Choosing a health insurance plan is easier when you understand the key terms used to describe how your coverage works. Below is a simple guide to the most common health care terms you’ll see while shopping in BEN360.
Your premium is the amount you pay each month to keep your health insurance active.
- Think of it as your “subscription” to your health plan.
- Your employer’s ICHRA allowance may cover some or all of this amount.
Your deductible is the amount you pay out-of-pocket each year before your insurance begins paying for most covered services.
- Example: If you have a $3,000 deductible, you pay the first $3,000 of eligible medical costs yourself.
- Some services, like preventive care, may be covered before you hit your deductible.
Your out-of-pocket maximum (OOP max) is the most you’ll pay in a year for covered medical expenses. Once you hit this amount, your insurance pays 100% of covered services for the rest of the year.
The OOP Max includes:
- Deductibles
- Copays
- Coinsurance
It does not include premiums.
A copay is a fixed dollar amount you pay for a specific service — like $25 for a doctor visit or $10 for a prescription.
- Copays often apply after your deductible, but some plans offer copays immediately.
Coinsurance is the percentage of costs you pay after you’ve met your deductible.
- Example: If your plan has 20% coinsurance, you pay 20% and your insurer pays 80% of covered services (until you meet your out-of-pocket max).
A plan’s network is the group of doctors, clinics, hospitals, and providers contracted with that insurance carrier.
- Staying in-network generally means lower costs.
- Going out-of-network may cost more — or may not be covered at all, depending on the plan type.
HMO, EPO, PPO, POS (Network Types)
These terms describe how flexible a plan is with providers and referrals:
- HMO: Must stay in-network; referrals usually required
- EPO: No referrals needed; in-network only
- PPO: Most flexible; in- and out-of-network coverage
- POS: Mix of HMO and PPO features
Metal tiers represent how you and the insurance company split costs — not the quality of care.
- Bronze / Expanded Bronze: Lower premiums, higher out-of-pocket costs
- Silver: Balanced premiums and cost-sharing
- Gold: Higher premiums, lower out-of-pocket costs
- Catastrophic: Very low premiums, very high deductibles; limited eligibility
A formulary is the list of prescription drugs covered by your plan.
- Drugs are often grouped into tiers that determine their cost.
For more information on health plan terms to understand, read our blog: 10 Insurance Benefit Terms You Should Know
For more information on choosing a health plan, read our blog: Your Guide to Choosing a Health Insurance Plan