Understanding Health Insurance Costs: Premiums, Deductibles & More

You spend money in almost every area of your life. So, having a clear understanding of costs not only gives you a sense of control but helps you make informed decisions. 

To better understand your health insurance costs, examining all the key types of costs can be a good starting point.

Consider your automobile expenses: There are clear costs like your car payment, insurance, gas, oil changes and repairs. Then there are less obvious expenses, like the finance charge of your payment, windshield wiper fluid and even parking meters.  

Let’s look at some common health insurance costs with examples explaining each.  

Common Health Insurance Costs

There are many terms in the health insurance world, and you may already be familiar with some. Words like premium, deductible, coinsurance and copayment are a few of the common costs you’ll frequently hear about. Let’s break each down: 

  What is it? Here's an example...
 Premium A premium is the amount of money your insurance company charges for the plan you've chosen. It's usually paid on a monthly basis but can be billed a number of ways. You must pay your premium to keep your coverage active, regardless of whether you use it or not. After researching rates, the health plan you've chosen costs $175 per month - this is your premium. To keep your plan and benefits active, you'll need to pay your premium on time every month.
 Deductible A deductible is a fixed amount you must pay every year toward your medical bills before your health insurance company starts to cover costs. Plans vary, and some don't have a deductible.  Your health plan has a $1,000 deductible. You are required to pay your own medical bills up to $1,000 for the year. Once that amount is met, your insurance coverage kicks in. At the beginning of the year, you'll have to meet the deductible again.
 Coinsurance Coinsurance is the percentage of medical costs you pay after you meet your deductible. Depending on your plan's coverage, you and your health insurance company will each pay a certain amount. You have an "80/20" plan. This means your insurance company pays for 80% of your costs after you've met your deductible. You must pay for the remaining 20%.
 Copayment (or "copay") A copayment, or copay, is a fixed cost you pay for a covered healthcare product or service, like a doctor's appointment or prescriptions. The remaining cost is paid by your insurance company. Copays do not count toward your deductible. Your health plan has a $20 copayment for routine doctor's visits. This means you pay $20 each time you go to the doctor.

Less Common Health Insurance Costs 

All insurance plans are different. There may be some expenses that are partially covered, or not at all. You should be aware of these less common expenses, as they contribute to your total healthcare costs. Some examples include services provided by a doctor or hospital that’s not part of your plan’s network, plan limits for specific care services, such as a certain number of visits for physical therapy per benefit period, as well as over-the-counter drugs. 

Tips for Calculating Your Total Health Insurance Cost

There are a variety of health plan options available. While it can take a little work to find the right health plan that fits your budget, this kind of knowledge will help you feel in control as you plan ahead. 

Look at both the common and occasional expenses you might expect to pay. Here are some tips for calculating your total health insurance costs: 

  • Deductibles: A deductible is a way for you to share the cost of your healthcare. In return, you pay a lower premium. If your health plan offers different deductible levels to choose from, pick the highest amount that you can comfortably pay in a calendar year. Learn more about deductibles and how they impact your premium. 
  • Office Visits: Estimate the total number of in-network doctor’s visits you’ll have in a year, like routine physicals or checkups. Based on a plan’s copayment, add up your total cost.  
  • Prescriptions: For prescription drug needs, add up your monthly costs that won’t be covered by the plan options you’re considering. Even plans with comprehensive drug coverage may have a copayment.  
  • Other Care: Dental, vision and other regular and necessary care add to expenses. Figure in these costs for you and your family and consider a plan that covers them if numbers are high.  

By looking at all expenses, not just the common ones, you’ll be able to set a budget and find the most affordable plan for your healthcare.