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It’s not just you—navigating the healthcare system and comprehending health insurance can feel like learning a new language. We’re here to help you understand the paperwork. Welcome to Health Insurance 101: the terms you absolutely need to know. 

Related: Everything You Need to Know About Open Enrollment for 2018

Allowable Charge

The dollar amount that your insurance company will reimburse a provider for a medical expense. If the total charge is greater than the allowable charge—for example, if the total charge is $200 but the allowable charge is $150—you may have to pay the difference.

Annual Limit 

The maximum amount your insurance will pay for each year you’re enrolled in a health plan — whether that’s a maximum dollar amount in total, a maximum dollar amount per condition, or a maximum number of visits allowed under the plan. Once you exceed your annual limit, you’ll need to pay for additional medical costs out of pocket. 

Balance Billing

When your provider sends you an invoice for the difference between a total charge for a service and the allowed amount for that service. If your appointment costs $200, for example, but the allowable charge is $125, you may receive a bill for $75. 

Carrier

Another term for health insurance provider — the company that supplies you with health insurance. 

Catastrophic Health Plan

A health plan that offers essential coverage as outlined in the Affordable Care Act, but typically covers just three visits with a primary care provider each year. Purchasing a catastrophic health plan helps you save money on monthly premiums, but may require that you pay higher deductibles, copayments and coinsurance, and pay for some services out of pocket.  

Consolidated Omnibus Budget Reconciliation Act (COBRA)

Legislation that allows you to keep your insurance if you lose your job or if you’re no longer covered as a dependent under your parents’ or guardian’s insurance. To remain covered, you’ll need to pay the full premium, including the employer’s share. 

Copayment

A fixed payment you’ll need to make for a covered service. If your copayment for a consultation is $20 and you’ve met your deductible, for example, you’d pay $20 out of pocket for your appointment.  

Deductible

The amount you must pay for services before your insurance provider will start covering medical costs. If your plan has a deductible of $500, you’d pay for the first $500 in services out-of-pocket, but your health insurance would pay any further costs for covered services (minus any copayments or coinsurance).  

Durable Medical Equipment (DME)

Equipment or supplies that your doctor prescribes for regular use. This includes blood pressure monitors, blood sugar monitors, oxygen tanks or air filters, wheelchairs or other mobility devices, and more. 

Exclusive Provider Organization (EPO) Plan

A lower-cost health plan that provides coverage exclusively for services provided by doctors and hospitals within the plan’s network. These plans do not provide out-of-network benefits and often fall between HMOs and PPOs in terms of cost and convenience. 

Essential Health Benefits

Services that all qualified health plans (QFPs) must cover to comply with the Affordable Care Act. These include hospital care, doctor’s visits, childbirth and pregnancy, cancer treatment and more. While essential health benefits are outlined in federal law, some states may have additional coverage requirements.  

Exchange/Health Insurance Marketplace

An online, phone and in-person service available to help you find affordable health insurance. You can find your state’s marketplace here.

Excluded Services

Services not covered by your health plan. You’ll need to pay for excluded services out of pocket. 

Grievance

A complaint lodged with your health insurance provider. You might file a grievance if you’re denied coverage for care you believe you are included in your plan, for example, or if your insurance provider argues that a service is not medically necessary and refuses to reimburse your provider. 

Group ID

The unique number that your health insurance provider assigned to your employer. This number is found on your insurance ID card if you receive health insurance via your employer. 

Guaranteed Issue

A federal requirement that you must be able to purchase health insurance, regardless of your medical history, age or other personal information. 

Grace Period

The short period after your monthly payment is due, during which you can make a late premium payment but still keep your insurance. If your plan has a grace period of 90 days, for example, you can make a late payment before 90 days and maintain coverage. 

Health Insurance

A form of insurance that covers some or all of the cost for medical, surgical and in some cases dental, visual and other expenses for the insured.

Health Maintenance Organization (HMO) Plan

A relatively low-cost plan that offers coverage for services from a network of doctors, but does not include out-of-network benefits and requires a referral to see a specialist. Because HMO networks may be limited, you’ll sacrifice some convenience in return for a lower monthly cost. 

In-Network Coinsurance

The percentage of the allowed amount that you’ll pay out of pocket for services within your health insurance network. It’s typically lower than out-of-network coinsurance, so visiting a doctor in your network saves you money.  

In-Network Copayment

The copayment you’ll make for visiting a doctor within your health insurance network. It’s typically lower than the copayment you’d make to doctors outside your network.  

Lifetime Limit 

The limit to the benefits your health insurance provider will pay over your lifetime. That might be an overall dollar amount, a certain number of procedures, or a dollar amount per condition. Once you’ve reached your lifetime limit, you’ll have to pay for health services out of pocket. 

Medicaid

A government-provided healthcare program that offers fully or partially subsidized insurance to low-income families, people with disabilities, and others. Medicaid is distributed by the state, so your eligibility depends partially on where you live. Click here to learn more about Medicaid eligibility in your state. 

Medicare

A health insurance program for those age 65 and older provided by the federal government.

Member ID

The unique number your health insurance number assigns you for identification. It can be found on your member ID card. 

Network

The doctors, hospitals and suppliers your health insurance has contracted with. Health insurance plans often offer better coverage for in-network providers with lower coinsurance and copayment costs. 

Out-Of-Network Copayment

The copayment you’ll make for visiting a doctor outside of your insurance network. It is typically larger than your in-network copayment. 

Out-of-Network Coinsurance

The percentage of the allowed amount you’ll need to pay for services from doctors outside your network. This is often a greater percentage than your in-network coinsurance. 

Out-Of-Pocket Maximum Limit 

The limit to what you’d have to pay on your own for the coverage year. This includes deductibles, copayments, and coinsurance, but does not include your premiums. The limit is set by the federal government and changes annually.

Preferred Provider Organization (PPO) Plan

A type of plan that provides in-network coverage—including the ability to see an in-network specialist without a referral—as well as some out-of-network coverage. PPO plans typically provide the most convenience, but come at a higher cost than EPO and HMO plans. 

Point-of-Service (POS) Plan

A hybrid of PPO and HMO plans. Like an HMO, your primary care provider will need to belong to your health insurance network. But like a PPO, you’ll get some out-of-network benefits—though you’ll have to pay higher fees for out-of-network services. 

Pre-Existing Condition

A disease, condition or other health issue that you had before you signed up for insurance. Under the Affordable Care Act, health insurance providers cannot charge you more or refuse to cover treatment for a pre-existing condition.  

Prior Authorization

Also called pre-authorization, prior authorization is a decision on whether health care service is medically necessary. In some cases, your insurance provider may need to authorize services before you receive them in order for them to be covered. 

Preferred Provider 

Providers who are part of your insurance network and are able to provide services at a discount. Some health care plans have tiered networks, meaning some in-network providers are able to provide steeper discounts than others.

Qualified Health Plan

A health plan that meets the federal criteria for health coverage and limits on out-of-pocket expenses, which are outlined by the Affordable Care Act. 

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