Get­ting sick can be expen­sive.  Even minor ill­ness­es and injuries can be very cost­ly to diag­nose and treat.  Health care cov­er­age helps you get the care you need and pro­tects you and your fam­i­ly finan­cial­ly if you get sick or injured.

We’re break­ing down the health insur­ance basics.  Because, when you under­stand it, you’re more like­ly to get pre­ven­tive care, make bet­ter health deci­sions and even reduce your costs.

55% of peo­ple can’t answer basic health insur­ance ques­tions and younger gen­er­a­tions strug­gle with under­stand­ing the fun­da­men­tals of insur­ance even more.  69% of mil­len­ni­als and 64% of Gen Zers admit­ted they’ve opt­ed not to seek care due to uncer­tain­ty about their health insurance.

Put sim­ply, health insur­ance is a way to pay for your health care.  Your health insur­ance pro­tects you from pay­ing the full costs of med­ical ser­vices when you’re injured or sick.  And it works the same way your car or home insur­ance works: you or your employ­er choose a plan and agree to pay a cer­tain rate, or pre­mi­um, each month.  In return, your health insur­er agrees to pay a por­tion of your cov­ered med­ical costs.

How Health Insur­ance Pay­ments Work

Your pre­mi­um, or how much you pay for your health insur­ance each month, cov­ers some or all the med­ical care you receive – every­thing from pre­scrip­tion drugs to doc­tors’ vis­its.  Most peo­ple choose a health insur­ance plan based on the ben­e­fits and med­ical ser­vices the plan cov­ers, as well as on month­ly cost.  But there are oth­er fac­tors to con­sid­er as well, like what you will be required to pay when you see a doc­tor or a health care facility.

These out-of-pock­et pay­ments are impor­tant to under­stand and know the dif­fer­ences between them:

Deductible — A deductible is the amount you pay out of pock­et on health­care costs before your insur­ance com­pa­ny starts to con­tribute to your health­care costs for the year.  Gen­er­al­ly, a plan with a low­er deductible will have a high­er month­ly pre­mi­um than a plan with a high­er deductible.
Co-pay — A co-pay is a set fee you pay for a doc­tor vis­it.  For exam­ple, if your pol­i­cy lists a co-pay­ment of $20 for a doc­tor vis­it, you pay that amount each time you see the doc­tor.  Keep in mind that the co-pay will dif­fer for dif­fer­ent ser­vices.  What you pay for a trip to the emer­gency room will prob­a­bly not be the same as a co-pay for a vis­it to your pri­ma­ry care physician.
Co-Insur­ance — Co-insur­ance is the amount you pay for cov­ered health care after you meet your deductible. This amount is a per­cent­age of the total cost of care – for exam­ple, if your co-insur­ance is 20%, your insur­ance cov­ers the oth­er 80%.  Co-insur­ance lev­els vary by plan, as do deductibles.
Out-of-Pock­et Max­i­mum — An out-of-pock­et max­i­mum is a lim­it on the amount of mon­ey you have to pay for cov­ered ser­vices in a plan year.  After you spend this amount on your deductible, co-pay­ments and co-insur­ance, your health plan pays 100% of the costs of cov­ered benefits.

Know­ing how your insur­ance and health­care costs are struc­tured is an impor­tant part of your per­son­al finances.  When you choose a plan, look at your typ­i­cal health­care needs and costs so you can make the best deci­sion for your health, and your wallet.