Looking for health insurance in the U.S. can be confusing as you wade through all the legalese and specific terminology discussing medical care. Medicare, employer-sponsored plans, or health insurance purchased on the exchange — it’s no less bewildering. Yet, understanding what all the different words mean can help you make a better, more informed choice for you, your family, and your business.
In the interest of trying to clear up some of the confusion, here are some of the most common terms you’ll come across while looking for health insurance with quick definitions.
Claim: A claim is a request for payment sent to your insurance company, often by the doctor or service provider, but—depending on the insurance policy—sometimes by the patient. Once the insurance company verifies that the services are covered, they will send payment.
COBRA: The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that aims to be a short-term bridge for healthcare coverage. Workers and their dependents who lose their health benefits have the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in hours worked, transition between jobs, death, divorce, and other life events. Qualified individuals may be required to pay the entire premium for coverage up to 102% of the cost of the plan.
COBRA generally requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end (per the U.S. Dept. of Labor).
Coinsurance: This is the percentage of a provided service that the patient will pay for the service after the patient has met their deductible. For example, some insurance policies cover certain scans, treatments, or lab tests at 80%, meaning the patient is responsible for the remaining 20% of the cost.
Co-pay/Co-payment: Co-pays are pre-determined flat-rate fees set out in each insurance policy as a set amount the patient has to pay for a specific in-network service or medication. For example, a person may need to pay $20 to see a PCP (Primary Care Physician) but $40 to see a specialist (such as an orthopedic doctor). Some policies also set co-pays for prescriptions. Co-pays count toward the maximum out-of-pocket expenses on a patient’s policy but not toward the deductible. Note: There are typically no copays when you use a doctor or medical service that is out-of-network but you are responsible for paying the coinsurance or a percentage of covered charges.
Cost sharing: Cost sharing is how the costs of services, prescription drugs and patient care are set out between the health insurance provider and the member, including coinsurance, co-pays, and deductibles.
Deductible: A deductible is a set amount that the insured person has to pay for covered medical services before the health insurance company begins to pay for their share of the medical services. Most plans will cover certain prescriptions or services such as preventive services before the plan member meets their deductible. This amount and these stipulations vary and are laid out in each individual insurance plan.
DPC (Direct Primary Care): Direct primary care is based on a subscription model. The doctor gets paid a monthly fee to take care of the plan member. Text message, video chat, longer visits, or same or next-day appointments—are all typical services of a DPC. Decent healthcare plans are based on this model that we see as the future of healthcare and the best way for a patient to take charge of their own health with unlimited access to their DPC provider.
EPO (Exclusive Provider Organization): An EPO offers care only within a network of providers (excluding emergency care), like an HMO, but does not require the plan member to choose a PCP or to get referrals to see a specialist. EPOs usually offer a larger provider network than an HMO. EPOs usually cost more than an HMO but less than a PPO.
FSA (Flexible Spending Account): FSAs are usually offered by employer-sponsored health insurance plans, and this is a specific amount of pre-tax money the plan member can put aside from each pay period for medicine, non-covered medical services, or other medical expenses. The plan member must submit proof of the eligible expense and that it is not covered by the health plan in order to receive reimbursement. These expenses must usually be made during the calendar year or plan year, depending on the plan or the employee loses the money.
High Deductible Health Plans (HDHP): These are health plans that typically have lower monthly premiums but you pay more health care costs before the insurance company starts to pay. (See the definition for deductible.) For 2022, the IRS defines a high deductible health plan as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family.
HMO (Health Maintenance Organization): An HMO plan is a plan that covers care within a regional, limited network of providers, and the plan member must stay within the plan’s network of providers. Likewise, HMO plans require plan members to fill their prescriptions at in-network pharmacies in order to be covered. Out-of-pocket expenses in an HMO plan, including deductibles, are often lower than in a PPO plan. Plan members are usually required to see their PCP (Primary Care Physician) before seeing a specialist, and a referral is needed in order for the patient to see an in-network specialist. In Texas, patients don’t need a referral for emergency care or obstetrician/gynecologist visits.
HSA (Health Savings Account): A type of savings account that lets you set aside pre-tax money to pay for qualified medical expenses. These types of savings accounts are typically only available with high deductible health plans.
Maximum out-of-pocket expenses: This is the maximum amount a member pays for medical care within a plan year or calendar year (depending on the way the plan is set up). After the member has paid this set amount within the year, the health insurance provider pays 100% of covered medical expenses for the rest of the year.
Network: The network refers to the doctors, hospitals, and medical service providers the health insurance provider has contracted with to deliver health care services to their plan members. Many plans, such as HMOs and EPOs, will only cover care within their network (with some exceptions such as emergency care). Other plans, such as PPOs, will pay a portion of medical expenses for out-of-network providers as well—all as agreed upon within each plan.
PCP (Primary Care Physician): This is the Primary Care Provider, usually a General Practitioner (GP) or Family Doctor, who serves as the primary medical contact for plan members, conducts preventive care including annual exams, and provides referrals to specialists when needed. See DPCs for more info on Decent’s model of Direct Primary Care.
PPO (Preferred Provider Organization): A PPO is a health plan with health care options through a network, yet plan members can also choose health care providers outside of the network with some coverage. However, out-of-network providers will cost more to plan members. A PPO plan often costs a higher monthly premium as well, yet they usually do not require referrals to see specialists.
Premium: A health insurance premium is the cost for the selected health insurance plan, which is typically billed monthly. If you get healthcare coverage through your place of work, then the premium is often split between you and your employer.
Preventive/Preventative care: Preventive care includes screenings, checkups, and counseling to prevent illnesses, disease, or other medical conditions. Most plans require these covered services to be delivered by in-network providers. For more information on covered preventive care services specific to adults, women, and children, see healthcare.gov.
Zero Dollar Medical Deductible Health Plans: These no-deductible health insurance policies carry a deductible of zero which means coinsurance and copay benefits begin immediately. (You don’t have to meet a minimum balance before the health insurance company contributes to your health care expenses.) Fans of health care transparency prefer these types of health plans as your out-of-pocket costs are more easily estimated.
Those are some of the most common and most important health insurance terms you may want to familiarize yourself with when deciding on the best healthcare plan for you, your family, or your business.