Health Insurance Terms

A plain-language reference for the terms you encounter when shopping for health insurance, reading your Explanation of Benefits, or comparing plan options during open enrollment. Understanding the vocabulary — deductibles, copays, coinsurance, networks — is what separates people who choose the right plan from people who get hit with surprise bills.

• Balance Billing Balance billing occurs when an out-of-network provider bills you for the difference between their charge and what your insurance paid — a practice now federally restricted in emergency settings by the No Surprises Act.
• Catastrophic Health Plan A catastrophic health plan is a low-premium, very high-deductible ACA insurance plan available to people under 30 or those with a hardship exemption, designed to protect against worst-case health events.
• COBRA Insurance COBRA allows you to continue your employer-sponsored health insurance coverage after leaving a job, but you must pay the full premium — including what your employer used to pay — which can make it expensive.
• Coinsurance Coinsurance is the percentage of covered medical costs you pay after meeting your deductible, with your insurance plan paying the remaining percentage.
• Copay A copay is a fixed flat fee you pay for a specific medical service — like $25 for a primary care visit or $10 for a generic prescription — regardless of the total cost of that service.
• Deductible A deductible is the amount you pay out-of-pocket for covered medical services before your health insurance plan begins sharing the cost.
• EPO (Exclusive Provider Organization) An EPO is a health insurance plan that covers care only from in-network providers — like an HMO — but doesn't require a primary care physician or referrals to see specialists.
• Explanation of Benefits (EOB) An Explanation of Benefits (EOB) is a statement from your health insurer showing what services were billed, what the insurer paid, what was adjusted, and what you owe — it is not a bill.
• Formulary A formulary is a list of prescription drugs covered by your health insurance plan, organized into tiers that determine how much you pay for each medication.
• FSA (Flexible Spending Account) A Flexible Spending Account (FSA) is an employer-sponsored benefit that lets you set aside pre-tax dollars to pay for eligible medical expenses, reducing your taxable income.
• HDHP (High-Deductible Health Plan) An HDHP is a health insurance plan with a higher minimum deductible and lower premiums, designed to be paired with a Health Savings Account (HSA) for tax-advantaged medical spending.
• Health Insurance Premium A health insurance premium is the fixed amount you pay — usually monthly — to maintain your health insurance coverage, regardless of whether you use any medical services.
• HMO (Health Maintenance Organization) An HMO is a type of health insurance plan that requires you to choose a primary care physician and get referrals to see specialists, with coverage limited to an in-network provider group.
• In-Network vs. Out-of-Network In-network providers have contracted with your health insurer to provide services at negotiated rates, meaning lower costs for you — out-of-network providers have no such agreement, resulting in higher or uncovered costs.
• Marketplace Insurance Marketplace health insurance refers to health plans sold through the Affordable Care Act's Health Insurance Marketplace (HealthCare.gov or state exchanges), where eligible individuals can compare plans and access premium tax credits based on income.
• Medicaid Medicaid is a joint federal-state health insurance program that provides free or low-cost coverage to eligible low-income individuals, families, pregnant women, elderly adults, and people with disabilities.
• Medicare Medicare is a federal health insurance program primarily for Americans 65 and older, as well as certain younger people with disabilities, funded through payroll taxes and monthly premiums.
• Network Adequacy Network adequacy is the standard requiring health insurance plans to maintain a sufficient network of in-network providers so that enrollees can access covered services without unreasonable distance or wait times — a key protection enforced by state and federal regulators.
• Open Enrollment Open enrollment is the annual window of time during which you can sign up for, change, or cancel your health insurance plan — whether through your employer or the ACA marketplace.
• Out-of-Pocket Maximum The out-of-pocket maximum is the most you'll ever have to pay for covered medical services in a plan year — after which your insurance covers 100% of in-network costs.
• PPO (Preferred Provider Organization) A PPO is a type of health insurance plan that gives you the flexibility to see any doctor or specialist — in-network or out-of-network — without a referral, in exchange for higher premiums.
• Prior Authorization Prior authorization is a requirement from your health insurance company that your doctor obtain approval before providing certain medical services, procedures, or medications in order for them to be covered.
• Short-Term Health Insurance Short-term health insurance is a temporary, limited health coverage plan designed to bridge gaps in coverage — such as between jobs or during a waiting period — typically lasting 1 to 12 months, with lower premiums but significant coverage limitations.
• Step Therapy Step therapy (also called "fail first" requirements) is a health insurance protocol that requires patients to try and fail on lower-cost medications or treatments before the insurer approves coverage of a more expensive option prescribed by their doctor.
• Surprise Billing Surprise billing occurs when a patient unknowingly receives care from an out-of-network provider — often during an emergency or at an in-network facility — and later receives an unexpected bill for the cost difference that their insurance didn't cover.