Your Guide to Common Insurance Terms

Health insurance is a complex topic. Navigating insurance may feel overwhelming, especially when you’re trying to figure out what’s covered, what isn’t, and how much your bill will be. There are all sorts of terms related to health insurance – and nobody teaches them in school!

To help you gain a better understanding of common insurance terms, we’ve put together this handy guide. It’ll walk you through some of the words you might come across and what each one means. As you read, remember that each insurance plan is a little different!

If you don’t already have insurance, check out this article on how to get insurance.

What is In-network/Out-of-network coverage?

Healthcare can get expensive, so it’s always good to know where you’ll have the biggest savings! Most insurance companies have a list of preferred providers. If a provider is in-network, they are on this list. Typically, you will pay lower overall costs if your provider is in-network. If a provider is out-of-network, or not on the list, you might still be able to use your insurance to see them, but you will pay more.

When you’re looking for a new provider, check to see if they’re in-network with your insurance. You can either call the provider directly, or check on your insurance website. The customer service number is usually listed on the back of your insurance card. 

If the provider you’re considering isn’t in-network but you still want to get your care from them, payment plans or other options may be available. Your insurance may also cover a portion of the cost, but it will cost more than seeing an in-network provider.

What is a copay?

A copay is a set rate that you owe for a specific service. Seeing your primary care provider (PCP), getting a routine test, or seeing a specialist are all things that may require a copay. Your copay will always be a standard amount, but that amount may vary based on the service you receive.

For example, a visit to your midwife or family physician may have a $25 copay, so every time you see them you’ll owe that same amount. A trip to a maternal fetal medicine doctor, who is a specialist, might cost you $100 for each visit.

Copays are represented in dollar amounts (i.e. $50, $100). Copay amounts are often listed on your insurance card.

What is coinsurance?

Coinsurance is a set percentage that you owe for a specific service. Screenings and non-routine tests are services that often use coinsurance instead of a copay. Coinsurance is represented in percentages (i.e. 20%, 50%).

Perhaps your ultrasound is not fully covered by insurance, and you owe 20% coinsurance on the procedure. If the hospital charges $300 for an ultrasound, you’ll owe 20% of $300, or $60 for the ultrasound.

What is a deductible?

Many insurance plans have what’s called a deductible. Simply stated, a deductible is the amount of money you have to pay out-of-pocket before your insurance starts to cover your healthcare costs. If you have a $1,000 deductible, it means you have to pay $1,000 before insurance pays for your healthcare. (Your deductible might be higher or lower based on your insurance plan.)

Your deductible resets each year. Some reset by calendar year. Others reset when your insurance renews, which is called plan year. 

However, it’s a little more complicated than that! Let’s break it down a bit.

Covered costs

Some costs are covered before you pay your full deductible. Annual checkups and routine tests or preventive care usually fall into this category. So even if you haven’t paid any of your hypothetical $1,000 deductible, covered costs are still paid for by insurance. An annual checkup is a great example of a covered cost on most insurance plans.

Does your deductible “apply”?

If you take a peek at your insurance plan, you might see some places where your “deductible applies” or “deductible does not apply.”

Most covered costs do not apply to your deductible. If you have a $25 copay on a covered cost (like a gyn care visit), that $25 does not count towards your deductible. You will still have to pay your full deductible – in this example, that’s $1,000.

If your deductible does apply, any money you spend paying for those services will count towards reaching your deductible. If your deductible applies to your ultrasound or non-routine bloodwork, your insurance will pay only after you’ve reached that deductible.

A deductible example

Whew – confused yet? A deductible is one of the most complex parts of an insurance plan to understand. Here’s an example to help you:

Aniqa has a $1,000 deductible and 20% coinsurance on her insurance plan. She just found out she’s pregnant and will need appointments, tests, and ultrasounds. Her appointments are a covered cost; they don’t count towards her deductible. Each one is a $25 copay. She has to pay this every time, for every appointment. She has eight appointments during her pregnancy and pays a total of $200 ($25 x 8). 

Her tests and ultrasounds do count towards her deductible. The final bill is $3,000. Since Aniqa’s deductible is $1,000, she pays that amount first. Then, she pays 20% coinsurance on the remaining $2,000, which is $400. 

So , Aniqa’s total cost of care is:

$200 (copays) + $1,000 (deductible) + $400 (coinsurance)  = $1,600.  

What is an out-of-pocket maximum?

The out-of-pocket maximum is the most you will pay before your insurance starts to cover everything. This number represents the maximum you might have to pay in one year. Some out-of-pocket maximums reset by calendar year, and others reset by plan year.

You will only pay more than the out-of-pocket maximum if you need services your insurance does not cover or you seek out-of network care. The money you spent on your deductible counts towards your out-of-pocket maximum.

What is a monthly premium?

Your premium is what you pay each month to keep yourself enrolled in your health insurance. This cost is separate from all your other expenses. Even if you don’t use your insurance, you have to pay your premium to keep your coverage.

Understanding your insurance

Every insurance plan and every insurance company does things a little bit differently. Understanding what your insurance does and doesn’t cover, who you can see for care, and how much you’re expected to pay will probably require asking questions. Insurance companies have people dedicated to helping you understand your coverage and bills. For help, call the number on the back of your insurance card.

Healthcare is complex – and so is paying for it. Understanding your insurance can help you to ask the right questions at the right time. Feel empowered to reach out to your provider or your insurance company with questions before or after your visits.