8 Health Insurance Terms to Know Before Enrolling
If you’ve ever thought health insurance terminology was confusing, you’re not alone. In fact, in 2020 over 96 percent of Americans couldn’t correctly identify the four most common health insurance terms. Millennials struggle the most; well over half of them can’t identify any terms!
But if you think you’re one of the 4 percent who do know their coverage vocabulary, you might want to think again. Most Americans totally overestimate how well they understand health insurance basics.
In this quick, simple guide, we’ll break down the most important health insurance terms to know to be a better informed and more empowered health care consumer. Then you can confidently enroll in coverage that’s right for you.
Of course, if you feel ready now, you don’t have to wait. Just enter your ZIP code below to get started.
Definitions: The short version
Here are quick definitions of the most important health insurance terms to know. If you want more in-depth explanations, keep scrolling.
Health insurance terms to know
1. Premium
A premium is the fixed amount you pay the health insurance company each month for your health plan. Unless you cancel your plan, you will pay the set premium price regardless of how much (or little) you use your plan, and in addition to costs you may be charged for medical care. Many people qualify for government subsidies, which lower the price of monthly premiums.
2. Deductible
A deductible is the amount of money you have to pay out-of-pocket for health care before your insurance will help cover the cost. For example, if your deductible is $1,000, you’ll have to pay $1,000 for your health care before your insurance company will begin paying its share. Deductibles count nearly all of your in-network health care costs throughout the year (in other words, copays don’t count) and reset annually.
High-deductible plans typically have lower premiums because you’re taking on less risk upfront. You’ll be expected to pay full price for doctor visits and prescriptions until you’ve hit your deductible amount (usually around $6,000 for a high-deductible plan), after which your insurance will start to pay for some or all of your medical care.
3. Copay
A copay is a set fee you pay for your doctor visits and prescriptions. This is usually a smaller amount, like $20 for a standard doctor visit. Copays do not usually count toward your deductible, but they are applied to your out-of-pocket maximum.
4. Coinsurance
Coinsurance is the percentage of the doctor’s bill that you have to pay after you hit your deductible. For example, let’s say you need a $10,000 surgery. If you’ve met your deductible and your plan has 20 percent coinsurance, you would pay a maximum of $2,000 for the procedure, and your insurance would pay the remaining $8,000.
5. Metal tier
Health insurance companies organize their plans by metal tiers — bronze, silver, gold, and platinum — to represent different price points and coverage amounts. Bronze plans have inexpensive premiums but more out-of-pocket costs, while expensive platinum plans — which are ideal for patients who use a lot of health care — cover more of your medical bills. While the inner Olympian in you may shoot straight for gold, bronze and silver plans can be great, affordable options if you don’t have many medical costs but still want the security of health insurance.
Learn more about choosing health insurance metal tiers.
6. Out-of-pocket maximum
Your out-of-pocket max (OOPM) is the highest amount you’ll pay for covered medical costs — including deductibles, copayments, and coinsurance — in a year. This protects you from sky-high medical bills, and typically caps your spending around $7,000 (or $14,000 for a family). Once you hit your max, your insurance will pay for 100 percent of your medical bills. Note that your OOPM does not include your monthly premiums and services your plan doesn’t cover, like an out-of-network doctor visit.
7. Network type
A network is the group of medical providers your insurance company contracts with to set discounted rates on health care services. There are four different types of insurance networks: HMO, PPO, EPO, and POS. Each type has its own rules on how you can use your plan: While some will cover visits with a doctor outside your network, others are more strict and even require referrals in order to see a specialist. Typically, the more freedom your plan gives you to receive care outside your network, the higher your premiums will be.
8. HSA-eligible
A health savings account (HSA) is a tax-free savings account that you use for medical expenses. Because these funds are tax-free, they are a powerful financial tool that lets you reserve funds for a future time when you might have big medical bills. An HSA must be paired with a high-deductible health plan. When a plan has a deductible that is higher than a certain amount determined by the government each year, it is HSA-eligible.
What’s next?
Now that you know the basic vocabulary, put that knowledge to work for you. Enter your ZIP code below to check out plans in your area and get covered in as little as 10 minutes.
