Health Insurance Terminology

Coinsurance: Coinsurance is your share of the costs of a covered health care service calculated as a percent (for example, 20 percent) of the allowed amount for the service. You pay coinsurance plus any deductibles you still owe for a covered health service.

Premium: A premium is the amount of money charged by an insurance company for coverage. The cost of premiums may be determined by several factors, including age, geographic area, and number of dependents.

Copayment: A copayment, or copay, is a fixed amount you pay for a covered health care service, usually when you get the service. The amount can vary by the type of covered health care service.

Deductible: A deductible is the amount you owe for health care services each year before the insurance company begins to pay. For example, if your annual deductible is $1,000, your plan won’t pay anything until you’ve met your $1,000 deductible for covered health care services that are subject to the deductible. The deductible may not apply to all services, such as when a copay only applies or preventive care services. Deductibles are useful for keeping the cost of insurance low. The amount varies by plan, with lower deductibles generally associated with higher premiums. They are fairly standard on most types of health coverage.

Out-of-pocket Maximum (OOPM): An out-of-pocket maximum is the most you should have to pay for your health care during a year, excluding the monthly premium. It protects you from very high medical expenses. After you reach the annual out-of-pocket maximum, your health insurance or plan begins to pay 100 percent of the allowed amount for covered health care services for the rest of the year. The deductible, coinsurance, copays and prescription drug copays are included in the out-of-pocket maximum.

Preventive Care: Rather than waiting for a patient to become sick, preventive care aims to keep people healthy, or at least catch illnesses at their earliest and most treatable stages. Preventive care includes preventive and diagnostic services performed by providers, such as annual physicals or mammograms. Under the provisions of the Affordable Care Act (ACA), policies must cover various preventive services for men, women and children without sharing the cost for these services through coinsurance, deductibles or copayments. Certain Preventive care services are subject to frequency limitations.

Annual Limit and Lifetime Limit: In the past, health insurance carriers imposed Annual and Lifetime limits on the benefits you receive. You are no longer subject to these limitations and there is no maximum to the benefits you may receive.