Health insurance terms, explained in plain English

The six terms that decide your cost

If you only learn six words, learn these: premium, deductible, copay, coinsurance, out-of-pocket maximum, and network. Every plan comparison is really a trade-off between the first one and the rest. A cheap premium moves cost to the deductible and coinsurance; a richer plan moves it back to the premium.

Full glossary A–Z

Premium

The fixed amount you pay every month to keep a health plan active, whether or not you use care.

Deductible

The amount you pay for covered services each year before the plan starts paying its share. Preventive care is usually covered before the deductible.

Copay

A flat dollar amount you pay for a specific service, such as $30 for a primary care visit.

Coinsurance

Your percentage share of a bill after the deductible is met — 20% coinsurance means the plan pays 80%.

Out-of-pocket maximum

The most you can pay in a plan year for covered in-network care. After you hit it, the plan pays 100% of covered services.

Network

The doctors, hospitals, labs, and pharmacies that have contracted rates with your insurer. In-network care always costs less.

HMO

Health Maintenance Organization. Lower cost, in-network only except emergencies, and usually requires a primary care referral for specialists.

PPO

Preferred Provider Organization. Higher premium, no referrals needed, and partial coverage for out-of-network care.

EPO

Exclusive Provider Organization. In-network only like an HMO, but typically without referral requirements.

POS

Point of Service. A hybrid that uses referrals like an HMO but offers some out-of-network benefits like a PPO.

HDHP

High Deductible Health Plan. A plan meeting IRS deductible and out-of-pocket limits, which makes you eligible to fund an HSA.

HSA

Health Savings Account. A triple-tax-advantaged account paired with an HDHP: deductible contributions, tax-free growth, tax-free medical withdrawals. Balances roll over forever.

FSA

Flexible Spending Account. An employer account funded pre-tax for medical costs; most of the balance must be used within the plan year.

HRA

Health Reimbursement Arrangement. Employer-funded reimbursement for premiums or medical costs. ICHRA is the individual-coverage version.

Premium tax credit

The ACA subsidy that lowers your monthly marketplace premium, based on household income and the cost of the benchmark silver plan in your area.

Cost-sharing reduction

Extra savings that lower deductibles and copays, available only on silver marketplace plans at qualifying incomes.

Metal tier

Bronze, silver, gold, and platinum — a label for how much of total costs the plan pays on average, not a measure of care quality.

Open Enrollment

The annual window when anyone can buy or change a marketplace plan without needing a qualifying event.

Special Enrollment Period (SEP)

A 60-day window to enroll outside Open Enrollment after a qualifying life event such as job loss, marriage, birth, or a move.

Qualifying life event

A change in circumstances — losing coverage, moving, marrying, having a child, aging off a parent's plan — that opens an SEP.

Essential health benefits

The ten categories every ACA-compliant plan must cover, including hospitalization, prescriptions, maternity, mental health, and preventive care.

Guaranteed issue

The rule that an ACA-compliant plan cannot deny you or charge more for pre-existing conditions.

Pre-existing condition

A health condition you had before coverage began. ACA-compliant plans must cover it; short-term plans generally do not.

Formulary

The insurer's list of covered prescription drugs, sorted into cost tiers.

Prior authorization

Approval the insurer requires before it will pay for certain drugs, imaging, or procedures.

Explanation of benefits (EOB)

The statement showing what was billed, what the plan paid, and what you owe. It is not a bill.

Balance billing

When an out-of-network provider bills you for the difference between their charge and what your plan paid.

COBRA

The federal right to continue an employer plan after leaving a job, usually at full cost plus a 2% administrative fee.

Short-term plan

Temporary, medically underwritten coverage that is not ACA-compliant and can exclude pre-existing conditions.

MAGI

Modified Adjusted Gross Income — the income figure the marketplace uses to calculate your subsidy.

Actuarial value

The share of average total covered costs a plan pays: roughly 60% bronze, 70% silver, 80% gold, 90% platinum.

Provider directory

The insurer's searchable list of in-network doctors and facilities. Always confirm directly with the office before enrolling.

How to use these when comparing plans

Take two plans and write down four numbers each: annual premium, deductible, coinsurance percentage, and out-of-pocket maximum. Then add your expected use — a few visits and a prescription for most people, or a planned procedure if you know one is coming. The plan with the lower total wins, and it is very often not the one with the lowest premium.

Then check the network before you enroll. A plan is only cheap if your doctors and prescriptions are actually covered by it.