Health Insurance Glossary

The terms insurers assume you already know — explained plainly, one at a time.

Premium: Your monthly payment to keep insurance active, whether or not you use care that month.
Deductible: The amount you pay out-of-pocket before insurance starts covering costs. A $2,000 deductible means you pay the first $2,000 of covered bills each year.
Copay: A fixed fee for a specific service, like $30 for a primary care visit, usually due at time of service.
Coinsurance: After your deductible, you and your insurer split costs by percentage. With 80/20 coinsurance, the insurer pays 80% and you pay 20% until you hit your out-of-pocket maximum.
Out-of-Pocket Maximum: The most you'll pay in a year for covered care. Once you hit this cap, insurance pays 100% of covered costs for the rest of the year.
Network: The group of doctors and hospitals that negotiated discounted rates with your insurer. In-network visits typically cost less than out-of-network.
PPO: Preferred Provider Organization — a plan type that lets you see any doctor without a referral, usually at a higher premium than an HMO.
HMO: Health Maintenance Organization — a plan type with a smaller network and required referrals from a primary care doctor to see specialists.
Prior Authorization: Pre-approval your insurer requires before covering certain procedures or medications.
Formulary: Your plan's approved drug list, organized by tiers. Tier 1 (generics) is cheapest; specialty drugs can cost hundreds per month even with insurance.
Claim: A request submitted to your insurer for payment of a service.
EOB (Explanation of Benefits): A document from your insurer after processing a claim, showing what was billed, adjusted, and owed. It is not a bill.
HDHP: High-Deductible Health Plan — lower premiums but higher deductibles. Qualifies you to open an HSA.
HSA: Health Savings Account — a triple tax-advantage account: pre-tax contributions, tax-free growth, tax-free withdrawals for medical expenses.
COBRA: Continuation coverage after leaving a job. You pay the full group premium plus a 2% admin fee, often 3-4x what you paid while employed.
Special Enrollment Period: A 60-day window outside Open Enrollment to get coverage after a qualifying life event: job loss, marriage, a baby, or moving.
ICHRA: Individual Coverage Health Reimbursement Arrangement — lets employers reimburse employees tax-free for individual plans they choose themselves, with no minimum group size.
QSEHRA: Qualified Small Employer HRA — a simpler reimbursement arrangement for businesses under 50 employees with no group plan.