied claim, and how long do I have?
Common questions
Does my premium count toward the deductible?
No. The premium is the price of the plan. The deductible and the out-of-pocket maximum count only what you pay for covered care.
Do copays count toward the deductible?
It depends on the plan. Some plans charge a copay for certain services before you meet the deductible, and some don't count every copayment toward the out-of-pocket limit. The Summary of Benefits and Coverage says how your plan handles it.
Is preventive care always free?
All Marketplace plans and many others must cover a list of preventive services without a copayment or coinsurance, even before the deductible, generally when you use an in-network provider. HealthCare.gov adds that coverage may vary and $0 cost isn't guaranteed in all cases.
When can I sign up for a Marketplace plan for 2027?
On HealthCare.gov, Open Enrollment runs from November 1, 2026 to January 15, 2027; enroll by December 15 for coverage from January 1. States that run their own exchange can set different dates. Outside that window you need a qualifying life event for a Special Enrollment Period.
What can I do if my plan denies a claim?
You can file an internal appeal within 180 days of the denial notice. If the plan still says no, you can ask for an external review by an independent reviewer, generally within 4 months.