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.
Good Faith Estimate: Under the No Surprises Act, uninsured and self-pay patients have the right to receive a written Good Faith Estimate of expected charges before a scheduled service or procedure. If the final bill exceeds the estimate by $400 or more, you may be able to dispute it through the federal patient-provider dispute resolution process.

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.
Coverage Determination: A coverage determination is a formal, written decision from your insurer about whether a specific service, drug, or procedure will be covered for your situation under your plan. You can typically request one in advance, and Medicare has a specific coverage determination process for Part D drugs.
Medical Policy / Clinical Policy: A medical policy (or clinical policy) is a formal, published document from an insurance company that defines the specific clinical criteria under which a procedure, device, or service is considered medically necessary and therefore covered. These are usually posted publicly on the insurer's website.
Coverage Criteria: Coverage criteria are the specific clinical conditions, documented findings, required test results, or prior treatment requirements that must all be satisfied and documented for a service to meet medical necessity under a policy.
Letter of Medical Necessity: A Letter of Medical Necessity is a formal letter written by your treating physician explaining, in clinical terms, why a specific procedure or treatment is necessary for your condition based on your diagnosis, symptoms, and treatment history — and how it maps to the insurer's own coverage criteria.

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.
HMO (Health Maintenance Organization): A plan type that requires you to use a specific network of providers and generally requires a referral from your primary care physician before seeing specialists. Except in emergencies, out-of-network care is not covered.
PPO (Preferred Provider Organization): A more flexible plan type that allows you to see any doctor or specialist — in or out of network — without a referral. Out-of-network care is covered but at a higher cost to you.
EPO (Exclusive Provider Organization): A hybrid plan that does not require referrals like a PPO, but requires you to stay strictly within the network like an HMO. Out-of-network care is not covered except in emergencies.
HSA (Health Savings Account): A tax-advantaged savings account you can contribute to and use to pay eligible medical expenses — only available when paired with a qualifying high-deductible health plan (HDHP). Unused funds roll over every year and remain yours if you change jobs or plans.
FSA (Flexible Spending Account): A tax-advantaged account funded through payroll deductions that can be used for eligible medical expenses. Unlike HSAs, FSAs are 'use it or lose it' — most unused funds do not roll over to the next year (some plans allow a small carryover or grace period).

Policy & billing 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.
Claim: A claim is a formal request submitted by your provider (or by you, for out-of-network care) to your insurer requesting payment for medical services rendered. The insurer reviews the claim against your benefits and either pays it, denies it, or pends it for more information.
CPT Code: Current Procedural Terminology (CPT) code — a standardized 5-digit numeric code that describes every medical procedure, service, and treatment. Insurers use CPT codes to process and adjudicate claims.
ICD Code: International Classification of Diseases (ICD) code — a standardized code representing your diagnosis. For a claim to be approved, the ICD (diagnosis) code must support the CPT (procedure) code — insurers check that the reason for the service matches an appropriate clinical indication.
NPI (National Provider Identifier): The National Provider Identifier is a unique 10-digit identification number assigned to every licensed healthcare provider in the United States. It is used in all electronic health transactions to identify providers.
Fully Insured Plan: Your employer (or you directly) pays premiums to an insurance company, and that insurer takes on the financial risk of paying claims. This is what makes your state Department of Insurance the right place to escalate a denial — the insurer, not your employer, is the one making coverage decisions and answerable to state law.
Self-Funded Plan (ASO / ASC): Your employer pays claims directly out of its own funds and hires an insurance company or third-party administrator (TPA) only to process claims — not to take on risk. You'll see this called ASO (Administrative Services Only) or ASC (Administrative Services Contract); the terms are interchangeable. Your card may say 'administered by' rather than 'insured by.' Critically, state Departments of Insurance generally have no jurisdiction over self-funded plans — the right destination is the federal Department of Labor's EBSA (1-866-444-3272).
Medigap: Medigap policies supplement Original Medicare (Parts A & B) by covering costs like copays, coinsurance, and deductibles. Plans are standardized (A through N) so benefits are consistent regardless of insurer, though prices vary. Your state DOI regulates the sale of the policy itself; problems with what Original Medicare paid or denied underneath it go through Medicare's own appeals process instead.
Medicare: The federal health insurance program for people 65+ and some younger people with disabilities, including Original Medicare (Parts A & B), Medicare Advantage (Part C, run by private insurers under contract with Medicare), and Part D drug coverage. Claims and appeals never go through a state DOI or the Department of Labor — start at medicare.gov/claims-and-appeals or call 1-800-MEDICARE.
Medicaid: A joint federal-state program providing coverage based on income and other eligibility factors, often administered day-to-day through private managed care organizations under contract with the state. Complaints go to your state's Medicaid agency specifically — a different agency than your Department of Insurance, even though both are part of state government.
ERISA: The Employee Retirement Income Security Act of 1974 governs most employer-sponsored health plans, fully insured and self-funded alike, setting minimum standards for claims and appeals. It generally preempts state insurance law for self-funded plans. Two exemptions worth knowing: church plans and government/public-sector employer plans (state, county, city, school district) are exempt from ERISA entirely — meaning neither the Department of Labor nor your state DOI has jurisdiction, and your plan documents or HR office are the real recourse.

Appeals & denials

Adverse Determination: An adverse determination is the formal legal term for an insurance denial — a determination by your insurer that a requested service is not covered, not medically necessary, or otherwise not payable under your plan.
Internal Appeal: An internal appeal is the first formal level of challenging an insurer's denial — filed directly with the insurance company. Typically must be filed within 180 days of the denial notice. The insurer reviews the appeal and issues a written decision, usually within 30 days for non-urgent care and 72 hours for urgent care.
External Review: An external review is an independent review of your denial by an Independent Review Organization (IRO) — a third party with no affiliation with your insurer. This is a federal right under the ACA after an internal appeal is exhausted, and the IRO's decision is binding on the insurer.
Independent Review Organization (IRO): An IRO is an accredited, neutral third party authorized to conduct external reviews of insurance coverage denials. The IRO makes an independent clinical determination — separate from the insurer — and its decision is legally binding.
Expedited Appeal: An expedited appeal is an accelerated appeal process available when standard timelines would seriously jeopardize a patient's life, health, or ability to regain maximum function. Insurers must issue a decision within 72 hours.
Grievance: A grievance is a formal complaint filed with your insurance company about a coverage decision, quality of care concern, or service problem — distinct from an appeal of a specific claim denial. Grievances create a documented paper trail and can be escalated to your state's Department of Insurance (on fully insured plans) or the Department of Labor's EBSA (on self-funded ERISA plans).

Laws & patient rights

No Surprises Act: A federal law protecting patients from unexpected out-of-network bills in emergency situations and for care from out-of-network providers at in-network facilities. Restricts balance billing in these contexts and provides an independent dispute resolution process.
ACA (Affordable Care Act): Comprehensive federal health reform legislation that established minimum coverage standards, required insurers to cover essential health benefits, prohibited denial for pre-existing conditions, and guaranteed the right to both internal and external appeals.
COBRA: The Consolidated Omnibus Budget Reconciliation Act — a law allowing you to continue your employer-sponsored coverage for a limited period after leaving a job, at your own expense (typically the full premium plus a small administrative fee).
Open Enrollment: Open enrollment is the annual window during which you can enroll in, switch, or make changes to your health insurance plan. Changes outside this period generally require a qualifying life event.
Special Enrollment Period (SEP): A Special Enrollment Period is a time-limited window outside of open enrollment during which you can enroll in or change coverage due to a qualifying life event — such as losing coverage, marriage, birth of a child, or change in residence.

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