Decoding Health Insurance Terminology

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Health insurance protects you during medical emergencies and unexpected health complications. However, many people, especially young people, struggle to understand the world of insurance. It’s loaded with terminology that can be confusing for people unfamiliar with it, but we’re here to help you learn. Here are a few examples of common phrases used by health insurance companies so you can better understand your coverage.

The following list is in no way a complete one, and some terminology varies by company. Be sure to talk to your insurance company or health insurance broker directly if you have any questions or concerns about your health coverage.


Insurance premiums are typically a high-priority concern for those choosing between different coverage plans. Your premium is how much you pay for your health insurance. This may be paid monthly, quarterly, or yearly depending on your plan.


Your deductible, along with your premium, is one of the most important aspects to pay attention to when choosing health insurance. It refers to how much you have to spend before your insurance kicks in. For example, if you’re deductible is $3,000, your insurance won’t begin to pay any medical expenses until the amount you’ve paid out of pocket has exceeded that $3,000. A high deductible isn’t always a bad thing, and some people opt for high deductibles so they have a lower premium.

Allowed Amount

Your insurance company will give you an allowed amount for different types of services. This is the maximum they’ll pay for a covered service. The “allowed amount” may also be called “eligible expense,” “negotiated rate,” or “payment allowance.” If your insurance states that your allowed amount for the emergency room is $500, but you’re billed $700, it’s up to you to pay the $200 difference. Allowed amounts are negotiated ahead of time, so you can look into your allowed amount for a specific service before scheduling an appointment. However, keep in mind that allowed amounts are maximums, so they may only offer a percentage of that amount.


Your co-payment is a fixed amount you pay for a specific service before or after you’ve paid your deductible. Pay attention to your co-pays when choosing the best health insurance for you. They’ll vary by service and by plan, so one plan may have a $25 co-pay for routine doctor visits but a $100 co-pay for emergency room services. Another plan may have the opposite, so it’s up to you to decide what your priorities are. If you frequently visit the emergency room but not your primary care doctor, you may want the plan that has a low emergency room co-pay, even though the doctor visit co-pay is higher. Work with health insurance agents if you need extra guidance when deciding what’s best for you.

Keep in mind that co-pays are only relevant once you’ve paid your deductible. If you’ve only paid $1,000 out of pocket but your deductible is $3,000, you’ll continue to pay out of pocket until you reach $3,000. It’s only once you’ve reached your deductible that you get to use co-pays.


Your health insurance network refers to the providers and facilities that your health insurance is contracted with to provide services. You’ll often hear the phrase “in-network” and “out-of-network,” so we’ll explain those as well.


In-network providers are those that are contracted with your health insurance. This means they provide you with services at a discounted rate so your cost will be lower, and they won’t exceed your allowed amount. In-network providers and facilities are almost always cheaper than out-of-network.


Out-of-network providers aren’t contracted with your insurance. In some cases, out-of-network services may not be covered at all, but most of the time it just means that co-pays are going to be higher and they may exceed your allowed amount. This is what makes out-of-network services more expensive.

Health insurance is a necessity, so the plan you choose should reflect your needs and priorities. If you want to find the best health insurance companies for your needs, you should familiarize yourself with their terminology. You can’t pick the best plan until you understand it. Call The Health Insurance Advisors Agency today so we can help guide you through this process.

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