Plain-language glossary

Every key insurance and policy term in patient-friendly language, grouped by topic.

What you pay

Premium: Your premium is the fixed monthly fee for being enrolled in a health plan. You pay it whether or not you use any services. Premiums do not count toward your deductible or out-of-pocket maximum.
Deductible: A deductible is the dollar amount you must pay for covered services each plan year before the insurer begins paying its share. For example, with a $2,000 deductible, you pay the first $2,000 of allowed charges yourself (preventive care is often exempt). Family plans usually have both an individual deductible and a higher family deductible.
Copay (Copayment): A copay is a fixed fee — for example $25 for a primary care visit or $50 for a specialist — that you pay at the point of service. Copays may apply before or after the deductible depending on your plan. They typically count toward your out-of-pocket maximum but not always toward your deductible.
Coinsurance: Coinsurance is the percentage of the allowed charge you owe after meeting your deductible. If your plan pays 80% coinsurance, you pay the remaining 20%. Example: a $1,000 procedure after deductible with 20% coinsurance means you owe $200 and the insurer pays $800. Coinsurance applies up until you reach your out-of-pocket maximum.
Out-of-Pocket Maximum: Your out-of-pocket maximum (OOP max) is the annual cap on what you pay for covered, in-network services — combining deductible, copays, and coinsurance. Once you hit it, the plan pays 100% of allowed charges for the rest of the year. Premiums, out-of-network charges, and non-covered services usually do NOT count toward this cap. Family plans have both individual and family OOP maximums.
Allowed Amount: The allowed amount (also called the negotiated rate) is what an in-network provider has agreed to accept as full payment from your insurer plus you. If a provider bills $500 but the allowed amount is $300, an in-network provider writes off the $200 difference. Out-of-network providers may bill you for the difference — called balance billing.
Balance Billing: Balance billing happens when a provider charges you the difference between their billed amount and what your insurer allowed. In-network providers cannot balance bill. The federal No Surprises Act protects you from most surprise balance bills in emergencies and at in-network facilities, but gaps still exist.
Explanation of Benefits (EOB): An EOB is NOT a bill. It is a summary the insurer mails or posts to your member portal after a claim is processed. It shows the billed charge, the allowed amount, what the plan paid, and your patient responsibility. Always compare your EOB to the provider's bill before paying.

Coverage rules & reviews

Medical Necessity: Medical necessity means the insurer is evaluating whether a service is clinically appropriate for the patient based on diagnosis, symptoms, prior treatment, accepted standards of care, and the documentation submitted. It is not a judgment of whether you personally need care — it is a documentation and policy review.
Prior Authorization: Prior authorization (also called precertification or preauthorization) means the provider or facility may need to request approval from your health plan before a service is delivered. Without it, the plan may decline to pay even if the service is otherwise a covered benefit. Your provider's office usually handles the request.
Investigational: Investigational (or experimental) usually means the insurer believes there is not yet enough published evidence to consider the service standard care for the specific condition being treated. Policies in this category often change as new evidence is published.
Conservative Treatment: Conservative treatment refers to less invasive, lower-cost care — for example physical therapy, medication, activity modification, or monitoring — that may be expected before a higher-cost or invasive procedure is approved.
Cosmetic: Cosmetic means the insurer may classify the service as primarily intended to improve appearance, rather than to treat a documented functional or medical problem. Reconstructive services after injury or surgery are usually handled under different policy criteria.
Utilization Management: Utilization Management (UM) is the umbrella term for how insurers review services — including prior authorization, concurrent review during a hospital stay, and retrospective review after the fact. UM is governed by published criteria, often using tools like MCG or InterQual alongside the insurer's own medical policies.
Step Therapy: Step therapy is a policy where the insurer may require that a preferred medication or treatment be tried first. If it does not work or is not tolerated, the plan may then approve the next step. Documentation of the trial is usually required.

How your plan works

In-Network vs Out-of-Network: In-network providers have a contract with your insurer to accept negotiated rates. You pay less and are protected from balance billing. Out-of-network providers have no contract — your cost-share is higher (or not covered at all on HMO/EPO plans), and they can bill you for amounts above what your plan allows.
Referral: Some plans (especially HMOs) require a referral from your primary care provider before they will cover a specialist visit. PPOs, EPOs, and direct-access plans generally don't. A referral is separate from prior authorization — you may need both.
Primary Care Provider (PCP): A PCP is typically a family medicine, internal medicine, pediatric, or general practice clinician (MD, DO, NP, or PA) who provides routine care, preventive screening, chronic disease management, and refers you to specialists when needed. HMO plans usually require you to name a PCP.
Non-Duplication of Benefits: If you are covered under two health plans, the secondary plan applies a non-duplication clause: it calculates what it would have paid as primary, subtracts what the primary already paid, and pays only the difference (if any). This is stricter than traditional coordination of benefits. Practical effect: a secondary plan often pays $0 because the primary already paid more than the secondary's allowed amount.
Coordination of Benefits (COB): When you are covered by two plans (for example, your own employer plan and a spouse's plan), COB rules decide which is primary and which is secondary. The 'birthday rule' is common for children: the parent whose birthday falls earlier in the calendar year is primary. The primary plan processes first; the secondary plan then considers the remaining balance — subject to its own rules, including non-duplication.
Network Tier: Tiered networks reward you with lower copays or coinsurance when you use a 'preferred' or 'Tier 1' provider, and charge you more for 'Tier 2' in-network providers. Always check which tier a provider falls into — not just whether they are in-network.
Plan Year vs Calendar Year: Most individual and ACA marketplace plans run on the calendar year (Jan 1 – Dec 31). Many employer plans run on a plan year that starts on a different date (for example July 1). Your deductible and out-of-pocket maximum reset at the start of each plan year — knowing the date helps you schedule elective care strategically.
Embedded vs Aggregate Deductible: An embedded deductible means once any one family member meets the individual deductible, the plan begins paying for that person — even if the family deductible isn't met yet. An aggregate (non-embedded) deductible means the full family deductible must be met (across any combination of members) before the plan pays for anyone. HDHPs often use aggregate deductibles.

Policy terminology

Formulary: A formulary is the list of prescription drugs the plan covers, typically organized into tiers that affect your out-of-pocket cost. Non-formulary drugs may require an exception request.

Educational only — not a coverage decision. Confirm details with your health plan.