Understanding Health Insurance Terms

Whether you're one of the record number of Americans who signed up for health coverage in 2022 through an Affordable Care Act marketplace, or if you have coverage through an employer or government program, the terms used in medical insurance can be confusing. Understanding them will help you get the most out of your policy.

(Preventive services such as annual check-ups, routine screenings, vaccinations and immunizations are covered at no cost when delivered by a doctor or other provider in the health plan’s network. Deductibles, copays and coinsurance do not apply.)

Here are several terms to keep in mind.

Premium

Perhaps the easiest term to understand, health insurance premiums are monthly amounts you pay to your health insurance provider to retain coverage. For coverage provided by an employer, most of the premium generally is paid by them. Your portion typically is deducted from your paycheck.

Deductible

The deductible is the amount you pay before your health insurance kicks in and begins covering your medical costs. Deductibles vary in prices and coverage. Some policies apply your deductible to all medical services, while another might have separate deductibles for different services, like prescription drugs.

Copayment

Copayments, or copays, are set fees that you pay for a health care service during a visit to the clinic or hospital. Copays are flat rates that can vary by plan and from one service to another. For example, you might have one copay amount for routine visits to your primary care physician, a higher copay for specialists, and yet another amount for prescription drugs.

Coinsurance

Coinsurance refers to your share of costs for a health care service. After you meet your plan's deductible, you begin paying coinsurance. Typically, coinsurance is a percentage of the amount your insurer approved on the overall medical service cost. For example, your coinsurance share might be 20% of a hospital visit, and your insurer's part would cover the remaining 80%.

Maximum Out Of Pocket Costs

Maximum out-of-pocket costs are the maximum amount you pay out of pocket, per year, for medical services. This amount includes your copay, the coinsurance amount, and the deductible itself. Once you meet your maximum out-of-pocket amount, health insurance takes over and covers any remaining balance on eligible services.

Health Savings Account (HSA)

A health savings account (HSA) helps you save money for future medical expenses. With an HSA, each year you decide how much money to put into the account. You can use this money for deductibles, copays and coinsurance. The money you contribute is tax-free, and the balance rolls over from year to year. Because HSA funds are non-taxable when applied to the proper medical expenses, you can potentially reduce your tax burden amount.

Network

A health insurance network is the doctors, hospitals, pharmacies and other suppliers a health insurer contracts with to deliver health care services to its members. Your highest level of benefits – including lower copays, coinsurance and maximum out of pocket costs – are available through an insurer's network.

By understanding health care terms you make the most of your health care dollars and receive the most value from your plan.