We’ve compiled some basic health insurance cost terms and defined them for you. Understanding these key terms and concepts related to health insurance costs will help you navigate a discussion about affordability.
Actuarial value (AV)
The average percentage of benefit costs covered by a health plan product. A plan’s AV indicates how generous the coverage is. An AV of 60% means that, on average, insurance covers 60% and consumers pay the other 40% for covered services through copays and other out-of-pocket costs. AV does not take into account premium costs.
The ACA assigns metal tiers to plans based on their AV: bronze (60% AV), silver (70%), gold (80%), and platinum (90%). For more detail on metal tiers, visit www.coveredca.com.
Out-of-pocket (OOP) costs
Costs a consumer must pay to receive health services covered under their plan. Out-of-pocket costs are sometimes broadly referred to as “cost sharing” and are in addition to premiums. Out-of-pocket costs include:
- Deductible. The amount a consumer pays for covered health care services before their health plan starts paying. For example, a consumer with a $2,500 deductible will pay for up to $2,500 of medical services each year before their insurance starts to pay. Deductibles do not apply to certain services, such as preventive care and, for plans offered through Covered California, many other services. For more on Covered California plan benefit design, see 2019 Patient-Centered Benefit Designs and Medical Cost Shares (PDF).
- Copayment. A fixed amount a consumer pays for a covered health care service when services are received. For example, a consumer might pay a $15 copay at the doctor’s office for a visit. The amount can vary by the type of covered health care service.
- Co-insurance. Similar to a copayment but instead of a fixed amount, the consumer pays a percentage of a charge for a covered health care service. For example, a consumer might pay 10% of the cost of an x-ray, while the plan pays the other 90%.
Out-of-pocket maximum (OOP max)
The highest amount that consumers are required to pay for their share of covered services each year. After the consumer share hits this limit, the plan pays 100%. The out-of-pocket maximum does not include premiums or the cost of care not covered by the plan.
The fixed monthly amount that must be paid to maintain health coverage. With ESI, monthly payments are shared between employer and employee. For example, under a generous employer plan, the employer might contribute 90% of the premium while the employee pays 10% through regular payroll deductions. Consumers in the individual market have no employer to help pay their premium, although some receive premium subsidies (see the section on The ACA & Affordability).