CARD T183
Deductible
The amount the member pays for covered services subject to the deductible before the plan begins sharing those costs. If $500 remains on the member’s deductible, the next $500 of covered expenses subject to it is the member’s responsibility.
How it works
A deductible is the covered expense amount assigned to the member before specified plan payments begin. Some services, such as certain preventive care, may be covered before it is met. Apply the remaining deductible to the allowed amount, then the stated coinsurance to the remainder. Individual and family deductibles may have different structures. [10]
For a $2,000 allowed service with $500 deductible remaining and 20% member coinsurance afterward, the member pays $500 + $300 = $800, absent other limits.
The deductible is not the premium, and not every service must be subject to it.
CARD T184
Copayment
A set dollar charge the member pays for a covered service. For example, a $25 charge for a covered office visit.
How it works
A copayment is a fixed dollar charge for a covered service, such as an office visit or prescription. Different services can have different copays. The plan may require a deductible before some copays apply, and other services may use coinsurance. Premiums continue separately. [10]
Under a stated $25 visit copay with no other cost sharing, three covered visits cost the member $75.
Copay means a dollar amount; coinsurance means a percentage.
CARD T185
Coinsurance
The member’s percentage share of a covered service’s allowed cost, usually after the deductible. If the deductible is met and the member owes 20% of a $100 allowed amount, the member pays $20.
How it works
Coinsurance splits covered allowed costs by percentage, usually after the applicable deductible. An 80/20 arrangement commonly means the insurer pays 80% and the member 20%, but read which party the question identifies. An out-of-pocket limit can reduce further member liability. Noncovered charges and permissible balance bills are separate. [10]
After the deductible, 20% member coinsurance on a $600 allowed expense is $120; the plan pays $480 before other provisions.
Always identify whose percentage is given and whether the deductible has been satisfied.
CARD T186
Allowed Amount
The amount a health plan recognizes for a covered service when calculating payment and cost sharing. For example, cost sharing may be based on $100 even when the provider bills $150.
How it works
The allowed amount is the total price the plan recognizes for a covered service, before dividing the cost between the plan and member. For example, a provider bills $150, but its network agreement allows $100. If the deductible is met and the member owes 20%, the member pays $20 and the plan pays $80. The network provider generally writes off the remaining $50 rather than charging it to the member. Rules for out-of-network providers and surprise bills can differ. [10] [12]
A provider bills $150, the network allowed amount is $100, and the member owes 20% after deductible. The member pays $20 and the plan $80; the contracted $50 excess is not added.
Allowed amount is not the same as the insurer’s payment: member cost sharing may come out of it.
CARD T187
Out-of-Pocket Maximum
The annual limit on the member’s cost sharing for covered in-network care. Premiums, noncovered care, and out-of-network costs generally do not count.
How it works
The out-of-pocket maximum limits applicable member cost sharing for covered in-network care during the plan year. Deductibles, copays, and coinsurance generally count when the plan rules require them to. Premiums, noncovered services, and most out-of-network costs do not. Special surprise-billing protections can require certain out-of-network services to use in-network cost sharing. The limit resets for the next plan year. [10] [12]
A member has $100 left before the applicable maximum and otherwise owes $300 for covered in-network coinsurance. Only $100 is owed toward that cost sharing.
Reaching the maximum does not stop premiums or make every excluded service covered.
APPLY THE TERMS
Practice questions
Select an answer, then check it to see why each option is right or wrong.
T183 · Deductible
0 of 3 answered
T184 · Copayment
0 of 3 answered
T185 · Coinsurance
0 of 3 answered
T186 · Allowed Amount
0 of 3 answered
T187 · Out-of-Pocket Maximum
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Sources & further reading
Original explanations and practice scenarios informed by the following regulatory, legal, and product resources. State examples are not presented as nationwide deadlines or requirements.