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Guide to understanding your insurance coverage

When you know how to read your insurance paperwork, you can make more informed decisions. This guide walks you through the basics of medical codes and benefits.

It is important to understand your Explanation of Benefits (EOB) when choosing a health insurance plan.1


An EOB is a document that explains your medical claims and what your health insurance paid.1 It is not a bill.

EOB documents generally include patient information, health plan information, claim details, service information, cost information, and reason codes. The EOB will show the total charges for your healthcare services compared to the “allowable” charges, which is the amount your insurer agrees to pay. There may be a portion of charges that are not “allowed”, meaning amounts your insurance company does not agree to pay based on its contract with your healthcare provider.1

 

In simple terms: An EOB shows what was billed, what your insurance paid, and what you may owe.

For example, if a doctor visit costs $200, the EOB will show the total charge. It will also show how much Medicare paid and whether you owe anything.

If you have a private insurance plan, review your specific EOB details. This guide focuses on Medicare and how to understand your EOB.


See an example of how to read your EOB for Medicare Part A and Part B1
Read the Explanation of Benefits1

FAQ

A monthly premium is the amount you pay each month to keep your health insurance plan.2

  • This amount stays the same for the calendar year.2
  • In simple terms: Your premium is the cost of having the plan, whether you use medical services or not.

 

Detailed explanation of Medicare premiums2

A deductible is the money you must pay out of your own pocket before your health insurance begins to cover part of the cost.2

  • You pay your monthly premium to keep your plan.2 Your deductible is separate from your premium.
  • In simple terms: You pay the deductible first. After you meet it, your insurance begins paying a portion of your costs.2

For example, if your deductible is $1,000, you must pay the first $1,000 of covered services yourself. After that, your insurance starts sharing the cost.

Some plans cover certain preventive services, such as annual wellness exams, before you meet your deductible. Check your specific plan details.2

 

Detailed explanation of Medicare deductibles2

A co-payment is a fixed amount you pay for a covered medical service.2

  • In simple terms: You pay a set dollar amount.

For example, you may pay $20 for a visit to your primary care provider.

Some services may require you to meet your deductible first. Check your Summary of Benefits for details.

 

What does MediCare cost?2

Co-insurance is a percentage of the cost of a covered service that you pay after you meet your deductible.2

  • In simple terms: You pay a percentage. Your insurance pays the rest.

For example, if your plan has 20% co-insurance and a procedure costs $10,000, you would pay $2,000. Your insurance would pay the remaining $8,000 after your deductible has been met.

 

What does MediCare cost?2

Full Medicare definitions of co-payments and co-insurance2

Understanding your EOB

Not all Medicare plans work the same way.

  • An out-of-pocket limit (also called an out-of-pocket maximum) is the most you will pay for in-network, covered services in a calendar year.3,4
  • After you reach this amount, your plan pays 100% of covered, in-network costs for the rest of the year.3,4
  • In simple terms: This is your yearly spending cap. It does not include your monthly premium.

 

Important: Medicare Advantage plans have a yearly out-of-pocket maximum.3,4 Original Medicare (Part A and Part B) does not have one combined yearly limit.3,4 If you have supplemental coverage, your costs may be different.

 

Continuing the example above: if your deductible is $1,000 and your out-of-pocket maximum is $5,000, you keep paying your share until you reach $5,000.

Your share includes deductibles, co-payments, and co-insurance.³

In the example above, once you reach $5,000, your plan pays the rest of your in-network covered costs for the year.

 

Note: Your monthly premium does not count toward your out-of-pocket limit.³ This number matters most for people who use more healthcare services during the year.

 

Learn more about Medicare out-of-pocket costs3

Try to stay in-network whenever possible.

  • Insurance plans have contracts with certain hospitals, doctors, and specialists.5 These providers are in-network.
  • If a provider does not have a contract with your plan, they are out-of-network.5 Out-of-network care often costs more.5

  • Out-of-network care may not be covered at all. You may pay more through higher co-insurance or co-payments. Your plan may also reimburse less.5
  • Always confirm that your provider is in-network before receiving care. In some cases, you may choose to pay out-of-network to see a specific healthcare provider or receive a specific service or product.

 

Important: Before your appointment, ask your provider if they are in-network with your insurance.

 

This applies to all plans, including:

  • Medicare
  • Medicare Advantage
  • Private insurance plans

 

Learn what Medicare covers in 20264

Learn about provider networks in the Health Insurance Marketplace5

  1. Centers for Medicare & Medicaid Services. How to read an explanation of benefits. Accessed January 23, 2025. https://www.cms.gov/medical-bill-rights/help/guides/explanation-of-benefits
  2. Centers for Medicare & Medicaid Services. What does Medicare cost? Medicare.gov. Accessed January 23, 2025. https://www.medicare.gov/basics/get-started-with-medicare/medicare-basics/what-does-medicare-cost
  3. National Council on Aging. What you will pay in out-of-pocket Medicare costs in 2026. Accessed February 26, 2026. https://www.ncoa.org/article/what-you-will-pay-in-out-of-pocket-medicare-costs-in-2026/
  4. Centers for Medicare & Medicaid Services. Medicare and You Handbook 2026. Accessed February 26, 2026. https://www.medicare.gov/publications/10050-medicare-and-you0.pdf
  5. Centers for Medicare & Medicaid Services. What you should know about provider networks. Accessed January 23, 2025. https://www.cms.gov/marketplace/outreach-and-education/what-you-should-know-provider-networks.pdf
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