Common Health Insurance Terms, Defined Simply

Health insurance comes with its own vocabulary, and carriers rarely stop to explain it. Here are the terms that show up most often, defined the way I'd explain them to a friend.

The core five

• Premium: The amount you pay every month just to have the plan, whether or not you use any care.
• Deductible: The amount you pay out of pocket for covered care before your insurance starts sharing the cost.
• Copay: A fixed dollar amount you pay for a specific service, for example, $30 for a primary care visit, regardless of the total cost of the visit.
• Coinsurance: The percentage of a bill you're responsible for after you've met your deductible. If your plan has 20% coinsurance, you pay 20% of the covered cost and your insurance pays the rest.
• Out-of-pocket maximum: The most you'll pay in a plan year for covered care. Once you hit this number, your plan covers 100% of covered costs for the rest of the year.

Around enrollment

• Open Enrollment: The annual window when anyone can enroll in or change a Marketplace plan.
• Special Enrollment Period: A window, usually 60 days, triggered by a qualifying life event that lets you enroll outside of Open Enrollment.
• Qualifying life event: A change in circumstances, like losing job coverage or getting married, that opens a Special Enrollment Period.

Around cost and subsidies

• Premium tax credit: A subsidy that lowers your monthly premium on a Marketplace plan, based on household income and size.
• Cost-sharing reduction: An additional subsidy, available on certain Silver-tier Marketplace plans, that lowers your deductible and out-of-pocket costs.
• Federal Poverty Level (FPL): An income benchmark used to determine subsidy eligibility.

Around networks and plan types

• In-network: Providers who have a contract with your insurance company, generally resulting in lower costs to you.
• Out-of-network: Providers without a contract with your plan, usually resulting in higher costs, or no coverage at all, depending on your plan type.
• Referral: Written approval from your primary care provider to see a specialist, required by some plan types like HMOs.
• Formulary: The list of prescription drugs a plan covers, often organized into cost tiers.