Health Insurance Basics: What You Need to Know

Health insurance in the US can be complicated

Health insurance can feel confusing, especially when you're trying to focus on your recovery. Understanding a few key terms can help you feel more confident about your benefits, costs and treatment decisions. Here's a simple breakdown of the concepts we're asked about most in our clinic.

Deductible: what you pay first

Your deductible is the amount you pay out of pocket each year before your insurance starts contributing to covered services.

• Deductibles typically reset at the beginning of the calendar year.
• Until your deductible is met, you may be responsible for the full allowed amount (explained below).
• Some plans have separate deductibles for in-network and out-of-network care.

Example: if your deductible is $2,000 and you've paid $500 so far this year, you have $1,500 remaining before insurance begins sharing costs.

Out-of-pocket maximum: your financial safety net

Your out-of-pocket maximum is the most you'll pay in a year for covered healthcare services.

• Once you reach it, insurance covers 100% of covered services for the rest of the year.
• Deductibles, co-pays and co-insurance usually count toward this maximum.
• Like deductibles, out-of-pocket maximums typically reset annually.

This protects you from unlimited medical expenses in a single year.

Co-pay: a set fee per visit

A co-pay is a fixed dollar amount you pay for a service, such as a physical therapy visit.

• Common co-pays might be $20, $30 or $50 per visit.
• Some plans require a co-pay only after the deductible is met.
• Other plans require a co-pay from the first visit.

Your insurance plan determines when and how co-pays apply.

Co-insurance: a percentage split

Co-insurance is the percentage of costs you share with your insurance after your deductible is met.

Example: if your plan has 20% co-insurance and the allowed amount is $100, you pay $20 and insurance pays $80.

Co-insurance continues until you reach your out-of-pocket maximum.

Allowed amount: the key number that matters

The allowed amount is the maximum fee your insurance company considers reasonable for a service.

• It's often less than the provider's standard charge.
• Your cost (deductible, co-pay or co-insurance) is based on the allowed amount, not the billed amount.
• For in-network providers, the allowed amount is pre-negotiated with insurance.

Understanding the allowed amount helps explain why charges and patient responsibility may differ.

In-network vs. out-of-network: what's the difference?

In-network providers have contracts with your insurance company that set agreed-upon rates. Out-of-network providers do not have these contracts.

In-network care is often less expensive, but out-of-network care is not always significantly more expensive. The difference depends entirely on your individual plan. Important things to know:

• Some plans offer excellent out-of-network benefits.
• Deductibles and co-insurance may be higher out-of-network, but not always.
• The allowed amount still applies, even out-of-network.
• Quality of care, provider expertise and personalized treatment can be important factors to consider.

We encourage patients not to assume that out-of-network automatically means unaffordable. Many patients are surprised to find their costs are similar, or manageable, depending on their plan.

Want help understanding your benefits?

Insurance plans vary widely, and no two plans are exactly the same. If you'd like help understanding your benefits before scheduling, or have questions about your current plan, our team is happy to help guide you.

Understanding your insurance lets you focus on what matters most: your recovery. At Kauno we provide detailed good faith estimates so you have a full understanding of your coverage before treatment. For more examples of each term, see our quick guide to health insurance.

Questions about your coverage? We'll help you understand your benefits before your first visit.

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the takeaway

Your costs are based on the allowed amount, shaped by your deductible, co-pay or co-insurance, and capped by your out-of-pocket maximum. Don't assume out-of-network means unaffordable: it depends on your plan.

Frequently asked questions

What is an allowed amount in health insurance?

It's the maximum fee your insurance company considers reasonable for a service. It's often less than the provider's standard charge, and your cost is based on it rather than the billed amount.

What counts toward my out-of-pocket maximum?

Deductibles, co-pays and co-insurance usually count toward it. Once you reach it, insurance covers 100% of covered services for the rest of the year.

When does my deductible reset?

Deductibles typically reset at the beginning of the calendar year.

Is out-of-network physical therapy always more expensive?

Not always. Some plans offer excellent out-of-network benefits, and many patients find their costs are similar or manageable depending on their plan.