Health Insurance Glossary

Insurance policies are legally binding documents written to protect the rights of both you and the insurer. Unfortunately, the language in insurance documents can also make insurance policies and benefits information difficult to understand.

The list below includes definitions for some of the most common health insurance terminology you may encounter when reviewing your existing healthcare plan or shopping for a new one.

• Affordable Care Act (ACA), or “Obamacare” – A law passed on March 23, 2010. This law was intended to change healthcare in the U.S. to make it more accessible and affordable for all Americans.
• Allowed amount (see also UCR) – The charge amount that an insurer agrees is reasonable for a service or procedure. If the charge is greater than that amount, the insurance company doesn’t have to pay it, and these costs could be passed on to the patient if the provider is out of network.
• Annual or lifetime limits – The maximum an insurer will pay during a year or throughout your entire enrollment, respectively, in your health insurance plan (the ACA phased out these limits except for grandfathered plans).
• Balance billing – Your healthcare provider bills you for the difference between the healthcare provider’s charge and the amount your insurance company allows for that service. Note: A preferred or in-network provider may not balance the bill for covered services.
• Coinsurance – The percentage of the cost of services you’re responsible for (such as coinsurance of 20% means that if a service costs $1,000, you’ll be responsible for $200, and your insurer will pay $800).
• Consolidated Omnibus Budget Reconciliation Act (COBRA) – This law was passed to protect employees and their family members who lose their employer-sponsored health insurance due to certain qualifying events, such as the death of the covered employee or termination of employment. To continue coverage under COBRA, the insured may have to pay higher premiums, and the coverage may only last 18 to 36 months.
• Copayment – Your out-of-pocket cost per service (such as $20 per office visit).
• Deductible – The out-of-pocket cost you must pay before your insurer begins paying. Usually, this is a specified amount per year that resets at the beginning of every year.
• Essential health benefits – The ACA-required healthcare services must be covered by plans offered in the health insurance marketplace and states expanding their Medicaid coverage. These items and services are grouped within the following 10 categories: 1) ambulatory patient services; 2) emergency services; 3) hospitalization; 4) maternity and newborn care; 5) mental health and substance abuse disorder services, including behavioral health treatment; 6) prescription drugs; 7) rehabilitative and habilitative services and devices; 8) laboratory services; 9) preventive and wellness services; 9) chronic disease management; and 10) pediatric services, including oral and vision care.
• Excluded services – Healthcare services not paid for or covered by your health insurance plan.
• Explanation of Benefits (EOB) – A form sent to you by your insurance company after you have received healthcare services that explains what was covered by your insurance and the amount you may be responsible to pay. The EOB is not a bill. If you’re responsible for the remaining amount to be covered, you’ll receive a bill from your healthcare provider.
• Federal poverty level (FPL) – A government benchmark used to determine if you are eligible for benefits from a government program, for example, Medicaid. The amount is adjusted every year. In 2023, the FPL for an individual is $14,580 and $30,000 for a family of four.
• Grandfathered plan – An employer-sponsored health insurance plan that has been in place since before the ACA became law on March 23, 2010 (even if you enrolled after that date) that hasn’t changed substantially in terms of costs and benefits provided. If you’re in a grandfathered plan, you might not have all the rights and protections required by the ACA.
• Health maintenance organization (HMO) – A type of insurance plan that may cost less than other traditional plans because services are provided by a network of healthcare providers and hospitals within a network. Your care is coordinated by a primary care physician (PCP), and you need a referral from your PCP to see other healthcare professionals to be covered by your plan.
• Health savings account (HSA) – An account set up with your bank or employer that allows you to save pretax money throughout the year to cover qualifying out-of-pocket medical expenses during that year. Accounts similar to HSAs include flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs). One big difference among these types of accounts is whether you can keep any money left in the account when the year is up or if you change jobs.
• Individual responsibility payment or individual mandate – The tax penalty required by the ACA for anyone who can afford minimum essential health coverage but doesn’t get it. The payment, which increased yearly, was paid when you filed your federal income tax return but was discontinued. However, the U.S. Supreme Court could allow it to be reinstated sometime in 2023. More information on the penalty.
• Managed care – A term used to describe health insurance plans that tend to cost less because costs are controlled by offering a limited number of healthcare providers and facilities, usually referred to as the “network.” Types of managed care plans include HMOs and PPOs.
• Medicaid – A government program funded jointly by the federal and state governments to assist people with lost incomes.
• Medicaid expansion – A provision of the ACA that increased the number of people covered by Medicaid by raising the income threshold, which means more people are eligible to receive benefits. Not all states have agreed to the expansion, so eligibility varies from state to state.
• Medicare – A federal health insurance program for people 65 or older and others with disabilities. It has four parts: A) hospital insurance; B) medical insurance; C) Medicare Advantage Plan (Medicare plans from private companies); and D) prescription drug coverage.
• Minimum essential coverage – The type of health coverage your plan must have to meet the requirements of the ACA and avoid paying a tax penalty. Generally, your plan must cover the ACA’s 10 essential benefits (see essential health benefits).
• Network – A group of healthcare providers and facilities participating in a health insurance plan.
• Obamacare – A nickname for the ACA, health reform legislation passed on March 23, 2010, during President Obama’s administration.
• Open enrollment – The time, usually about two months in the fall, when you can enroll in a health plan. You may not be able to enroll at other times during the year unless you have a qualifying event, such as a spouse's death, a job change, or a child's birth.
• Out of network – Refers to healthcare providers or hospitals that aren’t in the network of providers and hospitals that contract with your health insurance plan, such as an HMO, PPO, or POS, to provide healthcare services.
• Out-of-pocket maximum – The maximum amount of costs you’re responsible for in a year (such as if your out-of-pocket maximum for a year is $3,500, then you’re only responsible for meeting deductible and coinsurance costs up to that amount).
• Plan administrator – Although this sounds like an individual, it may be a call center with staff trained to answer your questions. You may also find answers to your questions at the insurer’s website. Insurance plans are required to provide contact information.
• Point-of-service plan (POS) – An insurance plan with a network of providers contracted with your insurance company to provide medical care. Typically, you can see a provider or use a hospital outside the network with a POS plan, but you’ll have to pay some or all of the cost. POS plans can also require in-network referrals.
• Preferred provider organization (PPO) – An insurance plan with a network of healthcare providers who have contracted with your insurance company to provide medical care. Typically, you can see any healthcare provider you want when you have a PPO, but you’ll have to pay some or all of the cost when you see someone outside the network.
• Preauthorization – Sometimes called prior authorization, prior approval, or precertification, it’s a requirement by some insurance plans that you check with the plan administrator before using a healthcare service, treatment plan, prescription drug, or durable medical equipment so that the insurance company can decide if it’s medically necessary. Preauthorization shouldn’t apply in the case of an emergency, and it’s not a guarantee the plan will cover the cost. Check your plan carefully for these requirements.
• Preexisting condition – Physical or mental illnesses or conditions that exist before you apply for health insurance coverage. With the passage of the ACA, with few exceptions, such as short-term insurance, insurers can no longer deny coverage to someone with a preexisting condition.
• Preferred provider – Healthcare providers and hospitals that contract with the insurance company to provide services covered by a plan. Depending on the plan type, you won't necessarily need a referral to see a preferred provider. HMOs are an example of plans that do require a referral to preferred providers.
• Premium – A periodic (usually monthly) payment to purchase insurance coverage.
• Primary care physician (PCP) – The healthcare provider who coordinates your care if you are covered by an HMO.
• Provider network – A group of healthcare providers contracts with your insurance plan to provide services. You may be charged in whole or part for services you received from outside the provider network.
• Qualifying event – These life-changing events may allow you to enroll in a health insurance plan at any time without waiting for the open enrollment period. Qualifying events include marriage, the birth or adoption of a child, divorce or legal separation, and the death of a spouse or dependents.
• Summary of Benefits and Coverage (SBC) – A document that the ACA requires insurers to provide that gives information about a health insurance plan’s deductible, copays, coinsurance coverage, exceptions, limitations, and exclusions. It also includes information about your right to appeal claim decisions and provides coverage examples for common claim scenarios. View a sample SBC.
• Supplemental or secondary health insurance – Insurance coverage may cover some out-of-pocket expenses that your primary health insurance plan doesn’t cover. One can serve as your secondary coverage if you and your spouse have a health insurance plan through your respective employers. You can also buy supplemental insurance coverage; for example, Medigap Insurance covers expenses not covered by Medicare.
• Uniform Glossary – Definitions of terms from the health insurance industry that you may need to know to understand and compare health insurance plans. The ACA requires that all plans make the glossary available to their participants.
• Usual, customary, and reasonable (UCR) – The amount paid for a medical service based on what providers in the area usually charge for the same or similar medical service. UCR may be used to determine the allowed amount.