Health Insurance Glossary: Deductible, Copay, Coinsurance, and More

Health insurance is easier to compare when the key terms are separated. The definitions below are general; the Summary of Benefits and Coverage, Evidence of Coverage, policy certificate, and plan notices control your actual benefits.

Premium

The amount charged to keep coverage active, usually monthly. Paying a premium does not mean all care is free. Premium tax credits, employer contributions, or other assistance can change the portion a member pays.

Deductible

The amount a member pays for covered services before the plan begins paying for services subject to the deductible. Some services may be covered before the deductible, while a plan may have separate medical and prescription deductibles. Premiums and noncovered charges generally do not count toward it.

Copayment (copay)

A fixed amount for a covered service, such as a set amount for an office visit or prescription. A copay can apply before or after the deductible, depending on the plan.

Coinsurance

A percentage of the allowed amount paid by the member for a covered service. If the allowed amount is $1,000 and the member’s coinsurance is 20%, the member’s share would be $200 before considering other contract rules. The provider’s billed charge and the plan’s allowed amount are not necessarily the same.

Out-of-pocket maximum

The most a member pays during the plan year for covered, in-network essential health benefits before an ACA-compliant plan pays 100% of additional covered in-network benefits for the rest of that year. Premiums, noncovered services, and certain out-of-network charges generally do not count. Read the plan definition.

Allowed amount

The maximum amount the plan recognizes for a covered service. In-network providers generally accept negotiated terms. An out-of-network provider may bill more than the allowed amount when law and contract permit.

Network

The doctors, hospitals, pharmacies, laboratories, and other providers that have contracted with the plan. Network status is plan-specific, not merely insurer-specific. Always verify the exact plan.

HMO, PPO, and EPO

• HMO: commonly uses a defined network and may require a primary care physician or referrals, except for emergencies and other protected care.
• PPO: generally permits in- and out-of-network care, with higher member costs or balance-billing risk outside the network.
• EPO: generally covers non-emergency care only in network, often without the same referral structure as an HMO.

Actual plan rules can differ from these general patterns.

Formulary and drug tier

A formulary is the plan’s list of covered prescription drugs. Tiers group drugs by cost-sharing. Coverage may also depend on prior authorization, step therapy, quantity limits, specialty-pharmacy use, and network pharmacy status.

Prior authorization

A plan requirement to obtain approval before certain services, supplies, or drugs. Approval is not a guarantee of payment; eligibility, coverage, medical-necessity criteria, coding, and contract terms are still reviewed.

Referral

Permission or direction, often from a primary care provider, to see a specialist or receive certain services. Some plans require referrals; others do not.

Essential health benefits

Ten broad categories of services that ACA-compliant individual and small-group plans must cover, including hospitalization, prescription drugs, emergency services, preventive care, and other categories. Coverage is still subject to plan rules and cost-sharing.

Metal levels

Bronze, Silver, Gold, and Platinum describe how a Marketplace plan and its members are expected to share costs across a standard population. They do not measure quality of care. A person who qualifies for cost-sharing reductions must choose an eligible Silver plan to receive them.

Premium tax credit and cost-sharing reduction

A premium tax credit can reduce the premium for an eligible Marketplace enrollee. A cost-sharing reduction can lower deductibles, copays, coinsurance, or the out-of-pocket maximum for an eligible person enrolled in a qualifying Silver plan. The Marketplace determines eligibility based on the application.

Explanation of Benefits (EOB)

A statement explaining how a claim was processed: billed amount, allowed amount, plan payment, member responsibility, and denial or adjustment reasons. It is not usually a bill. Compare it with the provider’s bill and appeal instructions.

Special Enrollment Period

A limited window outside annual Open Enrollment that may allow enrollment after a qualifying event or circumstance. Timing, proof, and eligibility vary.

Use the glossary while comparing plans

Explore insurance services, review private coverage, or request a plan-document comparison.

Official definitions

• HealthCare.gov: Deductible
• HealthCare.gov: Copayment
• HealthCare.gov: Coinsurance
• HealthCare.gov: Out-of-pocket maximum

Educational notice: General educational information only. Definitions, covered services, networks, formularies, cost-sharing, eligibility, and claim processing vary by plan. A licensed agent, the insurer, the Marketplace when applicable, and official plan documents must verify final details.