Insurance Terminology

Health insurance terms you should know

Annual deductible — The amount you pay for medical expenses before your health insurance plan begins to pay benefits. For example, if your medical plan has a $500 annual deductible, you will pay all of your health care expenses up to $500 before your health insurance plan will begin to pay. 


Annual out-of-pocket maximum — The most you will have to pay out of your own pocket for health care expenses during the year. The maximum does not include the insurance premium or cost of medical care that is not covered by your health insurance plan.


Authorization Approval to see a specialist, receive specific services or be admitted to the hospital.


Co-insurance — The percentage of costs of a covered health care service you pay after your deductible. For example, if a hospital charges $1,000 for surgery, and your insurance plan pays 70 percent, your health insurance company would pay $700, and you would pay 30 percent, or $300. 


Co-payment — A fixed amount (for example, $25) you pay for a covered health care service when you receive the service.


Covered services Health care services your insurance company will pay for under your plan.


Fee-for-service A traditional insurance plan that allows members to choose any doctor, regardless of specialty or hospital. Members pay the bills directly and then file paperwork with the insurer to be reimbursed. These policies are becoming less common and are generally the most expensive type of health insurance.


Health maintenance organization (HMO) — A health insurance plan that contracts with a group of physicians, other health care professionals and hospitals (known as a network) to care for its patients (known as members). Members usually must select a primary care physician from the network and call or see this doctor first for all medical care.


Inpatient care — Care that requires admission to a hospital.


Managed care organizations Companies that oversee the cost, quality and delivery of health care services. Includes HMO, PPO and POS plans.


Network A group of physicians, other health care professionals and hospitals that have agreed to provide services to members of a specific health plan.


Open enrollment (also known as “Annual Enrollment Period”) A specified time period each year when individuals select health insurance (HMO, PPO, fee-for-service, etc.) through an employer, Covered California or Medicare. Individuals may be asked to choose a primary care physician for themselves and family members covered by the plan.


Outpatient care — Medical care or treatment that does not require an overnight hospital stay in a hospital or medical facility. Sometimes called ambulatory care, outpatient care is usually provided in a medical office or outpatient surgery center. 


Point of service (POS) — A “tiered” health plan under which your coverage level is determined by where you receive care. You pay the least for care coordinated by your primary care doctor, a higher amount if you see a specialist in your network without a referral and an even higher cost if you go to a doctor outside the network.


Preferred provider organization (PPO) — PPO plans allow you to receive care from in-network physicians or health care providers without first requiring a referral from a primary care physician. A PPO may cover some costs if you see an out-of-network provider, but you will pay more. 


Primary care physician (PCP) A doctor specializing in internal medicine (internist), family medicine or pediatrics who coordinates all health services for a patient and refers that patient for specialty care. Some plans include obstetricians/gynecologists as primary care physicians.


Referral The process of sending a patient from one doctor to another, or to other health care professionals, for services. Most managed care plans require the primary care physician to authorize a referral before the cost of the service will be covered.


Specialist A doctor who has received advanced education and training in a particular area of medicine. Cardiology, dermatology and orthopedics are a few examples of medical specialties.


The information provided here is a glossary of common health insurance terms. Refer to your health plan policy for specifics about the terms of your health care policy.