It is very difficult to evaluate which health insurance plan is the best fit for you if you don’t have a basic knowledge of insurance industry lingo and terminology. An insurance provider can describe plans at length, but unless you understand the technical terms, you are not likely to be any wiser by the end.
Exclusions: The services that will not be covered under a health insurance policy. Exclusions vary by provider, but cosmetic surgery, experimental treatments, and some types of home care are common examples.
Co-payment: A fixed out-of-pocket amount that you pay for each medical service or prescription before the insurer begins to pay. Copay amounts vary by policy but commonly range from $10 to $50.
Co-insurance: The percentage of the total cost that you will pay for a medical expense. Co-insurance can be in addition to a copayment or instead of one; a common arrangement is 20% patient responsibility and 80% insurer payment.
Deductible: The amount of out-of-pocket money you must pay before the insurance provider starts covering expenses. Annual deductibles can range from a few hundred dollars to several thousand, depending on the plan. See Understanding Health Insurance Deductibles for more details.
Coverage limits: The pre-set monetary amount that a health insurance plan will cover. Once you incur medical expenses past that limit, you will be responsible for the remainder out-of-pocket. Recent reforms have phased out many annual coverage limits, but plan terms still vary, so check current law and your policy carefully; for background, see Understanding the Affordable Coverage Act and Health Insurance.
Premium: The monthly payment you make to your health insurance provider to keep coverage active.
Out-of-pocket maximums: The point at which your payment obligation ends and the insurer pays all future covered medical costs for the remainder of the policy period. These maximums may apply to specific benefits or to the overall policy.
How to determine what health insurance plan is the right one
Coverage should be chosen based on your medical needs and financial resources. Cost is an important consideration, but the monthly premium reflects the benefits, exclusions, deductibles, and coverage limits built into the plan.
If a policy excludes benefits you expect to need—maternity care, specific prescriptions, mental health services, immunizations, home health, therapy, eyeglasses, or preventive care—the plan may not meet your needs. For guidance on how coverage and medical needs interact, see Understanding Insurance and Medical Coverage.
Finally, choose a plan from a reputable insurer and consider working with a professional insurance agent. An agent can explain plan differences, help you compare options, and answer policy-specific questions; you can also talk to an agent to review your choices.
Frequently Asked Questions
What is the difference between a copayment and co-insurance?
A copayment is a fixed fee for a service or prescription, while co-insurance is a percentage of the total cost you pay after any deductible is met.
How does a deductible affect my monthly premium?
Plans with higher deductibles generally have lower monthly premiums, while lower-deductible plans typically cost more each month.
What does out-of-pocket maximum mean?
It is the maximum amount you must pay in a policy period for covered services; after you reach it, the insurer pays eligible costs for the remainder of the period.
How can I verify whether a specific service is covered?
Check the policy’s benefits and exclusions section and ask the insurer or your agent for written confirmation before receiving care.