When I got my first job with benefits, I enrolled in the health, dental, and vision insurance plans they offered. I didn’t know the basics of health insurance. I was young enough to be on my parents’ plans in America, but my folks told me it’d be less expensive (especially for them) for me to take the new option. But at that time, I had no clue how deductibles, co-pays, coinsurance, out-of-pocket maximums, or any of the other pieces worked. So I just rattled off those stats and let my parents be the judge.

This lack of understanding of the basics of health insurance properly could have cost me hundreds or thousands of dollars if a medical event happened. Not just because you need to make an educated decision when picking your plan to make sure it fits your lifestyle, but also because USING the plan you choose requires an understanding of the ins and outs of health insurance. Here’s a summary of the stuff I wish I knew when I was 22.

Premiums

These are the bills you pay to be a part of the health insurance plan you’ve enrolled in. If you are enrolled through an employer, these premiums will come out of every paycheck, so once you’re accustomed to your take-home pay, you won’t have to worry about budgeting for them. If you’re shopping around independently, keep this monthly (or however frequently they bill) cost in mind when planning out your spending budget. Make sure when choosing between different plan options you consider the annual cost of premiums along with how much it costs to actually use the plan when you need it.

Deductible

Most insurance plans (home, car, health, etc.) have them. Think of it as a maximum you’re asked to pay before your insurance company starts paying for expenses in full. For example, if you have a deductible of $2,000 and a qualifying medical bill that comes to $3,000 after insurance discounts, you’re responsible for paying the first $2,000 while the insurance company will pay the remaining $1,000. The rest of your qualifying bills after that will also be paid by insurance until the end of the year. Exceptions apply, like how not every medical expense applies to your deductible, such as various “elective” procedures like cosmetic surgery, or whatever your insurance company decides isn’t necessary to keep you alive and healthy. Rather than fully covering some expenses, some non-elective costs are mostly covered (you only pay 10% of the cost instead of footing the whole bill) until the out-of-pocket maximum amount is met.

Out-of-Pocket Maximum

Again, most insurance plans have them. The details of this are typically paired with those of the deductible on any given plan. The out-of-pocket maximum is the most your insurance company will make you pay before they cover all in-network expenses, regardless of if the expense applies to your deductible. So if you have a deductible of $2,000 and an out-of-pocket maximum of $5,000, your insurance would keep covering your qualifying expenses above the $2,000 like we previously mentioned, but any expenses that don’t hit the deductible would go toward that remaining $3,000. For example, let’s say you’ve already hit your $2,000 deductible for the year, and you have 2 medical expenses, one for $1,000 that would go toward the deductible and one for $4,000 that wouldn’t. That $1,000 expense would be covered since it’s past the deductible it applies to, but most of the $4,000 expense would come out of your pocket. For the remaining $3,000 that is above the deductible but below the out-of-pocket maximum, you’ll need to cover that yourself, but insurance should be covering the last $1,000 since it’s above the max. All of these examples are assuming you are working with an in-network provider.

In-Network vs Out-of-Network

Make sure that every doctor, dentist, hospital, clinic, whatever you visit is In-Network with your insurance company. Your insurance company should have some kind of online portal where you can “find a provider” (or something similar to that language) and search for people or facilities that you won’t have to pay as much to see. Depending on the nature of your visit, an in-network vs out-of-network doctor could cost you hundreds if you don’t do your due-diligence.

Try to find which providers are in your network BEFORE you need to use them. You don’t want to be clicking around a clunky website hoping to find someone nearby when you are in a rush to be seen for something serious.

Copays and Coinsurance

Some people use these interchangeably, and that’s not necessarily correct, but just think of them as money you have to pay alongside the coverage your insurance gives you. A co-pay is typically a flat amount ($30 every time you have a specific expense), while co-insurance is typically a percentage of your bill (you need to pay 10% of this cost while your insurance will cover the rest). The exact amounts and percentages that apply to you are going to be very specific to the plan you enroll in, so you’ll want to have access to a summary of your coverage costs somewhere handy, at least for the types of care you’ll require most often.

There is so much more complexity that comes to light when you really dig into how health insurance works for specific situations, but hopefully these notes on the basics of health insurance will clear up some of the confusion and save you financial stress in the future!

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