How well do you understand these four key health plan terms: co-insurance, co-pay, deductible, and out-of-pocket maximum?
Having a firm grasp on their definitions will help you to determine the affordability of each of your health insurance options. But they’re not the only important terms that can affect how your health plan functions and whether or not it’s a good fit for you and your family. Here are the common health insurance coverage terms you’ll want to familiarize yourself with before and during open enrollment.
of employees rate rank healthcare coverage as the most important workplace benefit.
Allowed Amount (aka eligible expense, payment allowance, negotiated rate): The maximum amount your insurance plan will pay for medical treatment. If your provider charges more than the allowed amount for the service or procedure, you may have to pay the difference. See also Balance Billing
Balance billing: When your medical provider bills you for the difference between the allowed amount and the provider’s charge.
Claim: A request for payment that the insured person or the health care provider submits to the health insurer. A claim is submitted when the insured individual receives medical items or services they think are covered by their insurance plan.
COBRA: The ability to continue with your current employer-sponsored health insurance coverage and related benefits after you are no longer with the company. Typically, the former employee pays for 100% of the plan’s health insurance premiums when accessing the health plan through COBRA. Some benefits like Health Savings Accounts (HSAs) are eligible for access via COBRA while others like Lifestyle Spending Accounts (LSAs) are not.
Co-insurance: The percentage of costs the insured person pays for covered health care services after they’ve satisfied their deductible. For example, if the plan’s deductible has been met and the co-insurance amount is 10%, and an office visit costs $100, the insured would receive a bill for $10. With an HDHP, 100% of services are paid by the insured (with the exception of preventative care) until they reach the deductible. HDHPs cover 100% of preventive care regardless of whether or not the plan’s deductible has been met.
Co-payment (Copay): A fixed amount ($20, for example) the insured individual pays for preventative care, covered health care services and prescriptions after they’ve paid their deductible. Copays are generally not allowed with HSA-eligible HDHPs.
Deductible: The amount an insured individual pays for covered health care services before their insurance plan starts to pay. Your deductible will depend on the type of plan you buy. The average deductible in 2023 for a Bronze level plan (typically the lowest premiums with the highest deductible) were $7,481, the average deductible for a Silver level plan (which is the next level up) was $4,890, the average deductible for a Gold level plan was $1,650 and Platinum level plans had an average deductible of $45. In 2024, HDHPs must have a minimum deductible of $1,600 to be considered HSA-eligible.
Dependent: An individual other than the primary health insurance policyholder who is covered by the insurance plan; typically a spouse or child. The IRS has specific requirements to determine tax dependents.
Durable Medical Equipment: Equipment and supplies ordered by a healthcare provider that are medically necessary and intended to be used every day for a prolonged period of time. Examples include: wheelchairs, oxygen tanks, etc.
of HR leaders feel that offering competitive financial benefits, and matching, is more important for attracting and retaining employees than it was a year ago.
Eligibility: The characteristics an employee or person must meet in order to access a certain benefit or program. For example, an employee might need to work a minimum of 30 hours a week to be eligible for the employer-sponsored benefit program. Or, a plan participant must sign up for a High Deductible Health Plan (HDHP) in order to participate in an HSA.
Emergency Medical Condition: An illness, injury, symptom or condition that would cause a reasonable person to seek immediate medical attention.
Emergency Medical Transportation: Necessary ambulance or life flight services for an emergency medical condition.
Emergency Room Care: Medical services received in the emergency room.
Emergency Services: Evaluation and treatment of an emergency medical condition in the emergency room.
Excluded Services: Medical services and treatment that aren’t covered by your health insurance plan.
Health Insurance: A contract that requires your health insurance carrier to pay for necessary medical services per the terms of the health insurance plan.
Hospitalization: In-patient medical care received in a hospital after being admitted to said hospital. Emergency room care is typically not considered hospitalization and can be covered at a different rate than hospitalization services.
Medically Necessary: Health services that are necessary to treat or prevent an illness, symptom, injury or condition and that meet the health plan’s standards of medicine.
Network: A contracted group of health care providers. These medical facilities, service providers, and suppliers are contracted with a specific health insurance carrier to provide care at a discount and accept the discounted price as payment in full. You will want to seek in-network care in order for your insurance plan to cover the highest percentage of the cost. In addition, it’s typically only in-network care that counts toward satisfying your deductible. See also: Out-of-Network
Open Enrollment (Open Enrollment Period): The brief window of time each year when people can enroll in a health insurance plan. Open enrollment dates vary from state-to-state and employer-to-employer. Employer-sponsored health insurance plans will have their own specific open enrollment periods so employees should check with their employer about the timing. Outside of the open enrollment period, employees can change their health insurance plan based on qualifying life events such as getting married, having a baby, or losing other health coverage.
Out-of-Network: A health care provider that does not have a contract with a health insurance carrier is considered “out-of-network”. Because network providers provide care at a discounted rate, out-of-network care can sometimes result in higher costs to the patient. In addition, out-of-network care will often not count towards the participant’s deductible satisfaction. Some health plans, such as HMO plans, will not cover care from out-of-network providers at all, except for in an emergency. See also: Network
Out-of-Pocket (OOP) Maximum/Limit: The most the insured will have to pay out-of-pocket for covered services in a plan year. After this amount is spent on deductibles, co-payments, and co-insurance, etc. for in-network care and services, the health plan pays 100% of the costs of covered benefits. Out-of-network costs do not apply to the out-of-pocket maximum.
of organizations have improved healthcare coverage in the past year.
Physician Services: Medical services from a licensed medical physician.
Preauthorization (aka prior authorization, prior approval): The requirement your health insurance plan might have for a list of services, procedures, prescriptions, or treatments in order for the insurance carrier to share in the cost. If your plan requires a preauthorization for something, you will need to get the insurance carrier's permission to have the procedure, etc. beforehand otherwise they might not cover any of the cost.
Prescription Drug Coverage: The percent of the cost of prescription drugs a health insurance plan will cover.
Preferred Provider: A provider who has a contract with the health insurer or plan to provide services at a discount (aka an in-network provider). A health insurance plan can have preferred providers or a tiered network that requires that the insured pays extra to see some providers. Check the Summary of Benefits and Coverage to learn which applies to the particular health insurance plan. See also: Network
Premium (Health Insurance Premium): The monthly cost of your health insurance plan. If you have an employer-sponsored plan, your employer will likely pay a percentage of that cost. The remainder will be your responsibility. In addition to your premium, you usually have to pay other costs for your health care, including a deductible, co-payments, and co-insurance.
Primary Care Provider: A physician, nurse practitioner (NP), clinical nurse or physician’s assistant who is allowed under state law to complete a range of health services.
Specialist: A physician who focuses on a specific area of medicine. Specialist services might be billed at a different rate than a general practitioner (GP) or primary care provider.
Summary of Benefits and Coverage (SBC): A snapshot of a health plan’s costs, benefits, covered health care services, and other features. SBCs also explain health plans’ unique features like cost sharing rules and include significant limits and exceptions to coverage in easy-to-understand terms.
UCR (usual, customary, reasonable): The usual amount providers in a specified geographic area charge for a service or treatment. The UCR is sometimes used to determine the allowed amount.
Urgent Care: Immediate care for an illness, injury, condition or symptom that needs attention but isn’t severe enough to go to the emergency room.