7 Medical Insurance Plan Terms You Need to Know

Medical insurance terminology can be difficult to understand, but by knowing some basic terms can help you save money when selecting a medical insurance plan.

Here are seven basic insurance terms you should know before choosing medical insurance for yourself and your family.

Balance Billing

If you receive a bill from a provider for the difference between the allowed amount and what they’ve charged, that is balance billing. So, if you visit the doctor and the total bill was $150, and insurance paid $100 (which is the allowed amount), then the provider could charge you for $50.

In some states, balance billing is not allowed, and preferred providers (who are those that contract with the health insurance company) cannot balance bill you for services that the plan covers.


A co-insurance is the amount you pay for medical services that a healthcare plan covers. They may be listed as a percentage, such as 20 percent, and the plan would pay 80 percent. The co-insurance is what you pay, along with the deductible amount.


The co-payment is the amount that you pay the provider when receiving a service the health insurance plan covers. For example, your primary care physician may receive an amount of $20 and a specialist $40 when you visit them for treatment or an examination.


A deductible is a yearly amount you pay for healthcare coverage on a plan. If it’s a family plan, then it may have embedded deductibles, which are individual amounts within the family plan.

It allows a family member to pay a lower deductible instead needing to meet the entire family amount. A non-embedded deductible would mean that the entire family deductible needs to be met before the plan covers anyone’s healthcare expenses.


The network is those providers, facilities, and suppliers that a healthcare plan contracts to provide your healthcare services. When shopping for plans, you can check to see if your current doctor or a preferred hospital is in their network.


A premium is how much you pay for a healthcare plan each month. It is important to note that a high premium doesn’t mean a plan’s coverage is better. That is why you need to read all the options available to you when selecting medical coverage for you and your family.

Out-of-Pocket Maximum

The out-of-pocket maximum is the yearly amount that you need to pay for medical coverage on your plan before they pay for any services. These payments go towards the total deductible on the plan and may be the same amount as the deductible.

Once you meet the out-of-pocket amount, the insurance usually pays 100 percent of your costs. However, carefully read what is counted toward the out-of-pocket amount. Some plans do not include co-payments, co-insurance, or other types of payments toward this figure.

If you can get a good grasp on these seven terms, then you should be able to find a healthcare plan that provides you and your family with the medical services that you need.

It is important to understand these basic terms as they will help you understand the true costs of any medical insurance plan.

Jeff Campbell

Jeff Campbell is a husband, father, martial artist, budget-master, Disney-addict, musician, and recovering foodie having spent over 2 decades as a leader for Whole Foods Market. Click to learn more about me

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