Cost sharing is the portion of medical expenses you pay out of your own pocket, separate from your monthly premium. It includes three main components: deductibles, copays, and coinsurance. Together, these mechanisms split the cost of healthcare between you and your insurance company, and they follow a specific sequence each year that determines how much you owe at any given point.
How Deductibles, Copays, and Coinsurance Work Together
Cost sharing follows a predictable order. First, you pay your deductible, which is the amount you must spend before your insurance starts covering a share of your bills. The average deductible for single coverage in an employer-sponsored plan is $1,886, according to KFF’s 2025 survey. Until you hit that number, you’re paying the full allowed cost of most services yourself.
Once you’ve met your deductible, coinsurance kicks in. This is a percentage split between you and your insurer. A common arrangement is 80/20, meaning your plan covers 80% of a service and you pay the remaining 20%. Copays work differently: they’re flat-dollar amounts you pay at the time of a visit or prescription, like $30 for a specialist appointment, regardless of the total bill. Some plans use copays for certain services and coinsurance for others.
All of these payments count toward your out-of-pocket maximum, which is the yearly ceiling on what you can be required to pay. Once you reach it, your insurer covers 100% of covered services for the rest of the plan year. Premiums do not count toward this limit.
Out-of-Pocket Limits Set by Federal Law
The Affordable Care Act caps how much Marketplace plans can charge you in a given year. For the 2025 plan year, the out-of-pocket maximum is $9,200 for an individual and $18,400 for a family. Those limits are rising in 2026 to $10,600 for an individual and $21,200 for a family. Employer plans follow the same federal ceiling, though many set their limits lower.
These caps exist to prevent catastrophic financial damage from a serious illness or injury. If you have a year with major medical expenses, like surgery or cancer treatment, you’ll stop paying coinsurance and copays once you hit the maximum. Everything after that is fully covered.
Why Insurers Use Cost Sharing
The economic logic behind cost sharing centers on a concept called moral hazard. When insurance covers everything with no out-of-pocket cost, people tend to use more healthcare than they would if they were paying something for it. Some of that additional use is genuinely needed care people had been putting off. But some of it is low-value care, services where the benefit to the patient is less than the actual cost of delivering them.
Cost sharing is designed to give you “skin in the game,” encouraging you to weigh whether a service is worth pursuing. Insurers and economists argue this keeps premiums more sustainable for everyone in the plan. The tradeoff is real, though: making people pay more at the point of care doesn’t just reduce unnecessary visits. It also discourages necessary ones.
The Effect on Medication and Health
A large body of research shows that higher cost sharing leads people to skip or delay care they actually need. A literature review examining 66 studies found that 85% of them showed a statistically significant link between increased out-of-pocket costs and decreased medication adherence. When researchers quantified the effect, each additional dollar in copay was associated with a 0.4% drop in adherence. That means a $10 copay increase could reduce adherence by roughly 4%.
This isn’t just an abstract statistic. Among studies that tracked health outcomes, 76% found that higher cost sharing led to worse results for patients. People with chronic conditions like diabetes or heart disease are especially vulnerable, because skipping medications or stretching prescriptions to save money can lead to hospitalizations that cost far more than the drugs would have.
Preventive Care Is Exempt
Federal law requires most health plans to cover a set of preventive services at zero cost to you. That means no copay, no coinsurance, and no deductible requirement for things like immunizations, cancer screenings, blood pressure checks, and annual wellness visits. This exemption exists specifically because cost sharing was discouraging people from getting routine care that catches problems early and costs far less than treating advanced disease.
The exemption applies even if you haven’t met your deductible for the year. It covers a broad range of services, from cholesterol screening to contraception to depression screening. If a preventive visit leads to a diagnostic test or treatment, however, those follow-up services may be subject to your plan’s normal cost sharing.
Cost Sharing in Medicare
Medicare has its own cost-sharing structure. For Part B, which covers doctor visits and outpatient care, the annual deductible is $257 in 2025. After meeting that, you typically pay 20% coinsurance with no out-of-pocket maximum under traditional Medicare, which is one reason many people buy supplemental Medigap policies. Medicare Advantage plans, by contrast, are required to cap your yearly out-of-pocket spending.
Help for Lower-Income Enrollees
If you buy insurance through the ACA Marketplace, you may qualify for cost-sharing reductions (CSRs) that lower your deductibles, copays, and coinsurance. To be eligible, your household income generally needs to fall between 100% and 250% of the federal poverty level, and you must enroll in a Silver-tier plan. Members of federally recognized tribes may qualify for zero or limited cost-sharing plans with income up to 300% of the poverty level.
CSRs don’t change your premium. They reduce what you pay when you actually use care, effectively making your Silver plan function more like a Gold or Platinum plan. Unlike premium tax credits, which show up on your monthly bill, cost-sharing reductions only become visible when you visit a doctor or fill a prescription.
How Plan Tiers Reflect Cost Sharing
On the Marketplace, plans are organized into metal tiers that signal how costs are divided between you and the insurer. Bronze plans have the lowest premiums but the highest cost sharing: you pay roughly 40% of costs on average, and the plan covers 60%. Silver plans split costs closer to 70/30. Gold plans cover about 80%, and Platinum plans cover 90%.
Choosing a tier is essentially a bet on how much healthcare you’ll use that year. If you’re generally healthy and mostly want coverage for emergencies, a Bronze plan’s lower premium may save you money overall. If you take regular medications or expect to need specialist visits, a Gold or Platinum plan’s higher premium often pays for itself through lower costs at the point of care. The right choice depends on your health needs, your budget for monthly premiums, and how much financial risk you’re comfortable absorbing if something unexpected happens.