If you’ve ever looked over your health insurance plan and felt lost when trying to understand your deductible, copays, or out-of-pocket maximum, you aren’t alone. These terms might seem similar, but they can have very different meanings when it comes to your health expenses. So how do deductibles and out-of-pocket costs vary from one another, and why does it matter?
Read on to learn the core differences between deductibles and out-of-pocket costs, along with examples.
Understanding your insurance deductible (with examples)
A deductible is the amount of money you have to pay for covered medical services each year before your insurance company steps in and starts to help with covering the cost of your care.
Your annual deductible amount depends on your health insurance plan. If you have a low deductible health plan (LDHP), your deductible is lower, but you pay a higher monthly premium (a payment that you make toward your health insurance company each month to keep your health insurance coverage.) In 2025, an insurance plan qualifies as a low-deductible plan if your deductible is less than $1,650 for an individual or less than $3,300 for a family.
If you have a high deductible health plan (HDHP), that means your deductible is higher, but you have a lower monthly premium. In 2025, any plan with a deductible over $1,650 for an individual or over $3,300 for a family is considered an HDHP. High deductible plans are often paired with a health savings account (HSA). An HSA is a savings account that allows you to deposit pre-tax income. You can then use those tax-free dollars to cover your medical expenses.
High deductible example: Let’s say you have a high deductible plan with an annual deductible of $3,000. That means if you go to the emergency room and wind up with a $2,500 medical bill, and you haven’t had any other medical expenses that year, you’ll need to pay for that entire bill yourself (out of pocket) – you’re still $500 short of reaching your deductible. In other words, your insurance company won’t start covering a portion of your care until you’ve paid up to $3,000 in medical expenses by yourself.
Low deductible example: Now, let’s say you have a low deductible plan with an annual deductible of $1,500. If you go to the emergency room and wind up with a $2,500 medical bill, and you haven't had any other medical expenses that year, you’ll only need to pay $1,500 of that bill before your health insurance begins to help cover some of the cost. Remember, the amount that your insurance covers after you reach your deductible will depend on your insurance plan.
Understand your out-of-pocket costs (with examples)
Out-of-pocket costs refer to the total amount of money you pay for health care services that your insurance doesn’t fully cover. This includes:
- Your deductible (high or low)
- Copays (flat fees you pay for things like doctor visits or prescription drugs)
- Coinsurance (a percentage of the bill you pay after meeting your deductible; not all plans have this)
In other words, your deductible is just one single part of your out-of-pocket costs.
Out-of-pocket cost example: Let’s say you’ve met your $3,000 deductible. Now, if you have a plan with co-insurance, your plan pays 80% of in-network medical services, and you pay 20%. If you get a $1,000 X-ray, you’ll have to pay $200 out-of-pocket, while your insurance will cover $800. You also might have a $30 copay each time you see your primary care doctor. All of these payments – your deductible, copays, and coinsurance – count toward something called your out-of-pocket maximum (OOP max). Your OOP max is the maximum amount you’ll have to pay for covered services in a year. After you hit your out-of-pocket max, your insurance company pays 100% of the cost for covered medical care for the rest of the year.
What’s the difference between deductibles and out-of-pocket costs?
Your deductible is just one type of out-of-pocket expense. Once you’ve met your deductible, you’ll still have other out-of-pocket costs, like copays and coinsurance, depending on your plan.
To recap:
- Deductible: what you pay for medical care before insurance kicks in
- Out-of-pocket costs: your deductible, copays, coinsurance, and any qualified medical expenses that aren't covered by your insurance.
- Out-of-pocket maximum: the maximum dollar amount you’ll pay for covered health care services in one plan year; once you meet it, your insurance pays for 100% of your care for the rest of the year
If you’re choosing between health insurance plans, you’ll need to decide whether a higher deductible/lower premium plan or a lower deductible/higher premium plan works better for you and your family members.
For some, like those who need frequent doctor visits or prescription drugs, a lower deductible may help reduce surprise medical bills and out-of-pocket costs. For those who don’t require much care beyond an annual physical, a high deductible plan may make more financial sense.
How Sesame can help
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Sesame is an online marketplace where doctors are able to list more than 380 medical services (from online urgent care to prescription refills) at upfront, cash prices — no insurance required, no copays, no deductibles, and no surprise bills.
Instead, patients can filter for doctor's appointments by price, availability and provider rating, and then book within seconds. And because there are no insurance middlemen to mark up the price of care, patients get access to the same doctors who would treat them through insurance at half the price of traditional healthcare. It’s radically simple and radically affordable - the way healthcare should be.
