The Cost-Sharing Sequence

Most health plans follow a standard cost-sharing sequence: the member pays 100% of costs until the deductible is met, then pays coinsurance (a percentage of costs) until the out-of-pocket maximum is reached, then the plan pays 100%. Understanding this sequence is fundamental to plan design.

1. 1Member incurs a covered medical expense
2. 2If deductible not met: member pays 100% (applies to deductible)
3. 3If deductible met but OOP max not met: member pays coinsurance (e.g., 20%)
4. 4If OOP max met: plan pays 100% for the rest of the plan year
5. 5Deductible and OOP max reset at the start of each plan year

Embedded vs. Aggregate Deductibles

For family coverage, plans use either an embedded or aggregate deductible structure. With an embedded deductible, each family member has their own individual deductible — once met, the plan pays for that member even if the family deductible is not met. With an aggregate deductible, the family must collectively meet the family deductible before the plan pays for any family member.

Copay Plans vs. Coinsurance Plans

Copay plans charge a fixed dollar amount per service (e.g., $30 for a primary care visit). Coinsurance plans charge a percentage of the allowed amount after the deductible. Copay plans are simpler for employees but more expensive for employers — the fixed copay does not scale with the cost of the service.