Privacy & policy

Health Insurance Terms Explained

Health insurance includes many specialized terms that can sometimes feel confusing. To help you better understand your coverage, here are some of the most common health insurance terms explained in simple language.

1. Premium

The amount you pay every month to keep your health insurance active.
You must pay this whether you use healthcare services or not.

2. Deductible

The amount you must pay for healthcare services before your insurance company starts paying.

3. Copay (Copayment)

A fixed amount you pay for a medical service.
This payment is usually made at the time you receive care.

4. Coinsurance

The percentage of the medical bill you pay after your deductible has been met.

5. Out-of-Pocket Maximum

The maximum amount you have to pay for covered healthcare services in a year.
Once you reach this limit, your insurance pays 100% of covered services for the rest of the year.

6. Network

A network is the group of doctors, hospitals, and clinics that accept your insurance plan.

• In-network: Lower cost for services

• Out-of-network: Higher cost or may not be covered

7. In-Network vs Out-of-Network

• In-network provider: A doctor or facility contracted with your insurance company.

• Out-of-network provider: Not contracted with your insurance company, which usually means higher costs.

8. Claim

A request sent to the insurance company for payment after you receive medical care.

Claims are usually submitted by:

• Hospitals

• Doctors

• Pharmacies

9. Explanation of Benefits (EOB)

A statement from your insurance company that explains:

• The medical service you received

• What the doctor charged

• What the insurance company paid

• What amount you still owe

10. Preauthorization (Prior Authorization)

Approval from the insurance company before certain treatments or procedures are performed.

Common examples include:

• Surgeries

• MRIs

• Some medications

11. Primary Care Physician (PCP)

Your main doctor who manages your overall healthcare.

A PCP often:

• Treats common health issues

• Refers you to specialists when needed

12. Referral

A referral happens when your primary care physician sends you to a specialist for additional care.

Some health insurance plans require referrals before seeing a specialist.

13. Formulary

A formulary is the list of medications covered by your insurance plan.

Medications are often divided into tiers:

• Tier 1: Lowest cost medications

• Tier 2–3: Higher cost medications

14. Open Enrollment

The period each year when you can enroll in a health insurance plan or make changes to your existing coverage.

15. HMO, PPO, and EPO (Plan Types)

HMO (Health Maintenance Organization)

• Must use doctors within the network

• Requires a Primary Care Physician (PCP)

• Referrals are required to see specialists

• Usually lower cost plans

PPO (Preferred Provider Organization)

• Offers more flexibility

• You can see specialists without referrals

• Higher monthly premiums

EPO (Exclusive Provider Organization)

• Must stay within the network

• Referrals are not required