Health Insurance Terms Explained Simply

Health insurance is full of terms that carriers assume you already understand. This guide breaks down the ones that actually affect your wallet, in the order they typically apply to a real medical bill.

Premium is what you pay every month just to keep your plan active, whether or not you use any care that month. This is the number most people compare when shopping for a plan, but it's only part of the real cost picture.

Deductible is what you pay out of pocket before your insurance starts covering costs (for most services). A $2,000 deductible means you're responsible for the first $2,000 of covered care each year before coinsurance kicks in.

Copay is a fixed fee for a specific service — like $30 for a primary care visit — usually due at the time of service, sometimes even before your deductible is met, depending on the plan.

Coinsurance is your percentage share of costs after you've met your deductible. With 80/20 coinsurance, your insurer covers 80% of the (negotiated, in-network) cost and you pay the remaining 20%, until you hit your out-of-pocket maximum.

Out-of-pocket maximum is the most you'll pay in a plan year for covered care. Once you hit it, your insurance covers 100% of additional covered costs for the rest of the year — this is the number that matters most if you're worried about a worst-case medical event.

See our full Glossary for every term, including HSA, HDHP, prior authorization, and formulary tiers.