Individual Health Insurance Terms 101 - Remodel Health

Shopping for health coverage on the individual market can feel overwhelming, especially if it’s your first time. If you’re self-employed, aging off a parent’s health plan, or participating in an individual coverage health reimbursement arrangement (ICHRA), you may come across terms like “premium,” “deductible,” and “coinsurance” during enrollment season. If these terms are new to you, it’s normal to wonder what they mean for your wallet and healthcare.

This beginner-friendly guide breaks down the most common individual health insurance terms you’ll likely encounter when shopping for a new policy, so you can compare plans and successfully enroll in coverage.

In this blog post, you’ll learn:

• What the most common health insurance terms mean and how they affect your healthcare
• How these terms work together to shape the overall cost and coverage of your individual health plan.

1. What is a health insurance premium?

The first and most basic healthcare term is premium. A premium is the dollar amount you pay an insurance carrier in exchange for coverage. While most premium payments are monthly medical bills, they can be quarterly or annual, depending on your insurer and plan type. 

Once you enroll in a plan, your insurer will typically ask you to pay the first month’s premium to begin insurance coverage the following month. This is known as a binder payment.

Paying your monthly health insurance premium gives you two things: 

1. It keeps your health plan active throughout the coverage period.
2. It gives you access to the healthcare services outlined in your plan.
   1. For example, due to the Affordable Care Act (ACA), buying an individual plan on the exchange will at least cover the ten essential health benefits.

Like other types of insurance, you must pay your premium even if you don’t use your coverage in a given month. If you don’t, your insurer can terminate your policy. 

Your premium is the first expense you’ll want to consider when choosing your health plan. Because it’s a fixed cost for the plan year, it’s the first step in the budgeting process. According to KFF, the average premium for the benchmark individual health plan in 2025 is $497/month for single coverage¹. 

You can use your ICHRA contribution to pay for your individual health insurance premiums. For example, suppose you select a plan with a $500 monthly premium and your employer offers you $400 per month through an ICHRA. In that case, you’d only owe $100 per month out of pocket.

If you don’t have an ICHRA, you can check if you qualify for federal subsidies, like advance premium tax credits, which can help you offset the cost of your health plan if you buy a policy on a public exchange.

2. What is a health insurance deductible?

An annual deductible is the set amount you must pay out of pocket for covered medical care throughout the plan year before your insurance company begins sharing your healthcare expenses.

For example, if your plan has an annual deductible of $5,000, you must pay for all healthcare services and items on your own until you reach that amount. Once you meet your deductible, your insurance carrier will contribute to your additional healthcare costs.

Here are some key things to remember about your deductible:

• Some plans have one overall deductible, while others may apply separate deductibles to certain services, like prescription medication.
• If you enroll in an ACA Marketplace plan, your insurance carrier will typically cover preventive services free of charge, even before you meet your annual deductible.
• Plans with lower deductibles usually have higher monthly premium rates, and vice versa.

Depending on your health plan, simply meeting your deductible doesn’t automatically mean your plan will cover all healthcare expenses for the rest of the year. In many cases, it’s just one of several boxes you must check before your insurer will start paying 100% of covered expenses. 

3. What is a health insurance copayment?

A copay, short for copayment, is a fixed amount of money you may have to pay for a covered medical service or item, such as a doctor’s appointment or a prescription drug. Not all health plans have copays. But if yours does, the amount can vary depending on the medical service you receive and your chosen provider.

Two main advantages of copays are:

1. They help keep your monthly costs low, as plans with higher copays typically have lower premium costs.
2. They help you budget for healthcare expenses.
   1. For example, it’s easier to plan for medical bills in advance if you know you’ll only have to pay a $30 copay each time you visit the doctor’s office.

Copays may count toward your yearly deductible, but not always. You should check with your insurer or read your plan’s details to find out if your copayments will apply toward your deductible. In either case, copays always count toward your out-of-pocket maximum (we’ll review that healthcare term later on). 

4. What is coinsurance?

Coinsurance is the fixed share of medical costs you’re responsible for paying once you’ve met your plan’s deductible. This cost-sharing amount typically only applies to in-network providers.

For example, most silver plans use a 70/30 coinsurance percentage split. This means your insurer covers 70% of the medical bill for covered services, and you pay the remaining 30%. But remember, until you meet your annual deductible, you’re typically responsible for 100% of your healthcare expenses.

Your coinsurance rate has a big impact on your overall plan costs. Policies with lower monthly premiums often have higher coinsurance rates, while plans with higher premiums usually provide lower coinsurance. Cost-sharing details vary from plan to plan, so reviewing a plan carefully before enrolling is crucial.

5. What is the maximum out-of-pocket?

A maximum out-of-pocket, or an out-of-pocket limit, is the most a person will ever have to pay for covered healthcare services within the plan year. 

In 2025, the maximum out-of-pocket limits for federal Health Insurance Marketplace plans are $9,200 for self-only coverage and $18,400 for family policies. The limits for the 2026 plan year are $10,600 for single plans and $21,200 for family coverage².

In many cases, you can meet your max out-of-pocket by paying for medical services that count toward:

• Your annual deductible
• Copays
• Coinsurance costs

However, your out-of-pocket maximum doesn’t include your monthly premium, out-of-network costs, or healthcare expenses that aren’t covered benefits under your plan. 

Once you reach your max out-of-pocket amount, your health insurance company will pay 100% of your covered medical services and items for the remainder of the policy year.

6. What is a health insurance network?

A health insurance network is a group of doctors, hospitals, pharmacies, and other medical providers that have agreed to work with your insurance company. By signing these contracts, insurers can negotiate discounted rates, simplify billing, and make costs more predictable for members.

Below are the two network options: 

1. In-network: These providers contract with your insurance company to deliver care for covered services at discounted rates, meaning you’ll generally pay less. Additionally, receiving in-network care ensures your cost-sharing payments will apply toward your plan’s deductible and annual out-of-pocket maximum.
   1. When you sign up for a new health plan, you’ll receive a directory of in-network providers.
2. Out-of-network: These providers don’t have an agreement with your insurer, meaning they can set their own rates. If you choose an out-of-network provider, you’ll often be responsible for most or all of the bill, and the costs usually won’t count toward your deductible or out-of-pocket maximum.

How do I know if I have a “good” health insurance plan?

You now understand the difference between various health insurance terms and how they work together to give you complete coverage. Now you’re probably wondering, “How do I know if I have a ‘good’ health insurance policy?” 

A “good” health plan isn’t necessarily the cheapest or most expensive one available. Instead, it’s the policy that covers your specific healthcare needs and limits your financial risk if unexpected medical events occur. But ultimately, the right balance between monthly costs, out-of-pocket expenses, and covered services will look different depending on how often a person seeks medical care, if they have a chronic condition, their preferred providers, and other factors.

Here are some other tips to consider when determining if a health plan is right for you:

• If you rarely receive medical care, a plan with a low monthly premium and a high deductible can keep costs low while ensuring you have insurance coverage in case of a medical emergency. If you need frequent care, a higher premium with lower upfront costs may be more affordable in the long run.
• A plan with predictable copays can make budgeting easier before receiving care. In contrast, coinsurance may result in more varied costs depending on the type of medical care you receive, especially if you have a high coinsurance rate.
• Your maximum out-of-pocket limit is your fixed financial safety net. A lower limit can be worth it if you anticipate high medical expenses during the plan year, even at the risk of a higher monthly premium.
• Ensure your plan has your preferred doctors, specialists, and hospitals in-network. Going to an out-of-network provider means you’ll pay more out-of-pocket costs when you receive care.
• If you take regular medications, confirm that your plan covers them at a reasonable price. Also, double-check what your plan considers generic and specialty prescription drugs and the costs for each.

Conclusion

Understanding health insurance doesn’t have to feel like you’re navigating uncharted waters. By learning the basic terms, you’ll be better prepared to enroll in a plan with ease. Whether you’re seeking lower monthly premiums, stable cost-sharing amounts, or wide access to preferred providers, knowing these terms empowers you to choose the right coverage for you and your family.

Shopping for health insurance is even less stressful when you have an ICHRA powered by Remodel Health. If your employer is offering you a personalized health benefit using our ICHRA+® administrative solution, our team of experts is standing by to help you shop for and enroll in the individual health plan that best fits your needs. 

This article was originally published on May 19, 2022. It was last updated on September 19, 2025.

References

1. Average Marketplace Premiums by Metal Tier
2. Out-of-pocket maximum/limit