Edited by Lee Huffman
In-network, out-of-network. Dependent. Deductible. Diagnostic. Copays and coinsurance. What does it all mean?
When shopping for a new health insurance plan, it’s important to understand the health insurance terms used by insurers. Speaking their language allows you to make the best purchasing decision for you and your family and avoid getting overcharged.
Whether it’s the open enrollment period at work or you’ve had a qualifying life event, comparing health insurance plans can be overwhelming. By familiarizing yourself with the most common health insurance terms, you can decipher the language used by insurers when talking about the people on your plan, types of plans, providers you visit, and costs you may be responsible for.
Terms for People on Your Health Insurance Plan
>> Covered Person: A covered person refers to any individual who is covered and entitled to health insurance benefits under a specific health insurance plan, including the subscriber and eligible dependents.
>> Dependent: Common types of dependents include a subscriber’s spouse and children who are also covered and entitled to health insurance benefits under a specific health insurance plan.
>> Medical Group: Health insurers contract with a medical group of doctors and health experts to serve plan members.
>> Member: When you are enrolled in a health plan, whether as the subscriber or the subscriber’s dependent, you are considered a member of the plan.
>> Preferred Provider: Your health insurer may list preferred providers, which are doctors the insurer has contracted with to provide care at a lower cost to save both you and the insurer money.
>> Primary Care Provider (PCP): A primary care provider is a healthcare professional – usually a doctor, nurse practitioner, or physician assistant – who coordinates your overall health and wellness and generally provides your yearly physical exam and other non-emergency medical needs. Some health plans require you to declare a PCP.
>> Provider: A provider is any healthcare professional who provides healthcare services.
>> Subscriber: The main person on a health insurance plan is the subscriber, who is responsible for payment of the plan and any dependents.
Basic Health Insurance Terms
>> Appeal: If you don’t agree with a decision made by your health insurance company regarding coverage, you have the right to file an appeal. The company will then review your appeal and decide whether or not to approve it.
>> Benefit: Health insurance benefits are medical services or items that your health insurance plan covers in part or in full.
>> Claim: When you receive a medical service, you or your healthcare provider submits a claim to your health insurer for payment.
>> Exclusion/Excluded Service: Health insurance exclusions or excluded services are specific conditions, treatments, services, or circumstances that are not covered by your health insurance policy. Common exclusions include cosmetic surgery, elective surgery, experimental/alternative procedures, and injuries sustained from high-risk or criminal activities.
>> Explanation of Benefits (EOB): An explanation of benefits is a document sent to you by your health insurer that breaks down a medical claim, including the amount that was charged by the provider, the price negotiated on your behalf by your insurer, how much the insurer covered, and what portion you are responsible for paying. Although it may look like a bill, an EOB is only an informational statement about your claim.
>> HIPAA: HIPAA stands for the Health Insurance Portability and Accountability Act of 1996, which establishes federal standards to protect sensitive health information from disclosure without a patient’s consent.
>> Lifetime/Annual Limit: According to the U.S. Department of Health and Human Services, under previous law, health insurance plans could set a lifetime limit on what they would spend for your covered benefits during the entire time you were enrolled in that plan or an annual limit on what they would spend for your covered benefits during a year of enrollment. You were required to pay the cost of any and all care that exceeded those limits. With the passage of the Affordable Care Act of 2010 (aka Obamacare), insurance companies are no longer allowed to limit lifetime or annual coverage expenses for essential health benefits.
>> Medically Necessary: A health provider and health insurer determine whether a diagnosis or treatment is medically necessary by assessing if it meets accepted standards of medicine, is clinically appropriate for the condition, is cost-effective, and is not purely cosmetic or elective.
>> Minimum Essential Coverage (MEC): In 2014, the Affordable Care Act determined minimum essential coverage, which is the lowest amount of health coverage a person must obtain or an employer must provide to avoid penalties. If you do not meet MEC requirements, you may be subject to a penalty when you file your federal income tax return. Starting in the 2019 plan year, MEC penalties no longer apply. However, some states may have their own MEC mandates with penalties.
>> Network (In-Network, Out-of-Network): Health insurers contract with a network of doctors and facilities to provide care at a certain price. When you visit these doctors and facilities, they are considered in-network providers. If you visit out-of-network providers for care, you may be responsible for a higher payment, or your health plan may not cover the visit at all.
>> Plan: Also referred to as a policy, your plan is your specific health insurance coverage package, either purchased by you directly or provided by an employer or union.
>> Preauthorization/Prior Authorization: Certain health plans require preauthorization, or approval, before the plan will cover certain services, treatments, prescriptions, or health equipment, except in an emergency.
>> Referral: Some health plans will only cover certain health services if your primary care provider first writes a referral, or an order for you to see a specialist, to validate its medical necessity.
>> Summary of Benefits and Coverage (SBC): The document you receive when shopping for health plans is called the summary of benefits and coverage, which helps you compare costs and coverage of different plans at a glance.
Health Insurance Terms About Payment
>> Allowable Charge: Also known as allowed amount, payment allowance, or negotiated rate, an allowable charge is the maximum amount your health insurer will pay for a covered service. In-network providers usually have an agreed-upon contract with your insurer to accept the allowable charge as the full amount for covered services.
>> Balance Billing: When an out-of-network provider bills you for the difference between what your plan agreed to pay and the full amount charged, that is considered balance billing. However, once the No Surprises Act went into effect in 2022, patients usually cannot be held responsible for “surprise” medical balance bills unless they give written consent or are properly notified in advance.
>> Coinsurance: Generally set as a percentage, coinsurance is the amount you pay for covered services. For example, if your plan has 20% coinsurance and you receive a medical service that costs $500, you are responsible for $100 (20% of $500), and your health insurer covers the remaining $400.
>> Copay: Your copay is either a set dollar amount or a percentage you may pay each time you see a provider or get a prescription filled.
>> Cost-Sharing Reductions (CSR): Discounts and subsidies that lower health insurance deductibles, copayments, and coinsurance for lower-income subscribers are considered cost-sharing reductions. CSR eligibility varies by state and is determined by household size and income in relation to the federal poverty level.
>> Covered Charges: A covered charge is a medical treatment or supply that your health insurance plan pays for in full or in part. If you are unsure if a charge will be covered, contact your health insurer to confirm.
>> Deductible: Many health insurance plans only begin paying for covered charges once you hit your deductible, a predetermined amount of money you must pay out of pocket for covered healthcare services. For example, if your plan has a $1,000 deductible, you must pay the first $1,000 of covered healthcare services yourself before your health insurance begins kicking in.
>> Flexible Spending Account (FSA): If offered by your employer, you may be able to save money by opening and contributing to a Flexible Spending Account (FSA). This is a pre-tax account where you can set aside money (typically through payroll contributions) to pay for qualified medical, dental, and vision expenses not covered by your health insurance plan. Maximum contributions are determined each year by the Federal government. The FSA is technically owned by your employer, and funds cannot be invested and a limited amount of unused FSA money may be rolled over, if your employer allows it.
>> Health Savings Account (HSA): If you are enrolled in a High-Deductible Health Plan, you may be eligible to open a Health Savings Account (HSA). HSAs are, a pre-tax account where you can set aside money to pay for qualified medical, dental, and vision expenses not covered by your health insurance plan. HSAs usually have higher limits than FSAs, the money in your HSA is investable, and the account belongs to you, even if you leave your employer. Contributions and earnings roll over in perpetuity until they are withdrawn tax-free for eligible medical expenses.
>> Out-of-Pocket Costs/Maximum: Out-of-pocket costs refer to payments you make for healthcare that are not reimbursed by your insurance. These costs may include deductibles, copays, and coinsurance. Your out-of-pocket maximum is the most you will have to pay for covered services in a plan year. Once you hit this maximum, your insurance pays 100% of covered services.
>> Premium: Your health insurance premium is the amount you and/or your employer pay to your insurer each month to have health insurance.
>> Premium Tax Credit: If you purchase health insurance through the Health Insurance Marketplace, you may be eligible for the Premium Tax Credit (PTC), a refundable tax credit determined by your income, household size, and location.
>> Usual, Customary, and Reasonable (UCR): Health insurers and providers determine a Usual, Customary, and Reasonable (UCR) fee for services based on what providers in a certain geographical area usually charge for the same or similar medical service.
Types of Health Insurance and How to Get Them
>> Affordable Care Act (ACA): The Affordable Care Act (ACA) is a healthcare reform law enacted in 2010 with goals to make insurance more affordable, expand Medicaid, and support innovative care.
>> COBRA: The term “COBRA” comes from the Consolidated Omnibus Budget Reconciliation Act, which, according to the U.S. Department of Labor, gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events.
>> Consumer-Directed Health Plan (CDHP): A Consumer-Directed Health Plan (CDHP) is a low-premium, high-deductible health plan paired with a Health Savings Account (HSA) or Flexible Spending Account (FSA).
>> Exclusive Provider Organization (EPO): An Exclusive Provider Organization (EPO) is a type of health insurance plan that generally does not require you to receive referrals from your primary care provider to visit specialists, but coverage is restricted to in-network providers. Costs for EPO plans usually fall in between Health Maintenance Organization (HMO) plans and Preferred Provider Organization (PPO) plans.
>> Group Health Plan: A group health plan is offered by an employer or organization to its employees and their families.
>> Health Maintenance Organization (HMO): A Health Maintenance Organization (HMO) is a type of health insurance plan that generally requires you to choose an in-network primary care provider and receive referrals to visit in-network specialists. Costs for HMO plans are generally lower, but coverage is limited to in-network providers.
>> High-Deductible Health Plan (HDHP): A High-Deductible Health Plan (HDHP) offers lower monthly premium payments in exchange for a higher-than-usual deductible. These plans can be a good choice for relatively healthy people who don’t anticipate needing many healthcare visits throughout the year. By law, HDHP plans must cover certain in-network preventive services, like annual physicals, screenings, and immunizations, at no cost to you.
>> Individual Health Plan: An individual health plan is a private health insurance policy you purchase for yourself or your family, not through an employer or a government program like Medicare or Medicaid.
>> Marketplace: According to the U.S. Department of Health and Human Services, the Health Insurance Marketplace® is a service run by the federal government that helps people, families, and small businesses compare health insurance plans for coverage and affordability, enroll in or change a health insurance plan, find out about tax credits for private insurance or health programs like Medicaid or the Children’s Health Insurance Program (CHIP), and get answers to questions about health care insurance. The Marketplace is available online at HealthCare.gov. The following states and Washington, D.C. run their own Marketplaces: California, Colorado, Connecticut, Idaho, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Pennsylvania, Rhode Island, Vermont, and Washington.
>> Medicaid: Medicaid is a joint federal and state program that helps cover medical costs for eligible low-income adults, children, pregnant women, elderly adults and people with disabilities.
>> Medicare: Medicare is federal health insurance for people 65 or older. Some people younger than age 65 with certain disabilities are also eligible for Medicare coverage.
>> Open Enrollment Period: You can join a health plan during the open enrollment period without needing a qualifying life event.
>> Preferred Provider Organization (PPO): A Preferred Provider Organization (PPO) is a type of health insurance plan that generally allows you to seek in-network and out-of-network care. Costs for PPO plans are usually the highest of all plans, but you have the flexibility to visit any provider.
>> Qualifying Life Event/Special Enrollment Period: A major life change – such as loss of coverage, marriage or divorce, birth or adoption, or change of residence – that makes you eligible for new or different health insurance plan outside of the usual Open Enrollment Period is considered a qualifying life event. The qualifying life event triggers a Special Enrollment Period, generally 60 days, for you to shop for plans.
Emergency Health Insurance Terms
>> Emergency Medical Condition: An emergency medical condition is one that is severe enough to put your health in jeopardy if you do not receive immediate medical attention.
>> Emergency Medical Transportation: Emergency medical transportation is the urgent transport of patients with life-threatening conditions using vehicles like ambulances or helicopters. These vehicles are staffed by trained healthcare professionals such as Emergency Medical Technicians (EMTs) and paramedics who provide immediate medical care in transit.
>> Emergency Care: Emergency care refers to any type of healthcare you receive in an emergent, life-threatening situation.
>> Emergency Services: Emergency services include any immediate, unscheduled medical care for acute illnesses and injuries.
Health Insurance Diagnostic, Testing, and Treatment Terms
>> Diagnostic Test: A diagnostic test refers to any procedure used to identify the presence or absence of a disease or condition, often performed after a person experiences symptoms or a screening test shows an anomaly.
>> Durable Medical Equipment (DME): Durable Medical Equipment generally refers to physical items like mobility aids (wheelchairs, crutches, and walkers), hospital beds, oxygen equipment, and continuous positive airway pressure (CPAP) machines that are prescribed by a healthcare provider.
>> Formulary: A formulary is a list of prescription drugs, often broken down into tiers by price, that are covered by a specific health insurance plan.
>> Grievance: A grievance is a formal written complaint filed by a patient regarding dissatisfaction with the care received, services provided, or actions taken by a healthcare provider, organization, or insurer.
>> Habilitation/Rehabilitation Services: Habilitation services focus on developing or acquiring skills or functions that have never been present or are not age-appropriate. Rehabilitation services focus on restoring or improving skills or functions that have been lost or impaired due to an injury, illness, or medical condition.
>> Home Health Care: Medical services provided in a patient’s residence, including wound care, medication administration, physical therapy, and assistance with daily living.
>> Hospice Services: End-of-life care when treatment is no longer viable, including pain and symptom management, medical supplies, and emotional and spiritual support.
>> Hospital Inpatient/Outpatient Care: Inpatient care involves staying in a hospital overnight or longer for medical treatment necessary for serious or complex conditions that require continuous medical supervision and monitoring. Outpatient care involves receiving medical treatment without staying in a hospital overnight for less severe conditions or for follow-up care.
>> Imaging:Techniques used to create visual representations of internal structures in the human body for diagnostic and therapeutic purposes, such as X-rays, computed tomography (CT) scans, magnetic resonance imaging (MRI), and ultrasounds.
>> Long-Term Care:Services such as help with daily activities and medical supervision for chronic illnesses or disabilities. Some long-term care expenses may require a special long-term care insurance policy for coverage rather than health insurance.
>> Physician Services: The medical care provided by licensed physicians, including consultations, examinations, diagnoses, treatments, counseling, and monitoring.
>> Prescription Drug Coverage: The part of your health insurance plan that helps pay for certain medications that are listed on the plan’s formulary.
>> Preventative Care: Routine medical services such as annual physical exams, vaccinations, and screenings that health insurance plans are generally legally required to cover in-network at no cost to you in order to identify and address potential health issues early.
>> Screening: In health insurance, screening can refer to pre-policy screening or preventative screening. Pre-policy screening is a medical exam to assess your health for underwriting purposes when applying for a new policy. Preventative screening is a medical exam to detect diseases before symptoms appear.
>> Specialist: Unlike a primary care provider, who specializes in general medicine, a specialist has advanced training in a specific area of medicine, such as cardiology, gastroenterology, or oncology. Your health insurance plan may require you to receive a referral from your primary care provider in order to see a specialist.
>> Urgent Care: Urgent care is for non-life-threatening issues, usually provided at an urgent care facility and treated by a healthcare provider other than your primary care provider. Copays and coinsurance for urgent care visits are generally a set amount according to your health plan and are typically much lower than emergency room visits.
Conclusion
There are many different terms used in the health insurance industry to describe providers, treatments, and types of coverage. Understanding what they mean and how they’re used puts you in the best position when shopping around, comparing policy features and coverage levels, and filing a claim.
While these terms may be confusing at first, spending a few minutes to understand health insurance terminology enables you to be an informed consumer who doesn’t get taken advantage of.
The information provided on this website is for general informational and educational purposes only and should not be considered legal, financial, or insurance advice. While we strive to keep content accurate and up to date, insurance laws, policies, and regulations can vary by state and may change over time.
Nothing on this site constitutes professional advice or a recommendation of any specific insurance product, provider, or strategy. You should consult with a licensed insurance agent, financial advisor, or legal professional regarding your individual situation before making any decisions.
