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Common Insurance Terms Simplified

Health Insurance can be a tricky field to navigate. The concept is simple: pay monthly to cover any unexpected illnesses or injuries for both you and your family. But sometimes, searching for the best healthcare plan is seemingly impossible with all the medical and insurance jargon that’s out there.

We’ve compiled a list of common insurance terms and broke them down in ways that would be helpful to anyone out there.

Coinsurance: This is the amount a person with insurance must pay for healthcare services after co-pays and deductibles are met. It is your portion of the cost for covered services, whereas the insurance company pays the remaining portion.

Co-Payment: A preset charge that insurance plans require their members to pay for services, prescriptions, or even medical supplies. An example would be: $5 copay for generic drugs at a pharmacy. $25 copay to see a specialty doctor. The co-pay is different from insurance company to insurance company, and even by plan type.

Deductible: This is the dollar amount that an insurance company requires their members to pay every year before the insurance benefits kick in. Not every insurance plan has a deductible. For example, if your deductible is $1,000, your plan won’t pay anything in a given year until you’ve spent $1,000 on covered medical services, devices or medications. Depending on your plan, different types of services are included in spending that counts towards the deductible amount. Also, some services, including preventive services, may be covered before you spend the deductible amount. Be sure to check your plan for those specific details before scheduling any appointments.

Enrollment Period: A once a year window where people can sign up for an insurance plan. Often referred to as Open Enrollment.

Generic Medication: A generic medication is a prescription medication that has the same active-ingredient formula as a brand-name medication. Generics come to the market after a brand-name medicine’s patents expire, and they usually cost less. The U.S. Food and Drug Administration (FDA) rates these to be as safe and effective as brand-name medications.

In-Network: Doctors, hospitals, laboratories, clinics, and facilities that work with your health insurance plan. You will pay less for services provided in an in-network health provider than one that is out-of-network.

Out-Of-Pocket Costs: With health insurance, you pay your premium each month. Any additional cost that is not covered by your insurance company when you visit the doctor, hospital, or pharmacy are out-of-pocket costs. Examples include co-payments and coinsurance. Certain plans have a out-of-pocket limit

Out-of-Pocket Maximum:There can be limits on how much a patient is responsible for paying out-of-pocket, determined by each insurer. An out-of-pocket maximum is the total amount you will pay before your health insurance begins to pay 100 percent of the cost for in-network services. This limit never includes your monthly premium or services your plan doesn’t cover. Insurance plans count all in-network co-payments, deductibles, and coinsurance payments toward this limit.

Premium: Your monthly premium is the amount you pay in order to keep your health insurance plan. You pay this even if you don’t use healthcare services in that particular month.


For more information about plan types, such as PPO, HMO, POS, EPO, etc, please visit our page on health insurance.

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