Health insurance basics.
HDHP, PPO, ACA, and what actually matters.
Most people choose health insurance plans without understanding what they are buying. Here is what premiums, deductibles, copays, and out-of-pocket maximums actually mean, how to compare plan types, and when to use the ACA marketplace versus COBRAConsolidated Omnibus Budget Reconciliation Act (COBRA)A federal law that lets you keep employer health insurance for up to 18 months after leaving a job, at full cost.Full definition.
US-only. Health insurance mechanics are deeply US-specific. Single-payer and hybrid systems work differently. The HSAHealth Savings Account (HSA)A tax-advantaged account for healthcare costs, available with a high-deductible plan; contributions, growth, and qualified withdrawals are all tax-free.Full definition-eligible HDHPHigh-Deductible Health Plan (HDHP)A health insurance plan with cheaper monthly cost but a bigger amount you pay yourself before insurance starts covering bills. Required if you want a tax-free Health Savings Account.Full definition framework only exists in the US.
Premium is what you pay even if you never use care. Deductible is what you pay before insurance starts. Copay is a flat fee at the visit. Coinsurance is your share of costs after the deductible. Out-of-pocket maximum is the most you will pay in a year. Pick the plan with the lowest total expected cost (premium plus expected out-of-pocket) for your specific health profile, accounting for HSA tax savings if HDHP-eligible.
Section 1 · The five numbers that matter
Premium
What you pay per month for coverage. Applies even if you never use any healthcare. Employer plans: employer pays part, you pay part. ACA marketplace: subsidized based on income.
Deductible
How much you pay out of pocket before insurance starts paying. A $3,000 deductible means you pay the first $3,000 of healthcare costs each year. In-network and out-of-network deductibles are often different.
Copay
A fixed dollar amount you pay for specific services (doctor visit: $30 copay). Some plans apply copays before the deductible, some after. Prescription copays are tiered by drug tier.
Coinsurance
Your share of costs after the deductible is met. 80/20 coinsurance: insurance pays 80%, you pay 20%, until you hit the out-of-pocket maximum.
Out-of-pocket maximum
The most you will pay in a year. After this point, insurance covers 100%. 2026 out-of-pocket maximums for ACA-compliant plans: approximately $9,450 self-only and approximately $18,900 family verify×DON'T TRUST, VERIFYClaim: 2026 ACA out-of-pocket maximums are approximately $9,450 self-only and $18,900 family.Verify at: healthcare.gov ↗HHS publishes the annual maximum out-of-pocket limits in the Notice of Benefit and Payment Parameters each year..
Section 2 · HDHP vs PPO vs HMO
High-Deductible Health Plan (HDHP)
- Lower monthly premiums.
- Higher deductible (minimum $1,700 self-only in 2026 to qualify as HDHP).
- Qualifies you for an HSA. See HSA.
- Best for: healthy people who rarely need care, and people who want to use the HSA as an investment vehicle.
Preferred Provider Organization (PPO)
- Higher monthly premiums.
- Lower deductible, sometimes $0-$500.
- Broader network of providers.
- No HSA eligibility.
- Best for: people with ongoing conditions, frequent prescriptions, or high expected annual healthcare costs.
Health Maintenance Organization (HMO)
- Even lower premiums.
- Must use in-network providers.
- Requires referrals to see specialists. Your primary-care physician is the gatekeeper.
- Best for: people who want lower premiums and do not need out-of-network flexibility.
- Estimate your expected annual healthcare costs.
- For each plan: total cost = annual premium + expected out-of-pocket costs.
- For HDHP: subtract HSA tax savings (federal + state + 7.65% FICAFederal Insurance Contributions Act (FICA)The payroll tax that funds Social Security and Medicare, split between employee and employer.Full definition on payroll contributions).
- The plan with the lowest total expected cost wins.
Section 3 · ACA marketplace
Who uses it: self-employed people, gig workers, people between jobs, people whose employers do not offer coverage.
Premium tax credits
Based on household income as a percentage of the Federal Poverty Level. Calculate your estimate at healthcare.gov before choosing a plan.
Metal tiers
- Bronze: lowest premiums, highest deductibles.
- Silver: moderate both. Eligibility for Cost-Sharing Reductions if income qualifies.
- Gold: higher premiums, lower deductibles.
- Platinum: highest premiums, lowest deductibles.
Open enrollment
November 1 to January 15 each year (approximate). Special enrollment is triggered by qualifying life events: losing coverage, marriage, divorce, new child, or moving.
Section 4 · COBRA
When you lose employer coverage (quit, get laid off, reduce hours), COBRA lets you continue the exact same plan for 18 months (sometimes 36). You pay the full premium: both your share AND the employer's share, plus a 2% administrative fee.
When COBRA makes sense
- Mid-treatment for something requiring continuity of care with specific providers.
- Very briefly between jobs, when new coverage starts soon.
When ACA marketplace is better
Almost always cheaper if you qualify for premium tax credits. Check the marketplace before defaulting to COBRA.
- HealthCare.gov · healthcare.gov. Federal ACA marketplace, plan comparisons, and subsidy calculator.
- IRS Publication 969. Health Savings Accounts · irs.gov/publications/p969.
- Department of Labor. COBRA continuation coverage · dol.gov/general/topic/health-plans/cobra.