Healthcare is complex enough without the added challenge of unfamiliar insurance jargon. But when you take the time to understand terms like deductibles, co-pays, co-insurance, and EOBs, you equip yourself to make thoughtful, informed choices that support both your health and your peace of mind. Take a moment to explore the simplified definitions below and you’ll be mastering the language of health insurance in no time!
Premium
This is the fixed amount you pay regularly (usually monthly) to have health insurance. Think of it as a subscription fee to keep your coverage active.
Example: You pay $350 per month through payroll deductions to keep your health insurance active.
Co-pay
A co-pay is a flat fee you pay for certain health services.
Example: Your plan could require you to pay a $20 co-pay for each doctor’s visit.
Deductible
What you pay out of pocket before insurance starts sharing the cost. A lower deductible usually means a higher monthly premium, and vice versa.
Example: Your deductible is $2,000. You must pay the first $2,000 in covered medical costs before your insurance starts sharing costs.
Co-insurance
Co-insurance is your share of the bill after you’ve met your deductible.
Example: After meeting your deductible, you have a procedure that costs $1,000. Your plan covers 80%, so you pay the remaining 20% ($200).
Elective vs. Non-Elective Care
Elective: Planned care you choose to have
- Example: Cosmetic surgery
Non-elective: Medically necessary or urgent care
- Example: Going to the ER for a broken arm.
This difference between these two types of care affects how your health plan covers services.
Pre-Authorization (Prior Authorization)
Getting approval from your health insurance company before certain health services are covered. Services can include certain tests, medications, procedures, etc.
No approval may equal possible surprise bill.
Example: Your doctor recommends an MRI. Your insurance may need to approve it first. Without approval, the claim may be denied, leaving you to foot the bill.
Out-of-Pocket Maximum
The most you will pay for covered services in one plan year. Once you hit this number, insurance will pay 100% of covered costs for the rest of the year. (Your premium doesn’t count toward this.)
Example: Your out-of-pocket maximum is $6,000. Once you have paid $6,000 in deductibles, co-pays, and co-insurance for the year, insurance covers 100% of covered medical services.
In-Network vs. Out-of-Network
When you use your health insurance, where you go for care matters. “Network” simply refers to the group of doctors, hospitals, and medical facilities that have agreed to work with your health insurance company at negotiated rates.
In-network
Providers contracted with your insurance which results in a lower cost to you for health services.
Example: Your in-network specialist visit costs you a $50 co-pay because your insurance has already negotiated the price.
Out-of-network
Higher cost, and some services may not be covered.
Example: An out-of-network specialist charges $1,000 for a service. Your insurance considers $700 reasonable and customary for that service. You may owe the remaining $300 plus your share of $700.
Before scheduling an appointment, it’s important to confirm that your provider is in-network. A quick check can help you avoid unexpected bills later.
UCR (Usual, Customary, Reasonable)
UCR stands for Usual, Customary, and Reasonable. It’s the maximum amount your insurance company considers appropriate to pay for a medical service in your geographic area.
Example: An out-of-network provider charges $1,200 for a procedure. Your insurance determines the UCR amount is $900. If your plan covers 70% of the UCR, it pays 70% of $900, and you may owe the remaining portion plus the $300 difference.
Explanation of Benefits (EOB)
An Explanation of Benefits (EOB) is a summary from your insurance company that explains how a medical claim was processed. An EOB is NOT a bill. It’s simply a breakdown of how costs were shared.
It typically shows:
- What the provider billed
- Any network discounts applied
- What insurance paid
- What you may owe
Example: Your doctor charges $250. After network discounts, the allowed amount is $180. Insurance pays $130, and the EOB shows you may owe $50. You’ll receive a separate bill from the provider if payment is due.
Generic vs. Brand-Name Drugs
Both generic and brand-name drugs treat the same condition and must meet the same safety and effectiveness standards. The biggest difference for most people is cost. In most cases, choosing generic medication can significantly lower your out-of-pocket costs.
- Generic drugs contain the same active ingredients and are typically much less expensive.
- Brand-name drugs often cost more due to research, development, and patent protections.
Example: A brand-name prescription costs $120. The generic version costs $15 and has the same active ingredients as the brand-name drug.
HSA vs. FSA
Both Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) allow you to set aside pre-tax dollars to pay for qualified healthcare expenses. The key differences are how the money is managed and who owns it.
HSA (Health Savings Account)
- Requires enrollment in a high-deductible health plan (HDHP)
- Money rolls over year to year
- Can be invested
- Belongs to you and moves with you if you change jobs
Example: You contribute $2,000 and only spend $800. The remaining $1,200 stays in your account and continues to grow.
FSA (Flexible Spending Account)
- Established through your employer
- Typically, “use it or lose it” within the plan year (some plans allow limited rollover)
Example: You contribute $1,500 for the year. If you only spend $1,200, you may forfeit the remaining $300 depending on plan rules.
Understanding these key insurance terms and how they work can help you avoid unexpected costs and make more informed decisions about your care. While health insurance can feel complicated, knowing the basics gives you more control over your benefits and your budget.
Our dedicated customer service team is here to help you when you need assistance deciphering any of your benefit questions.
Call: 260-432-6690
Email: custsvc@phpni.com
Online chat tool: Available when you login to your PHP member account
