Health Insurance Costs Explained: Premiums, Deductibles, and Hidden Fees

Health insurance is most Americans' second-largest expense after housing. But the monthly premium is just the beginning — understanding all the cost components helps you choose the right plan and avoid surprises.

Average monthly premiums in 2025: individual plans $450-$650, family plans $1,200-$1,800 through employers. Marketplace (ACA) plans range from $200-$800+ depending on age, location, and metal tier. Most people qualify for subsidies.

Deductibles are what you pay before insurance kicks in. Average deductibles: Bronze plans $6,000-$8,000, Silver $3,000-$5,000, Gold $1,000-$2,000, Platinum $0-$500. Lower deductibles mean higher premiums.

Copays are flat fees per visit: primary care $20-$50, specialist $40-$80, urgent care $50-$100, ER $150-$500. These apply after your deductible on most plans, though some plans offer pre-deductible copays for primary care.

Coinsurance is your percentage after the deductible. Common splits: 80/20 (insurance pays 80%, you pay 20%), 70/30, or 60/40. On a $50,000 surgery with 20% coinsurance after a $3,000 deductible, you'd pay $3,000 + $9,400 = $12,400.

Out-of-pocket maximums cap your annual spending. 2025 ACA limits: $9,200 individual, $18,400 family. Once you hit this, insurance covers 100%. This is the most important number if you have chronic conditions or anticipate major procedures.

The cheapest plan isn't always the best value. A Bronze plan with a $600 premium and $7,000 deductible costs $14,200 before insurance helps. A Gold plan at $900 premium with a $1,500 deductible costs $12,300 before full coverage kicks in.

HSA-eligible high-deductible plans offer tax advantages. You can contribute $4,150 (individual) or $8,300 (family) pre-tax in 2025. Funds roll over indefinitely and can be invested. This effectively reduces your healthcare costs by your tax rate.

Network type matters for costs. HMO plans are cheapest but limit you to in-network providers and require referrals. PPO plans cost more but offer out-of-network coverage and no referral requirements. EPO plans are a middle ground.

Prescription drug costs vary wildly between plans. If you take regular medications, compare formularies before choosing. Moving from Tier 3 to Tier 1 for the same drug can save hundreds per month.

Open enrollment is typically November-January for marketplace plans. Missing it means waiting until next year unless you have a qualifying life event (job loss, marriage, baby, move).

If you're self-employed, individual health insurance premiums are 100% tax-deductible as a business expense, significantly reducing the effective cost.