8 Health Insurance Terms to Know Before Enrolling

health insurance terms to know

If you’ve ever thought health insurance terminology was confusing, you’re not alone. In fact, over 96 percent of Americans can’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 vocab, 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 in order to be a smarter and more empowered health care consumer.

Health Insurance Terms to Know

1. Premium

A premium is the fixed amount you pay the health insurance company each month for your health insurance. 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. This might be one of the most basic health insurance terms to know, but is extremely important.

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. High deductible plans have lower premiums because you’re taking on less risk up front; you’ll be expected to pay full price for doctor visits and prescriptions until you’ve hit your deductible amount (usually around $6,000), after which your insurance will start to pay for some or all of your medical care. Deductibles count all of your in-network health care costs throughout the year, and reset annually.

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. This might seem like one of the most confusing health insurance terms to know, but don’t worry, we’ve explained it even further here.

6. Out-of-pocket Maximum

Your out-of-pocket max (OOPM) is the MOST you can pay for covered medical costs–including deductibles, copayments, and coinsurance–in a year. This protects you from exorbitant 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.

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 let 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.

Definitions: The Short Version

Now that you’re a health insurance terminology whiz, put your new knowledge to good work and find the plan that fits you best. If you ever need a refresher on what’s what, you can always reference our translator cheat sheet.

health insurance terms to know