What is a deductible? And why your bill says what it says

A deductible is what you pay before the plan starts paying. Coinsurance is the percentage you keep paying after that. The out-of-pocket maximum is where your share stops. Those three numbers, in that order, explain almost every confusing medical bill.

The four cost-sharing terms, defined by HealthCare.gov
Term	What it means	When it applies
Premium	What you pay monthly to have the plan at all	Every month, whether or not you use care
Deductible	What you pay for covered services each year before the plan starts to pay	First, at the start of each plan year
Coinsurance	A percentage of the cost you pay for each covered service — say 20%	After the deductible is met
Copayment	A fixed amount, say $15, for a covered service	Usually at the time of service, often instead of coinsurance
Out-of-pocket maximum	The most you'll spend for covered services in a year	After you hit it, the plan pays 100% of covered services

The order these happen in is the whole thing

Premium buys the plan. Then, in a given year, you pay the full negotiated cost of covered care until the deductible is met — HealthCare.gov defines it as how much you pay before your plan starts to pay. After that, coinsurance kicks in and you pay a percentage while the plan pays the rest. Once your spending hits the out-of-pocket maximum, the plan pays 100% of covered services for the rest of the year. Almost every "why is my bill so big" question is answered by working out which of those three stages the bill landed in.

Why January bills feel brutal

Deductibles reset at the start of each plan year. The same MRI costs you dramatically more in January, when the deductible is untouched, than in November after a year of care has already met it. Nothing about the price changed — only which stage you were in. If a procedure is elective and you have already met your deductible, the timing question is worth raising with the clinician.

Coinsurance is a percentage of a number you never see

A 20% coinsurance sounds mild until you notice it is 20% of the plan's negotiated rate for the service, and that rate is not published on the bill in a form most people can find. This is the single most common source of a bill that seems to appear from nowhere: the deductible was met, so the reader expected the plan to pay — and it did, for 80% of a number they had never been told.

The out-of-pocket maximum is the number worth knowing

It is the ceiling on your share of covered services for the year, and after it the plan pays everything covered. Two caveats that matter enormously: it only counts covered, in-network services, and premiums do not count toward it. Out-of-network care and non-covered services can carry on costing you after you have technically "maxed out."

None of this applies if you are uninsured

If you have no plan, there is no deductible, no coinsurance and no out-of-pocket maximum — there is a provider's price, and your ability to negotiate it. That is a different situation with different tools: the cash price, the Good Faith Estimate, and financial assistance. The cost pages on this site are written for that case.

Reading a bill against these three numbers

Take the bill, find the amount the plan paid and the amount left to you, then compare it to where you are in the year. If the whole cost landed on you, you were probably under the deductible. If a percentage landed on you, that is coinsurance. If nothing should have landed on you at all, that is when to check whether the provider was in network, and whether the surprise-billing rules apply.

This page explains the mechanism. The arithmetic is one click away.

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Frequently asked questions

What is the difference between a deductible and an out-of-pocket maximum?

The deductible is what you pay before the plan starts paying at all. The out-of-pocket maximum is the ceiling on everything you pay for covered services that year — after it, the plan covers 100%. The deductible is the start of the plan's involvement; the maximum is the end of yours.

What is coinsurance?

HealthCare.gov defines it as a percentage of the cost you pay for each covered service, such as 20%. It applies after your deductible is met, and it is a percentage of the plan's negotiated rate rather than of the sticker price on the bill.

Do copays count toward my deductible?

It depends on the plan — some count copayments toward the deductible and some do not, though copays generally do count toward the out-of-pocket maximum. Your plan's summary of benefits states which, and it is worth checking rather than assuming.

Does my premium count toward the out-of-pocket maximum?

No. Premiums are what you pay to have the plan and sit outside the cost-sharing calculation entirely. Neither do out-of-network charges beyond what the plan allows, or services the plan does not cover — which is why "I hit my maximum" and "nothing else can cost me" are not the same statement.

Why did I get a bill months after the appointment?

Claims processing takes time: the provider bills the plan, the plan adjudicates and pays its share, and only then does the balance come to you. The explanation of benefits arrives first and is not a bill — it is the plan telling you what it did, and it is the document to check the eventual bill against.

Official sources

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