Insurance Words, Explained Simply

The amount you pay every month just to have health insurance — whether or not you use it. Like a monthly subscription fee.

Example: If your plan costs $120/month, that's your premium. Even if you never go to the doctor that month, you still owe $120.

The amount you must pay OUT OF YOUR OWN POCKET for medical services each year before your insurance starts paying. Think of it as your "entry fee" before coverage kicks in.

Example: Your deductible is $1,500. You break your arm and the bill is $2,000. You pay the first $1,500 — then insurance pays the rest.

A fixed amount you pay for a specific service at the time of the visit, like $20 for a doctor's appointment. It's separate from your deductible.

Example: Your plan has a $25 copay for primary care. Every time you see your regular doctor, you pay $25 at the visit — that's it.

After you've met your deductible, coinsurance is the percentage of costs you still share with your insurance company. It's different from a copay — it's a percentage, not a fixed amount.

Example: 80/20 coinsurance. A hospital bill is $5,000 (after deductible). Insurance pays 80% ($4,000), you pay 20% ($1,000).

The most you will EVER have to pay in a single year for covered services. Once you hit this limit, insurance pays 100% for the rest of the year. It's your financial safety net.

Example: Your out-of-pocket max is $6,000. After you've paid $6,000 in copays, deductibles, and coinsurance during the year, all remaining covered care is free.

In-network means a doctor or hospital has agreed to accept your insurance and charge set rates. Out-of-network providers haven't agreed — you pay much more or full price.

Example: Your insurance has a $30 copay for in-network specialists. The same visit to an out-of-network specialist might cost you $400+.

Permission your insurance company requires BEFORE you receive certain services, treatments, or medications. If you get care without this approval, insurance may not pay.

Example: Your doctor prescribes a brand-name drug. Before filling it, your insurance company must approve it (prior auth) or they won't cover it.

Your insurance plan's official list of covered prescription drugs. Only drugs on this list are covered at the expected price — drugs not on the list may cost much more or nothing.

Example: Your doctor prescribes Drug A (on formulary — $10 copay) instead of Drug B (off formulary — $400). Same condition, very different cost.

Most insurance plans group drugs into tiers (1, 2, 3, etc.) based on cost. Tier 1 generics cost the least. Tier 3 or 4 brand-names cost the most. Your copay or coinsurance depends on the tier.

Example: Tier 1 generic: $5 copay. Tier 2 preferred brand: $35 copay. Tier 3 non-preferred brand: $70+ copay.

A document from your insurance company showing what was billed, what they paid, and what you might owe. It is NOT a bill. Do not pay it. It's just an explanation.

Example: You see a doctor. A few weeks later you get an EOB showing your insurance paid $180 and your responsibility is $25 copay. Wait for the actual bill from the doctor's office to pay.

A request for payment submitted to your insurance company after you receive medical care. Usually your doctor submits this automatically — you shouldn't have to do it yourself.

Example: You visit the ER. The hospital bills your insurance — that's submitting a claim. Insurance reviews it and pays their portion, then sends you a bill for your share.

A denial means your insurance refused to pay for a service or medication. An appeal is your formal request for them to reconsider the decision. You have the right to appeal every denial.

Example: Your insurance denies coverage for a recommended surgery. You or your doctor can file an appeal with medical records — many appeals succeed.

Your main doctor who handles routine care, coordinates referrals to specialists, and knows your overall health history. Also called a "family doctor" or "general practitioner."

Example: You have diabetes and high blood pressure. Your PCP manages both conditions, orders your labs, and refers you to an endocrinologist for specialized diabetes care.

An approval from your primary care doctor (PCP) that some insurance plans require before you can see a specialist. Without it, your insurance may not cover the specialist visit.

Example: You have knee pain and want to see an orthopedist. If your plan requires referrals (HMO-type plans), you must see your PCP first and get a referral, or pay out-of-pocket for the specialist.

A specific window of time each year when you can sign up for, change, or drop health insurance coverage. Outside this window, you usually can't enroll unless you have a "qualifying life event."

Example: Open enrollment for Pennie marketplace plans runs November 1 – January 15 each year. If you miss it, you must wait or qualify for a Special Enrollment Period.