Four terms beginners must separate
| Term | What it generally means |
|---|---|
| Premium | The amount paid for insurance coverage. It is not the same as a charge for a specific visit. |
| Deductible | An amount the member may need to satisfy before certain covered benefits begin paying according to the plan. |
| Copay | A fixed amount assigned to the member for a covered service under the plan. |
| Coinsurance | A percentage of an applicable allowed amount that may be assigned to the member. |
| Out-of-pocket maximum | A plan-defined limit on certain member cost sharing during a benefit period; what counts toward it depends on the plan and applicable rules. |
Why the allowed amount matters
The provider's charge and the payer's allowed amount are not necessarily the same. Contract terms and plan rules can affect the amount used to calculate payment and patient responsibility.
Simple example
Assume a service has an allowed amount of $200 and the member has 20% coinsurance for that service, with no remaining deductible for this example. Twenty percent of $200 is $40. The example illustrates the math only; the actual remittance and applicable plan rules determine the final account action.
Quick knowledge check
A $30 amount due for each office visit is most likely what type of cost sharing?
Copay.
If coinsurance is 20% of a $150 applicable allowed amount, what is the simple coinsurance amount?
$30, before considering any other applicable plan rules.
Is a premium the same as a deductible?
No. A premium pays for coverage; a deductible is a form of member cost sharing that may apply to covered services.
Patient Cost-Sharing Practice Worksheet
Free learner accounts can download practice scenarios covering deductibles, copays, coinsurance and allowed amounts.
Open Learner DashboardCreate a free learner account to mark lessons complete and track Module 2 on your dashboard.
Create Free Account