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Health Insurance Basics

Lauren Hargrave · October 31, 2018 · 3 min read


While you’re researching health insurance, you’re going to come across a new lexicon that seems entirely foreign to you.  You might even find yourself searching for the definition of every other word.  Fear not, here’s a list of the most important words and phrases associated with health insurance and what they mean.


Your premium is the amount of money you pay to your health insurance company each month just to keep your insurance plan active.  Unfortunately, it doesn’t count toward your deductible or out-of-pocket maximum.


This is the amount you must pay for your medical care before your insurance starts to cover it.  Some services like wellness visits are 100% covered before you reach your deductible, so it’s important to read the plans you’re considering to see if that’s the case.


This is the fee you’ll have to pay for a doctor or hospital visit regardless of whether or not you’ve reached your deductible.  The money is a set amount and can vary depending on the service or type of doctor you’re visiting.  Not every plan will require co-pays and some plans, like High Deductible Health Plans (HDHPs) even forbid them. In most cases, your co-pays don’t count towards your deductible but do count towards your out-of-pocket maximum.


This is the percentage of your medical care you will be responsible for even after you’ve reached your deductible.  The percentages can vary depending on the type of service or doctor you’re visiting and most times do not count towards your deductible but do count towards your out-of-pocket maximum.

Out-of-Pocket Maximum

This is the most you will have to pay for your health care, outside of premiums.  Your co-pays, coinsurance and deductible all count toward your out-of-pocket maximum.  What doesn’t count, is any medical service you receive that isn’t covered by your insurance.

Provider Network

These are the doctors, hospitals and other healthcare providers who have agreed to work with your health insurance company.  Different plans have different rules about provider networks: some plans will only pay for care received within their approved network, while others will cover part of the care received outside their network.

Preferred Provider Organizations (PPOs) and Point of Service plans (POSs) usually cover some of the cost for services received outside of the preferred provider network.  You might have higher deductibles and copays or coinsurance associated with this care, but at least a portion of it will be covered by your health plan.

Health Maintenance Organizations (HMOs) and Exclusive Provider Organizations (EPOs) usually only cover care received within their preferred provider networks.  They can also require you get a referral from your primary care provider to receive treatment or see a specialist.


Some health plans require you receive approval from your health insurance company for certain medical services, treatments, medication and equipment.  Unfortunately, receiving preauthorization doesn’t guarantee the treatment, service, medication or equipment will be covered, but if you don’t get the preauthorization when it’s required, you could end up paying much more than you would have otherwise.

These are just the basic key words and phrases you might come across in your search for health insurance.  If you see a confusing phrase or term that’s not on this list, reach out to the health insurance company directly.  They’ll be able to not only give you a definition but also explain what it means in terms of the plan you’re looking at.

Lauren Hargrave

Lauren Hargrave

Lauren Hargrave is a writer from San Francisco who focuses on technology, finance and wellness. She follows comedians like most people follow bands and believes an outdoor sweat session can cure almost any bad mood. She’s also been writing her first novel for so long, her mom doesn’t ask about it anymore.

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Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.



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