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Health insurance basics

Glossary of healthcare terms


Affordable Care Act (ACA)
A comprehensive law passed in 2010, aimed at reforming America's healthcare system to improve access and affordability for more Americans.
Allowable Charge
The maximum amount a health plan will reimburse a doctor or hospital for a given service.
Annual Deductible
The amount you are required to pay each year before your health plan begins to pay for covered services.
Annual Limit on Cost Sharing
This is the total dollar amount (including deductibles, coinsurance and copays) you could pay for covered services each year. After you've reached that amount, your health plan pays for the rest of your covered services for that plan year.


Service for which a covered person is entitled to under the terms of that person's applicable health plan or insurance policy.


An itemized bill for services provided to a member.
This stands for Consolidated Omnibus Budget Reconciliation Act of 1985. This federal act requires group healthcare plans to allow employees and covered dependents to continue their group coverage for a stated period of time following a qualifying event that causes the loss of group health coverage. Qualifying events include reduced work hours, termination of employment, a child becoming an over-aged dependent, Medicare eligibility, death or divorce of a covered employee.
Coinsurance is your share of costs and generally applies after you've met your deductible. As an example, once you've met your deductible, your plan might pay 80 percent for covered services and you might pay 20 percent in coinsurance.
Copayment or Copay
Copay is a fixed amount you pay for a covered service, like a doctor's visit. You usually pay it at the time you go to the doctor.
Cost Sharing
The share of costs covered by your insurance that you pay out of your own pocket. This term generally includes deductibles, coinsurance and copays, or similar charges, but it doesn't include premiums, balance billing amounts for non-network providers, or the cost of non-covered services. Cost sharing in Medicaid and CHIP also includes premiums.
Coverage Start Date
The coverage start date is the day your health insurance policy goes into effect. You may receive your member ID card before this date, so make sure to wait until your actual effective date if you can. It will save you money!
Covered Person
The eligible person enrolled in the healthcare benefits plan and any enrolled eligible family members.
Covered Service
A service covered according to the terms in your health plan.


A deductible is the amount you pay for medical costs before your health insurance begins to make benefit payments. For example, if your deductible is $1,000, your plan won't pay anything until you've met your $1,000 deductible for allowable charges, not the billed charges.
A dependent is a person the insurance policyholder is responsible for, like a spouse or child.


Effective Date Of Coverage
The date your coverage begins or the date a change in your coverage takes effect. If you have questions, call the number on the back of your ID card.
Emergency Medical Care
Healthcare services that could, without immediate rendering, result in:
  • Placing the patient's health in serious jeopardy.
  • Serious impairment to bodily functions.
  • Serious dysfunction of any bodily organ or part.
Most health plans have specific guidelines to define emergency medical care.
Specific medical conditions or circumstances that are not covered under a health plan.
Explanation Of Benefits (EOB)
A statement sent by a health insurance company to covered individuals explaining what medical treatments and/or services were paid for on their behalf. EOBs are available both as a paper copy and online. See what all is included in an EOB.


Family Coverage
Healthcare coverage for a primary policyholder (called a "subscriber") and his or her spouse and any eligible dependents.
Flexible Spending Account (FSA)
An arrangement set up through your employer to pay for many of your out-of-pocket medical expenses with tax-free dollars. These expenses include copays and deductibles, and qualified prescription drugs, insulin and medical devices. Typically, unspent FSA funds are not rolled over at the end of the year unless your employer's FSA plan permits a grace period. (Note: Flexible spending accounts are sometimes called flexible spending arrangements.)
A formulary is a list of preferred prescription drugs that have been designated as safe and cost-effective and are covered by your health insurance plan. To save the most money, choose generic when available.


Generic Drug
A prescription drug that is the generic equivalent of a brand name drug listed on your health plan's formulary and costs less than the brand name drug.
A group of people covered under the same health plan and identified by their relation to the same employer or organization.
Guaranteed Issue
A requirement under the Affordable Care Act that health plans must permit you to enroll in some form of insurance coverage regardless of health status, age, gender or other factors.


Health Reimbursement Account: (HRA)
Health reimbursement accounts (HRA) are employer-funded group health plans from which employees are reimbursed tax-free for qualified medical expenses up to a fixed dollar amount per year. Unused amounts may be rolled over and used in subsequent years. The employer funds and owns the account. Health reimbursement accounts are sometimes called health reimbursement arrangements.
Health Savings Account: (HSA)
A type of savings account that allows you to set aside money on a pre-tax basis to pay for qualified medical expenses if you have a "high deductible" health insurance plan. Unspent HSA funds roll over year to year and may earn interest.
The federal Health Insurance Portability and Accountability Act of 1996 that outlines the rules and requirements employer-sponsored group insurance plans, insurance companies and managed care organizations must follow to provide healthcare insurance coverage for individuals and groups.
An HSA-qualified health plan is typically a high-deductible plan with a lower premium (monthly bill). The money you save on your premium can then be invested in a health savings account (HSA), to be used on healthcare costs and meet the deductible.


Services provided by a physician or other healthcare provider with a contractual agreement with the insurance company and paid at a higher benefit level.
Inpatient Services
Services received when a patient is admitted to a hospital or nonhospital facility as a registered bed patient for whom a room-and-board charge is made.
Insured Person
The person who a contract holder (an employer or insurer) has agreed to provide coverage for, often referred to as a member/subscriber.


Lifetime Limit
Many health insurance plans placed dollar limits upon the claims that the insurer will pay over the course of an individual's life. The Affordable Care Act prohibits lifetime limits on benefits.


Medical Group
A licensed healthcare facility, program, agency, doctor or health professional that contracts with a health plan to deliver healthcare services to plan members.
A person covered by a health plan.


A network is a group of doctors, hospitals and other healthcare professionals who have been contracted to provide medical services to members. Seeing a doctor that is in your network is the best way to save money.


Services performed by a provider who has not signed a contract or who is ineligible to participate in the provider network utilized by a covered person's applicable health plan.
Out-of-Pocket Costs
Your expenses for medical care that aren't reimbursed by insurance. Out-of-pocket costs include deductibles, coinsurance, and copays for covered services plus all costs for services that aren't covered.
Out-of-Pocket Maximum (OOPM)
Also called OOPM, This is the most you have to pay out of your own pocket for expenses under your insurance plan during the year. Deductibles, coinsurance, copays and other expenses for in-network essential health benefits (EHBs) apply to the OOPM.
Outpatient Services
Treatment that is provided to a patient who is able to return home after care without an overnight stay in a hospital or other inpatient facility.
Over The Counter (OTC)
An over-the-counter (OTC) medication is any medication that can be purchased without a prescription. OTC medications currently on the market effectively treat many common health conditions including allergies, heartburn and arthritis.


Pre-existing Condition
A condition, disability or illness that you have been treated for before applying for new health coverage.
The premium is the fixed amount you pay each month for your health insurance coverage. Essentially it's your monthly bill.
Prescription Drug List
A list of commonly prescribed drugs (also known as a drug formulary). Not all drugs listed in a plan's prescription drug list are automatically covered under that plan.
Prescription Drugs
Medications ordered by a doctor and obtained at a pharmacy. They are reviewed and approved through a formal process set by the U.S. Food and Drug Administration (FDA).
Preventive Services
Routine healthcare that includes screenings, check-ups, and patient counseling to prevent illnesses, disease, or other health problems.
Primary Care Provider (PCP)
The provider you choose to be your primary source for medical care. Your PCP coordinates all your medical care, including hospital admissions and referrals to specialists. 
A licensed healthcare facility, program, agency, doctor or health professional that delivers healthcare services.
Personal Health Record (PHR)
An online collection of important information about your health, such as medical claims data, medications, and family and social histories.


As applicable to HMO or point of service (POS) coverage, a written authorization from a member's primary care physician (PCP) to receive care from a different contracted doctor, specialist or facility.


A healthcare professional whose practice is limited to a certain branch of medicine, including specific procedures, age categories of patients, body systems or certain types of diseases.