Health Insurance Terms That are Good to Know

The language of health insurance can be difficult to understand. Yet, every day it’s becoming more and more important for health care consumers to have at least a basic knowledge of the industry’s terminology. Understanding these health insurance terms can help you choose the right plan and help you understand your coverage…

Allowable Charge.

Sometimes known as the “allowed amount,” “maximum allowable,” and “usual, customary, and reasonable (UCR)” charge, the allowable charge is the dollar amount considered by a health insurance company to be a reasonable charge for medical services or supplies based on the rates in your area.

Benefit.

A benefit is the amount payable by the insurance company to a plan member for medical costs.

Benefit Period.

The benefit period is the time when services are covered under your plan. It also defines the time when benefit maximums, deductibles, and coinsurance limits build up. It has a start and end date, and is typically one calendar year for most health insurance plans.

Co-insurance.

Co-insurance is the amount you pay to share the cost of covered services after your deductible has been paid. The coinsurance is usually a percentage. For example, if the insurance company pays 80 percent of the claim, you pay 20 percent.

Coordination of Benefits.

A coordination of benefits is a system used in group health plans to eliminate duplication of benefits when you are covered under more than one group plan. Benefits under the two plans usually are limited to no more than 100 percent of the claim.

Copayment (co-pay).

A copay is the amount you pay to a health care provider at the time you receive services, (e.g., $10 for every visit to the doctor), while your insurance company pays the rest. You may have to pay the copay for each covered visit to your doctor, depending on your plan. Not all plans have a copay feature.

Covered Charges.

Covered charges are for covered services that your health plan pays for.

Deductible.

A deductible is the amount of money you must pay each year to cover eligible medical expenses before your insurance policy starts paying.

Drug Formulary.

The drug formulary contains a list of prescription medications covered by your plan.

Exclusions or Limitations.

Exclusions or limitations to your plan are any specific situations, conditions, or treatments that a health insurance plan does not cover.

Explanation of Benefits (EOB).

An explanation of benefits is the health insurance company’s written explanation of how a medical claim was paid. It contains detailed information about what the company paid and the portion of the costs, if any, for which you are responsible.

In-Network Provider.

Your in-network provider is the group of doctors, hospitals, and other health care providers that insurance companies contract with to provide services at discounted rates. You will pay less for services received from providers in your network.

Out-of-Pocket Maximum.

An out-of-pocket maximum is the maximum amount of money you must pay for covered services during a benefit period (for example, over the course of a year). The out-of-pocket maximum never includes your premium, balance-billed charges, or services your health insurance plan doesn’t cover. The out-of-pocket maximum will vary from plan to plan but can include copayments, deductibles, and co-insurance. Once you have paid the full amount toward your out-of-pocket maximum, your insurance will pay 100 percent of the allowed amount for your covered health care expenses.

Out-of-Network Provider.

An out-of-network provider is a health care professional, hospital, or pharmacy that is not part of a health plan’s network of preferred providers. You will pay more for services received from out-of-network providers.


Health insurance can be confusing but understanding some of the more complicated terminology can help identify how you’re benefiting from your health insurance plan. Working with a licensed health insurance agent, like the advisors at ARC Benefit Solutions, can help you fully understand your benefits and determine which plans are right for you. Contact us today to get started!

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