March 28, 2018 How-To

Premiums, Deductibles, and Copays – Oh My!

When it comes to understanding health care terminology, it’s not always, well…easy to understand. As you’re reading through your benefits overview online or when you receive a medical statement in the mail, do you ever find yourself quickly glossing over the details feeling more confused than before?

If the answer to that question is “yes,” you’re not alone.

Having a grasp on the ins and outs of all-things insurance may not be completely necessary, but knowing the basics can be critical in helping you make the best decisions for you and your loved ones. Broken down below is a quick-hit list of terms and definitions created to help you figure out how to navigate the varying paths of health care.

Possibly one of the most talked about topics that we can cover is cost. Arming yourself with knowledge on what you’ll need to pay and when can help ease your mind, and your wallet, in the long run. Which leads us to the first part of the health care made easy guide – billing and payments.

Premium = Bill

A premium is the amount you pay for health insurance. It is, essentially, your bill for your health insurance – which could be due monthly, quarterly, or yearly. It’s a bill you may or may not see, depending on the type of health insurance you have.Example: If you have health insurance through your employer, money may be taken out of your paycheck each month for health insurance. This is your insurance premium.


The amount of money you pay for covered health care services before your health insurance starts to pick up the tab. If your costs exceed the deductible, your plan will cover the remainder, or a percentage of the remainder. If you’re in the process of choosing a health insurance plan, it is useful to know that plans with higher deductibles tend to have lower premiums.

Example: If your deductible is $2,000, you will be required to pay the first $2,000 out of pocket before your insurance kicks in. If you require a medical service that costs $3,000, you will pay the $2,000 deductible, and the plan will cover the remainder or a portion of the remaining $1,000.

Aggregate Deductible vs. Embedded Deductible

An aggregate deductible is when the entire family deductible for a family health care plan must be met to receive a reimbursement from your insurance company. The deductible can be reached by one family member or a combination of members within the family. An embedded deductible is when individual members in a family health care plan only need to meet their own deductible before the insurance company will reimburse service charges.


The amount you pay for a health care service, like a doctor visit or a trip to urgent care. The amount depends on your plan and the type of service you receive. Keep in mind that if your plan has a deductible, you may be responsible for meeting your deductible first. Then, your copay will kick in. In addition, prescription medications also require copays and they will vary depending on the medication.

Example: You have a $20 copay for visits with your primary care provider (PCP) and a $40 copay for urgent care visits. This means you will pay $20 every time you go to your PCP and $40 every time you go to urgent care.

In-network Copayment/Copay vs. Out-of-network Copayment/Copay

Network health insurance companies partner with doctors, hospitals, and other health care providers so their members can receive medical services at a discounted cost. This would be considered the health insurance’s “network.”

The amount you pay for a health care service to doctors who contract with your health insurance company is an in-network copayment. An out-of-network copayment is the amount you pay for a health care service to a provider who does not have a contract with your health insurance company. In-network copayments usually cost less than out-of-network copayments.

Example: You might pay a $20 copayment for a sick visit with an in-network doctor, where a sick visit with an out-of-network doctor might cost you a $50 copayment.


The percentage of the bill you pay for a covered product or service. Unlike a copay, which is a flat amount, coinsurance is a percentage of the cost of the service. If your health plan has a deductible, the coinsurance is the amount you’re responsible for after your deductible is met. If you receive services from an out-of-network doctor, you may be responsible for additional charges above the coinsurance.

Example: Let’s say you visit your doctor after your deductible is met. Now your plan requires a 20 percent coinsurance. If the doctor is paid $100 for the visit, you will owe $20.

Explanation of Benefits (EOB)

At first glance, it may appear to be a bill – it’s not. An EOB is a statement that your health plan sends in the mail after you receive a health service. It tells you how much the doctor charged, how much your insurance company will allow, how much your insurance paid, and the amount you may owe.

Out-of-Pocket Maximum

Many people don’t realize that every health insurance plan sets a maximum for the amount you will have to pay, referred to as the out-of-pocket maximum (OOP max). Once you have reached your OOP max, your health insurance company will begin to pay 100 percent of your costs for covered care. Different plans have different OOP maximums.

Example: Let’s say your out-of-pocket maximum is $5,000. Once you pay $5,000 for covered health care services (this can include deductibles, copays, and coinsurance), your health insurance will pay 100 percent of the costs for covered care.

Amount Billed/Billed Amount

This is the amount your doctor bills your health plan after providing you with health care services. This is not necessarily the amount your insurance plan will pay for these services, as health plans often negotiate payments with doctors to keep health care costs affordable.

Allowed Amount

This is the most money that your insurance company will pay toward a health care service. If your bill for a health care service exceeds the allowed amount, you might have to pay the difference. This may also be called “eligible expense,” “payment allowance,” or “negotiated rate.”

While these definitions are a good starting point, always refer to your member contract for details about your specific health plan. You can also learn more by using these other resources:

Stay tuned for the next edition Health Care Made Easy where we’ll cover the basics of a medical network!

Alexa Kerins
About the Author

Alexa is a senior communications consultant at CDPHP who plans, writes, and edits communications for a variety of projects. She is an eternal optimist who likes good food, fun exercise classes, traveling, and spending quality time with her family and friends. You can often find her obsessing over her mini golden doodle and uttering cheesy quotes like “you’re the bee’s knees” and “team work makes the dream work."

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