Many people who contact OHA are surprised to learn how much money they have to pay out-of-pocket when they have insurance coverage. Consumers usually make monthly premium payments to have insurance coverage (or employers do). But what are all those other out-of-pocket costs we pay when we use our insurance for our health care? These costs are expenses not reimbursed by insurance.
Understanding the different types of costs may help us decide how best to use our coverage, or at least reduce billing surprises. Certainly, if your care is due to an emergency, you likely don’t have time to consider costs, but otherwise, you might plan ahead by knowing the terminology that providers and insurance companies use when they calculate their share, and our share, of provider bills.
Insurance Out-of-Pocket and Billing Terminology:
- Premium– The monthly payment you make to have health insurance coverage.
- Allowed Amount– The maximum dollar amount your insurance plan will pay for a covered healthcare service or procedure.
How it works:
With In-Network Providers: Your insurance company has already negotiated set prices with these providers, so your insurer and providers know the Allowed Amount upfront. The provider agrees not to collect more than this amount (including your share like copays or deductibles).
Example: A provider charges $200 for a procedure, but your insurance's negotiated rate is $150. You and your insurance together will pay no more than $150 total. If the provider tries to bill you for the extra $50, this is usually not allowed—contact us at OHA if this happens and we can investigate.
With Out-of-Network Providers: These providers haven't agreed to your insurance company's rates. Your insurance will still determine an Allowed Amount (using formulas based on average costs, Medicare rates, or state regulations), but the provider may be able to bill you for the difference between what your provider charges and what insurance pays. This is called "balance billing."
Example: An out-of-network provider charges $200 for a procedure. Your insurance determines the Allowed Amount is $100. After your $50 copay, insurance pays the provider $50. However, under many insurance plans the provider can bill you for the remaining $100 (the difference between their $200 charge and the $100 Allowed Amount), meaning you could owe $150 total—your $50 copay plus the $100 balance.
- Deductible– The amount you pay for covered services before insurance starts to pay. Not all services may be subject to the Deductible, for example, annual exams and some preventive screening procedures are usually paid in full and not subject to the Deductible for the remainder of the plan year
- Example: You are treated for a broken wrist at the emergency room, and the bill is for $1,000 but the Allowed Amount is $600. If you have a $5,000 deductible and you haven’t met your Deductible for the year, you will owe $600 and it will be credited toward your Deductible for the remainder of the plan year.
- Coinsurance– A percentage of the Allowed Amount you have to pay after you have met your Deductible.
- Example: You have met your annual Deductible. An In-Network supplier charges $15,000 for a wheelchair. The insurance company processes the claim as an Allowed Amount of $10,000. Based on your insurance plan, your responsibility for the equipment is 20%. You will owe $2,000 (20% of $10,000) and the insurance plan will pay the remaining $8,000. (Note: if the supplier was not In-Network, the supplier may Balance Bill you for another $5,000 (the charge of $15,000 less the Allowed Amount of $10,000 on top of the $2,000 you paid.)
- Copayment– A fixed dollar amount you have to pay(typically at the time you receive care).
- Example: Your plan allows you to see a specialist without having to meet the Deductible first, but you are responsible fora co-payment of the first $45 of the Allowed Amount. It doesn’t matter if the Allowed Amount is $50 or $500, the co-pay is the same fixed dollar amount, $45.
- Out-of-Pocket Maximum– The most you pay for covered health care in a plan year, after which covered health care is usually 100% paid by insurance.
- Example: You have an annual Out-of-Pocket Maximum in your insurance plan of $6,000. Once you have incurred $6,000 of costs assigned to you for payment by the insurance plan, all covered services for the remainder of the plan year will be covered at no cost to you.
- Family Deductible- The total amount of money the whole family (the insured and any dependents) must pay before insurance covers their after-Deductible costs
- Example: A plan has a $1,000Deductiblefor each covered person but a Family Deductible of $2,500. Even if the family has 3 or more individuals on the plan, once $2,500 in total Deductible payments have been incurred, all individual members of the family have satisfied their collective Deductibles for the plan year.
- Out of Network Deductible– The amount you must pay for healthcare services from providers not In-Network before your insurance plan starts to pay. Some Preferred Provider Organization (PPO) plans have these provisions. Most Health Maintenance Organizations (HMOs) do not allow Out-of-Network coverage. An Out-of-Network Deductible is usually higher than an In-Network Deductible.
- Example: You have an insurance plan that has a $500Deductibleif you go to an In-Network provider, but a $1,500Deductibleif you go to an Out-of-Network provider.
- Balance Billing– A process by which you are billed for the difference between what your provider charges and what the insurance plan paid. It normally happens when you utilize care from a provider who is Out-of-Network with your insurance plan. Out-of-Network providers are not bound by contract to your insurance plan’s negotiated rates and typically may bill you the difference between your plan’s Allowed Amount and the billed charge. (Note: Balance Billing may not be allowed for some types of plans, like Medicaid and Qualified Medicare Beneficiary Medicaid assistance. If you believe you were inappropriately Balance Billed, please contact OHA for us to investigate.)
- Example: You go to an Out-of-Network provider for services. The provider charges you $10,000. The insurance company processes the claim as an Allowed Amount of $2,000. You have met your Deductible and owe 20%Coinsurance. You will be required to pay your share of the Allowed Amount $400 (20% of $2,000) plus you may be Balance Billed for $8,000 ($10,000 charge less the Allowed Amount).
- In-Network or Network– Refers to doctors, hospitals, other providers, and medical suppliers that an insurance plan contracts to provide services to its members at agreed upon prices
- Out-of-Network– Refers to doctors, hospitals, other providers, and medical suppliers that an insurance plan does not contract with to provide services to its members at agreed upon prices
- Medicare Advantage Plan Mandatory Maximum Out-of-Pocket (MOOP) for 2026– $9,350 (although many plans have lower maximums).
- Medicare Advantage Plan In-Network and Out-of-Network Combined MOOP for 2026– $13,900
In our next newsletter, we will look at questions you should ask providers to minimize your healthcare costs.