Insurance 101: What You Pay, What Insurance Pays, and When
Updated: 3 days ago
Have you ever gotten a bill from the doctor and thought, "Wait, isn't insurance supposed to pay for this?" You're not alone. The secret is that insurance doesn't pay the same way all year. Who pays changes in stages. Once you know the stages, your bills start to make more sense.
The stages of your insurance over the year
Every month, you pay your premium. Your premium is what you pay to have insurance. You pay it even if you never see a doctor. Think of it like a gym membership.
Some care is free from day one. Most plans pay 100% for preventive care, like a yearly checkup or a flu shot, when you go to a doctor in your plan's network.
Before your deductible, you pay most of the bill. Your deductible is the amount you pay for care each year before insurance starts to help. Some plans let you pay a small copay for certain visits during this stage.
After your deductible, you and insurance share the cost. This sharing is called coinsurance. For example, insurance pays 80% and you pay 20% of the amount agreed on between your insurance, and your provider.
After your out-of-pocket maximum, insurance pays it all. Your out-of-pocket maximum is the most you will pay for covered care in one year. Once you reach it, insurance pays 100% of covered care for the rest of the year. You may have a different out-of-pocket maximum for in-network care vs. out-of-network care.
On January 1, it all starts over. Most plans reset every year, so your deductible starts over and you need to reach it again for your insurance to kick in.
Let's follow Jordan's year
Jordan's plan has a $1,500 deductible. After that, Jordan pays 20%. Jordan's out-of-pocket maximum is $4,000.
January
What happened: Yearly checkup
Total bill: $250
Jordan pays: $0
Insurance pays: $250
March
What happened: Sore throat visit
Total bill: $150
Jordan pays: $150
Insurance pays: $0
June
What happened: Broken arm
Total bill: $3,000
Jordan pays: $1,680
Insurance pays: $1,320
September
What happened: Knee surgery
Total bill: $12,000
Jordan pays: $2,170
Insurance pays: $9,830
November
What happened: Follow-up visit
Total bill: $500
Jordan pays: $0
Insurance pays: $500
Here's what happened:
In March, Jordan paid the whole bill because the deductible wasn't met yet.
In June, Jordan paid the last $1,350 of the deductible. Then Jordan paid 20% of what was left ($330).
In September, Jordan's 20% share would have been $2,400. But Jordan only had $2,170 left before hitting the $4,000 maximum. So that's all Jordan paid.
In November, Jordan paid nothing. The maximum was reached, so insurance paid it all.
Jordan also paid a premium every month. Premiums don't count toward your deductible or your out-of-pocket maximum. When we talk about budgeting for your healthcare, we’re talking about your out-of-pocket spend (the spend outside of your premium).
Why this matters to you
When you better understand how your insurance works, you can better understand your exposure through the year. That means fewer surprise bills and less stress. Look up three numbers for your plan: your deductible, your coinsurance and your out-of-pocket maximum. Then try our budgeting tool to see what your year might look like and get inRhythm.
Key takeaways
You pay your premium every month, no matter what.
You pay most costs until you meet your deductible. Then you and insurance share the cost.
Once you hit your out-of-pocket maximum, insurance pays 100% of covered care until the year resets.
