Insurance and protection · Overview

Health insurance basics.
HDHP, PPO, ACA, and comparing costs.

READ8 min·UPDATED·APPLIES TOUnited States·LEVELBeginner
For anyone choosing between health plans. Sources are listed at the bottom of the page; check their dates before acting.

Compare premiums, deductibles, copays, and out-of-pocket maximums when choosing a plan. Consider when to use the ACA marketplace versus COBRAConsolidated Omnibus Budget Reconciliation Act (COBRA)A federal law that lets you and your covered family keep an employer's group health plan after a job loss, cut in hours, divorce, or death, usually for 18 months and up to 36 in some cases. You can be charged up to the full premium plus a 2% fee. It generally applies to employers with 20 or more employees.Full definition.

US-only. Health insurance mechanics are US-specific. Single-payer and hybrid systems work differently. The HSAHealth Savings Account (HSA)A health savings account available only when eligibility requirements are met. Federal tax benefits depend on contribution limits and qualified medical expenses. Health coverage, other coverage and Medicare enrollment can affect eligibility; state tax treatment can differ.Full definition-eligible HDHPHigh-Deductible Health Plan (HDHP)A health-plan category with statutory deductible and out-of-pocket rules. HSA eligibility also depends on other conditions. Special 2026 rules cover qualifying bronze and catastrophic plans; verify the plan and your own eligibility rather than relying on its deductible alone.Full definition framework only exists in the US.

Short answer

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. The out-of-pocket maximum limits cost-sharing for covered in-network services in a plan year, not every medical expense.[1] 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 out-of-pocket maximum caps your deductible, copays and coinsurance for covered in-network services in a plan year. After you reach it, the plan pays 100% of those covered benefits. It excludes premiums, noncovered services, out-of-network care and charges above the allowed amount that you may owe. For 2026, Marketplace plan limits cannot exceed $10,600 for an individual or $21,200 for a family; your plan may have a lower limit. Check the current plan documents.[1]

Who pays as the year's covered bills add up
1 · Deductiblefirst $3,000/yr, for example
You pay 100%
2 · Coinsurance80/20, until the cap
20%Plan pays 80%
3 · Out-of-pocket maxreached: cost-sharing stops
Plan pays 100%
0%100% of each covered in-network bill
Your sharePlan's share
Deductible, copays and coinsurance all count toward the cap. 2026 Marketplace caps: $10,600/yr individual, $21,200/yr family, or lower.
Outside the cap: you still pay these
Premiums, every monthNoncovered servicesOut-of-network careCharges above the allowed amount
Your share of each covered in-network bill falls from 100% under the deductible to 20% under 80/20 coinsurance, then to zero once you reach the out-of-pocket max. Premiums, out-of-network care and the other costs outside the cap never count toward it.

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.

HDHP + HSA - the triple tax advantage

A high-deductible health plan (HDHP) paired with a Health Savings Account (HSA) is the only account in the U.S. tax code that offers three tax advantages at once:

  1. Contributions are tax-deductible. Pre-tax via payroll, or an above-the-line deduction on your return.
  2. Growth is tax-free. Invest the HSA just like an IRAIndividual Retirement Account (IRA)A retirement account with tax advantages and eligibility rules. Traditional IRA contributions may be deductible; taxable withdrawals generally enter income. Roth contributions use after-tax money, and qualified Roth withdrawals are tax-free.Full definition. Funds compound inside the account with no drag.
  3. Qualified medical withdrawals are tax-free. At any age. No other account does all three.

After age 65 the HSA can be used like a Traditional IRA for any purpose (withdrawals taxed as income), so it doubles as a stealth retirement account. The "superpower" move for young healthy earners: pay for current medical costs out of pocket, keep the receipts, and let the HSA compound for decades. See HSA Deep Dive.

KEY FACT

2026 HSA contribution limits: $4,400 individual, $8,750 family. Age 55+ catch-up: additional $1,000. Contributions can be made until the April tax deadline for the prior year.

DECISION FRAMEWORK
  1. Estimate your expected annual healthcare costs.
  2. For each plan: total cost = annual premium + expected out-of-pocket costs. Also compare a bad year: annual premiums plus the in-network cap, plus costs outside the cap. Check coverage, network providers and medicines rather than treating the cap as a ceiling on all spending.[1]
  3. For HDHP: subtract HSA tax savings (federal + state + 7.65% FICAFederal Insurance Contributions Act (FICA)The federal payroll tax that funds Social Security and Medicare. Workers pay 6.2% for Social Security (on wages up to $184,500 in 2026) plus 1.45% for Medicare, and employers match both. Self-employed people pay both halves, 15.3%, as self-employment tax.Full definition on payroll contributions).
  4. The plan with the lowest total expected cost wins.

How to evaluate a health plan

Monthly premium is the cheapest, most visible number on the plan page - and the single worst way to compare plans. The right question is total cost across a normal year and across a bad one.

Beyond the five numbers in Section 1, check two more criteria:

  • Network breadth - does it include the hospitals and specialists you use?
  • Prescription coverage - the formulary tier for the drugs you take.

Compare a normal year as annual premiums plus expected out-of-pocket spending. For a bad year, budget annual premiums plus the in-network OOP max, plus costs outside the cap: noncovered services, out-of-network care and charges above the allowed amount that you may owe. The cap is not an all-expense ceiling. Check providers, prescriptions and exclusions in the plan documents and keep cash available for these exposures.[1]

Two totals, not the premium
Normal year
  1. Annual premiumsfixedPaid regardless of care used
  2. Expected out-of-pocketestimateWhat you expect to spend on care
Normal-year costCompare plans on this total
Bad year
  1. Annual premiumsfixedSame as a normal year
  2. In-network OOP maxcappedThe full cap on in-network cost-sharing
  3. Costs outside the capnot cappedNoncovered services, out-of-network care, charges above the allowed amount you may owe
Bad-year budgetCompare plans on this total too
A bad year keeps the same premiums, swaps expected spending for the full in-network OOP max and adds costs the cap does not limit. Compare plans on both totals and keep cash for the uncapped part.

When an HDHP makes sense

  • Generally healthy with low expected medical use.
  • Can pay the full deductible out of your emergency fund without stress.
  • Want the tax-advantaged HSA for long-term investing.
  • No chronic medications or regular specialist care.
  • Employer offers an HSA contribution match or seed (free money - take it).

If those describe you, the math usually favors the HDHP by several thousand dollars per year after accounting for the HSA tax savings.

When a PPO or HMO makes sense

  • Chronic condition requiring ongoing care (diabetes, asthma, autoimmune).
  • Expensive maintenance medications.
  • Planning a pregnancy or family with young kids (kids break things - often).
  • Regular specialist visits.
  • Prefer broad network access without referrals.

In these scenarios, the lower deductible and predictable copays of a PPO typically beat the HDHP even after accounting for the lost HSA tax benefit. Run the math for your household - and re-run it every open enrollment, because plan designs change.

Section 3 · ACA marketplace

Who uses it: self-employed people, gig workers, people between jobs, people whose employers do not offer coverage.

Where: healthcare.gov or your state's exchange.

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.

Many marketplace plans are also HSA-eligible. Filter for "HSA-eligible" or "qualified HDHP" during plan selection.

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.

WHEN COBRA WINS
Mid-treatment continuity
In the middle of chemo, surgery, pregnancy, or another time-sensitive treatment where switching networks would interrupt care. The short-term cost is worth the continuity.
WHEN COBRA WINS
Short gap before new job
New employer plan starts in 30-60 days and you have already hit your deductible for the year. One month of COBRA is often cheaper than restarting the deductible clock.
WHEN TO SKIP
Everything else
Shop the ACA marketplace. A Bronze or Silver plan with similar OOP max is usually hundreds cheaper per month. Income drops from job loss often trigger big subsidies.

Never go uninsured, even for a week. A single ER visit can cost more than a full year of any plan on this page. Coverage on-paper beats waiting for the perfect option.

RELATED PAGES
HSA · the triple-tax-advantaged account FSA vs HSA · which account to fund Insurance Overview · full insurance map Gig Worker Finance · for self-employed Healthcare in Early Retirement · bridge to Medicare

Where to go from here

Do next

How Much Insurance You Need

How to size total coverage across all your policies, not just health.

Read next

Insurance

The hub for the four core policies once health coverage is settled.

Explore further

Sources

Bracketed numbers in the text link to these sources. Figures, rates and rules change: check each source’s date before acting on it.

  1. Out-of-pocket maximum/limit - Glossary | HealthCare.gov ↩
  2. HealthCare.gov · healthcare.gov. Federal ACA marketplace, plan comparisons, and subsidy calculator.
  3. IRS Publication 969. Health Savings Accounts · irs.gov/publications/p969.
  4. Department of Labor. COBRA continuation coverage · dol.gov/general/topic/health-plans/cobra.
  5. Kaiser Family Foundation - Employer and marketplace plan analyses - kff.org
  6. Fidelity HSA - long-term HSA investing - fidelity.com

Last updated . Educational content, not financial advice. Disclosures · How pages are reviewed

Subscribe via RSS for new articles.