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When shopping for a new health insurance policy — or when your employer introduces a new health plan — you might wonder what certain health insurance terms mean.
In this guide, you’ll discover health insurance terminology for beginners and anyone who’s ever been confused about a policy, so you can make informed decisions.
Key Points
• Accident-only policies cover only injuries from accidents, not illnesses.
• Benefits refer to the health services covered by insurance plans.
• A claim is an itemized bill submitted to the insurance company for payment.
• Coinsurance is the percentage of costs the insured pays after the deductible.
• The out-of-pocket maximum sets the limit on annual health care expenses.
Top Health Insurance Terms to Know
Discover the health insurance definitions that can help you better utilize health insurance for you and your family.
Accident-Only Policies
These policies pay only in cases that were due to an accident or injury.
Benefits
These are the health care services covered by the insurance plan for an individual. Your health benefits might also be called a “benefits package.”
Claim
An itemized bill that shows all of the services and procedures that were provided to the member.
Coinsurance
This refers to the percentage of the medical charge you must pay out of your own pocket after meeting your deductible. The rest will be paid by your health insurance company. For instance, if you have a 15% coinsurance plan, you would pay 15% of each medical bill (after paying the full deductible), and the insurer would cover the rest.
Contract
In most cases, this means the insurance policy, which is a contract between the insurance company and the policyholder.
Copayment
This is the amount you pay out of pocket when you receive medical care or a prescription drug. A copayment is typically paid in person at the doctor’s office.
Deductible
This refers to the amount you must pay out of pocket before your insurance starts paying some of your health care expenses. The deductible resets at the beginning of the year or when you enroll in a new health insurance plan.
If your deductible is $2,000, your health insurance plan won’t cover any services until you have paid $2,000 out of pocket for the year. Someone with a high deductible and lots of medical costs could consider getting help in the form of medical loans, which are personal loans for medical and dental procedures.
Recommended: Your Guide to Insurance
Disability Benefits
If you’re unable to work because of an illness or injury, the insurance company pays for lost wages. You’ll receive a portion of your income until you’re able to return to work. Each policy defines what constitutes a “disability,” so you’ll need to meet those requirements and submit medical paperwork before receiving payment.
Health Insurance
Health insurance terminology 101: This is a contract that requires your health insurer to pay some or all of your health care costs in exchange for a premium.
Health Maintenance Organization (HMO)
An HMO is a health plan that provides health care services to members through a network of doctors, hospitals, and other health care providers.
HMOs are popular alternatives to traditional health care plans because they usually have lower-cost premiums while still offering a variety of services.
Health Savings Account (HSA)
This is pretax money you set aside to pay for qualified medical expenses. You and your employer may contribute.
One benefit of an HSA is that funds roll over if you don’t spend them by the end of the year.
Indemnity Plan
Sometimes referred to as a fee-for-service plan, an indemnity plan allows you to go to any physician or provider you want, but requires that you pay for the services yourself and file claims in order to get reimbursed.
Mandated Benefits
This refers to the health care benefits that state or federal law says must be included in health care plans. Mandated health insurance benefit laws may require plans to cover substance abuse treatment or maternity services, cover treatment by providers such as chiropractors, acupuncturists, and midwives, or include dependents and domestic partners.
Out-of-Pocket Maximum
This is the most you have to pay for covered services in a plan year. After you spend this amount, the health plan pays for the cost of covered benefits.
Out-of-Network Services
This is when you seek out services from providers who aren’t in your HMO’s or preferred provider organization’s (PPO’s) network. Usually, HMOs will only pay for care received within their network. If you’re in a PPO plan, you will have to pay more to receive services outside the PPO’s network.
Preexisting Condition
This health insurance term refers to a medical problem or illness you had before applying for health care coverage. If you have a preexisting condition, it’s a good idea to shop around and educate yourself when choosing an individual health plan.
Preferred Provider
This refers to a provider who has a contract with your health plan to provide services to you at a discount. If you have a favorite doctor, you might want to see if they are a preferred provider or “in network” for any new insurance plan.
When you’re looking to find a new physician, choosing a “preferred provider” found via the plan’s website could help keep medical costs down.
Your health insurance or plan may have preferred providers who are also “participating” providers. Participating providers can also have a contract in place with your health insurer, but you may have to pay more.
Preferred Provider Organization (PPO)
PPO plans provide more flexibility than HMOs when choosing a doctor or hospital. They also feature a provider network but have fewer restrictions on seeing out-of-network providers.
PPO insurance will pay if you see a provider out of the network, though it may be at a lower rate.
PPO plans usually cost more than HMO plans.
Premium
This is the amount paid to the insurance company to obtain or maintain an insurance policy. Usually it’s a monthly fee.
Provider Network
This is a list of all the doctors, specialists, hospitals, and other providers who agree to provide medical care to the members of an HMO or PPO.
Waiting Period
This is the time an employer may make employees wait before they are eligible for coverage under the company’s insurance plan.
The Takeaway
Do you know your HMO from your PPO and HSA? Have you looked closely at copays, deductibles, and out-of-pocket maximums? Knowing health insurance terms can help you make an informed decision when looking at health insurance policies.
When the unexpected happens, it’s good to know you have a plan to protect your loved ones and your finances. SoFi has teamed up with some of the best insurance companies in the industry to provide members with fast, easy, and reliable insurance.
Find affordable auto, life, homeowners, and renters insurance with SoFi Protect.
FAQ
What is the difference between a copayment and coinsurance?
A copayment is a fixed amount you pay for a medical service or prescription, usually at the time of care. Coinsurance is a percentage of the cost you pay after meeting your deductible, while your insurance company covers the remaining amount.
What is an out-of-pocket maximum in health insurance?
An out-of-pocket maximum is the most you will pay for covered health care services during a plan year. Once you reach that limit, your health insurance plan generally pays 100% of covered in-network costs for the rest of the year.
How do I know if a doctor is in my insurance network?
You can check your insurer’s provider directory online or contact the insurance company directly to verify coverage. Using an in-network provider typically results in lower health care costs than receiving care from an out-of-network provider.
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