Key Takeaways
Cost-Sharing in Health Insurance
Cost-sharing refers to the portion of medical expenses you pay yourself after your insurer covers its share. The three main forms are deductibles (what you pay before insurance kicks in), copays (flat fees per visit or service), and coinsurance (a percentage of costs you split with your insurer after meeting your deductible). These three elements work in sequence throughout a plan year.
All three cost-sharing amounts count toward your plan's out-of-pocket maximum, the annual cap on what you can be required to pay under ACA-compliant plans.
The Three Costs and What Each One Means
Most health insurance plans share costs with you in three distinct ways. Knowing what each term actually means is the first step to predicting your annual medical spending. For a broader glossary of terms, see every health insurance term explained.
Deductible
Your deductible is the dollar amount you pay for covered services each plan year before your insurer begins sharing costs. If your deductible is $1,500, you pay the first $1,500 of covered medical bills yourself. After that threshold, the plan starts contributing.
Copay
A copay (short for copayment) is a fixed dollar amount you pay for a specific service — for example, $30 for a primary care visit or $15 for a generic prescription. Copays are straightforward: the amount is set in advance and does not change based on the total bill.
Coinsurance
Once you have met your deductible, coinsurance is the percentage of each covered service cost you continue to pay. Under a plan with 20% coinsurance, you pay 20% of an allowed charge and the insurer pays the remaining 80%. Unlike a copay, the dollar amount you owe varies with the size of the bill.
Copays Can Apply Before and After the Deductible
Many plans charge copays for primary care visits, specialist visits, and prescription drugs regardless of whether you have met your deductible. This means you may owe both a copay and be counting costs toward your deductible at the same time early in the plan year. Plan designs vary significantly, so always verify when copays apply in your specific policy documents.
Preventive Care Is Usually Exempt From Cost-Sharing
Under the Affordable Care Act, most in-network preventive services — including annual wellness visits, recommended vaccinations, and certain screenings — must be covered without cost-sharing. This means you generally owe nothing for these services even if you have not yet met your deductible. Confirm which services qualify as preventive under your specific plan.
How the Three Work in Sequence
Think of your plan year as having distinct phases. Understanding the order in which these costs apply is where most confusion happens.
- Phase 1 — Before the deductible is met: You pay the full allowed cost of most covered services out of pocket. Many plans still charge copays at this stage for office visits and prescriptions — check your plan documents to confirm.
- Phase 2 — After the deductible, before the out-of-pocket maximum: Coinsurance applies. You split costs with the insurer at the agreed percentage. Copays for certain services may continue to apply separately depending on your plan design.
- Phase 3 — After the out-of-pocket maximum: The insurer covers 100% of covered in-network costs for the rest of the plan year. Your deductible, copays, and coinsurance payments all count toward this ceiling.
One important exception: preventive services such as annual wellness visits and recommended screenings are typically covered at no cost-sharing under ACA-compliant plans — even before you meet your deductible.
$1,763
Average individual deductible for employer-sponsored plans
According to the Kaiser Family Foundation's 2023 Employer Health Benefits Survey, the average annual deductible for single coverage in employer-sponsored plans was approximately $1,763.
$9,450
ACA out-of-pocket maximum for individual coverage (2024)
The federal government sets annual limits on out-of-pocket maximums for ACA-compliant plans; for 2024, the limit was $9,450 for individual coverage and $18,900 for family coverage.
~28%
Adults who were underinsured in the US
The Commonwealth Fund's 2023 Biennial Health Insurance Survey found that roughly 28% of insured adults under 65 were considered underinsured, often due to high deductibles relative to their income.
A Realistic Walk-Through
Seeing the numbers in motion makes the sequence clearer. The following scenarios illustrate how costs accumulate during a plan year.
Notice that in both cases, the out-of-pocket maximum acts as a financial safety net. High-deductible health plans — often paired with a Health Savings Account — apply this same logic but shift more initial cost to you in exchange for a lower monthly premium. For more on that trade-off, see how HDHPs and HSAs work together.
After you receive care, your insurer will send an Explanation of Benefits (EOB) detailing what was billed, what the plan paid, and what you owe. Learning to read that document is its own skill — our EOB field guide walks through it step by step.
Common Misunderstandings Worth Clearing Up
Several widely held beliefs about cost-sharing lead to real financial surprises. Health insurance myths are worth reviewing in full, but a few are especially relevant here.
- "My insurance pays after I meet the deductible." Partly true — coinsurance still leaves you responsible for a portion of every bill until you reach the out-of-pocket maximum.
- "Copays always count toward my deductible." Not necessarily. Many plans track copays and deductibles separately. Confirm in your Summary of Benefits and Coverage.
- "Out-of-network bills follow the same rules." Usually not. Out-of-network care often has a separate, higher deductible and may not count toward your in-network out-of-pocket maximum. Surprise out-of-network billing can catch even careful patients off guard.
Read Your Summary of Benefits and Coverage
Every ACA-compliant plan must provide a standardized Summary of Benefits and Coverage (SBC) document. It uses a common format to show exactly how your deductible, copays, coinsurance, and out-of-pocket maximum interact — including worked examples. Request one from your insurer or employer benefits portal before enrolling or renewing.
Your premium — the monthly payment that keeps your coverage active — is separate from all three cost-sharing mechanisms and does not count toward your deductible or out-of-pocket maximum. For a full picture of what drives your premium, see how health insurance premiums are calculated.
This article is for general informational purposes only and does not constitute personalized insurance, financial, or legal advice. Coverage terms, costs, and rules vary by plan and by state. Always read your plan documents carefully and consult a licensed insurance professional for guidance specific to your situation.