Understanding Health Insurance Jargon: A Layman’s Guide


Health insurance can be a perplexing subject for many individuals. The industry is filled with a multitude of terms and jargon that often leave consumers scratching their heads. However, having a grasp of these terms is essential for making informed decisions about your healthcare coverage. In this guide, we’ll break down common health insurance terminology in simple, understandable terms, empowering you to navigate the complex world of health insurance with confidence.

  1. Premium

Let’s start with one of the most fundamental terms: premium. Your premium is the amount of money you pay to your insurance company in exchange for coverage. It’s typically paid on a monthly basis, and the amount can vary based on factors such as your age, location, and the type of plan you choose.

  1. Deductible

Next up, we have the deductible. This is the amount you must pay out of pocket for covered services before your insurance kicks in. For example, if your plan has a $1,000 deductible, you’ll need to pay the first $1,000 of medical expenses before your insurance starts covering costs.

  1. Copayment

A copayment, or copay, is a fixed amount you pay for a covered healthcare service. For instance, you might have a $20 copay for a doctor’s visit or a $10 copay for prescription drugs. Copays are typically due at the time of service.

  1. Coinsurance

Coinsurance is similar to a copayment, but instead of a fixed amount, it’s a percentage of the cost of a covered service. For example, if your plan has a 20% coinsurance for hospital stays and the bill is $1,000, you would be responsible for paying $200 (20% of $1,000) while your insurance covers the remaining $800.

  1. Out-of-Pocket Maximum

The out-of-pocket maximum is the most you’ll have to pay for covered services in a plan year. Once you reach this limit, your insurance will cover 100% of covered expenses. This limit includes deductibles, copayments, and coinsurance, but typically excludes premiums.

  1. Network

Health insurance plans often have networks of healthcare providers, including doctors, hospitals, and specialists, with whom they have negotiated discounted rates. When you visit an in-network provider, you’ll usually pay less out of pocket than if you go out of network. It’s important to check whether your preferred providers are in-network when choosing a plan.

  1. Preauthorization

Preauthorization, also known as prior authorization, is the process of obtaining approval from your insurance company before receiving certain medical services or treatments. This requirement helps ensure that the services are medically necessary and covered by your plan.

  1. Explanation of Benefits (EOB)

After you receive medical care, you’ll typically receive an Explanation of Benefits (EOB) from your insurance company. This document outlines the services you received, the amount billed by the provider, the amount covered by your insurance, and any remaining balance you may owe.

  1. Health Savings Account (HSA)

A Health Savings Account (HSA) is a tax-advantaged savings account that you can use to pay for qualified medical expenses. HSAs are available to individuals with high-deductible health plans and offer several tax benefits, including tax-deductible contributions and tax-free withdrawals for medical expenses.

  1. Flexible Spending Account (FSA)

Similar to an HSA, a Flexible Spending Account (FSA) is a tax-advantaged account that you can use to pay for eligible medical expenses. However, unlike an HSA, FSAs are typically offered through employers and have a “use it or lose it” rule, meaning you must spend the funds within the plan year or forfeit them.


Navigating the world of health insurance can be daunting, but understanding the jargon is a crucial step towards making informed decisions about your coverage. By familiarizing yourself with terms like premiums, deductibles, copayments, and networks, you’ll be better equipped to select a plan that meets your needs and budget. Remember to review your policy carefully, ask questions when in doubt, and take advantage of resources available to you, such as insurance representatives and online tools. With a solid understanding of health insurance terminology, you can take control of your healthcare and protect yourself and your loved ones financially.