Understanding health insurance terminology is essential for navigating the healthcare system and making informed financial decisions. Below is a glossary of the most important concepts for beginners, as defined by the sources.

Cost-Sharing Concepts

These terms define how you and your insurance company split the costs of your healthcare:

• Deductible: This is the amount you must pay for covered healthcare services before your insurance plan begins to pay. There is often a tradeoff in the Marketplace between choosing plans with higher premiums or higher deductibles.
• Copayment (Copay): A fixed amount (for example, $20) you pay for a covered healthcare service, usually at the time you receive the service.
• Coinsurance: Your share of the costs of a covered healthcare service, calculated as a percentage (for example, 20%) of the allowed amount for the service. You pay coinsurance plus any deductibles you owe.
• Out-of-Pocket Maximum/Limit: The most you have to pay for covered services in a plan year. After you spend this amount on deductibles, copayments, and coinsurance for in-network care, your health plan pays 100% of the costs of covered benefits.
• Premium: The amount you pay for your health insurance every month.

Plan Types and Networks

The type of plan you choose determines which doctors you can see and how much you will pay for their services:

• Network: The facilities, providers, and suppliers your health insurer has contracted with to provide healthcare services.
• HMO (Health Maintenance Organization): A type of health insurance plan that usually limits coverage to care from doctors who work for or contract with the HMO. It generally does not cover out-of-network care except in an emergency. An HMO may require you to live or work in its service area to be eligible for coverage.
• PPO (Preferred Provider Organization): A type of health plan where you pay less if you use providers in the plan’s network. You have the flexibility to use doctors, hospitals, and providers outside of the network for an additional cost, and you usually do not need a referral to see a specialist.
• EPO (Exclusive Provider Organization): A managed care plan where services are covered only if you use doctors, specialists, or hospitals in the plan’s network (except in an emergency).
• POS (Point of Service): A type of plan where you pay less if you use doctors, hospitals, and other healthcare providers that belong to the plan’s network. POS plans require you to get a referral from your primary care doctor in order to see a specialist.

Other Important Terms

• High Deductible Health Plan (HDHP): A plan with a higher deductible than a traditional insurance plan. The monthly premium is usually lower, but you pay more healthcare costs yourself before the insurance company starts to pay its share.
• Allowed Amount: The maximum amount on which payment is based for covered healthcare services. This may also be called “eligible expense,” “payment allowance,” or “negotiated rate”.

Mastering these basic concepts will help you better evaluate your options during enrollment periods and understand your medical bills.

https://www.healthcare.gov/glossary/
https://www.cms.gov/
https://www.kff.org/health-reform/
https://www.aarp.org/medicare/