Understanding Health Insurance Terms

What is a Deductible?
A deductible is the amount of money you must pay each year for certain services before your health plan begins paying benefits.

For example, if John's deductible amount is $2,000, that's the amount he has to pay before his health plan will start paying its percentage. So, when he needed surgery at the beginning of the year, and his total bill was $5,000, he paid the first $2,000. The health plan paid its portion of the remaining $3,000.

What is Coinsurance?
Coinsurance refers to the percentage of health care costs you are responsible for paying, typically after your deductible is met.

In John's case, his co-insurance for hospital charges is 20 percent. His health plan pays 80 percent for covered services, and he pays the remaining 20 percent. Once he paid the deductible charge for his surgery, he must pay 20 percent, or $600 of the remaining $3,000. The health plan will pay the other 80 percent, or $2,400.