Health Care Basics: Understanding the Lingo

While in your 20s and early 30s, you may feel you don’t need health insurance. But if you’re faced with an unexpected medical need, you may feel better if you’re covered. The process to find a plan that’s right for you can be daunting, especially when it comes to cost-conscious or first-time insurance shoppers. That’s why understanding the key concepts that make up your plan is important. 

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Here’s a quick guide to help you decode some of the most common terms. 

Premium: This is the amount you and/or your employer must pay for your health insurance or plan every month, quarter or year. 

Covered service or expense: The portion of a medical, dental or vision expense that your health insurance or plan has agreed to pay for or reimburse.

Deductible: This is the amount you could owe during a coverage period (usually one year) for covered health care services before your plan begins to pay. An overall deductible applies to all or almost all covered items and services. A plan with an overall deductible may also have separate deductibles that apply to specific services or groups of services. 

Coinsurance: This is your share of the costs of a covered health care service, calculated as a percentage of the allowed amount for the service. You generally pay coinsurance plus any deductibles you owe.

Copay: This is the fixed amount you pay for a covered health care service. After you’ve reached your out-of-pocket limit, the copayment is not charged. 

Annual out-of-pocket limit: This is the most money you would have to pay for covered expenses in a plan year. 

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