Health insurance terms, explained in plain language

A practical glossary of premiums, deductibles, copays, networks, formularies, and other common insurance terms.

By Jesse Young · Reviewed September 30, 2026

Understanding a few common terms makes it easier to compare coverage and ask useful questions. These definitions explain the concepts; the details depend on your policy.

The costs you may pay

Premium

The recurring amount you pay to keep insurance active, usually each month. You can owe it even when you do not use care.

Deductible

An amount you pay for certain covered services before the coverage begins paying its share. Some services may be covered before you meet it.

Copayment, or copay

A fixed amount for a covered service or prescription, such as $20 for a visit.

Coinsurance

Your percentage of a covered cost. If the allowed amount is $100 and your share is 20%, your coinsurance is $20.

Out-of-pocket maximum

A limit on certain covered costs during a plan year. Premiums and non-covered services generally do not count. Medical and prescription limits can work differently.

Medicare distinction: Original Medicare alone has no yearly cap on your Part A and Part B out-of-pocket spending. Medicare Advantage has a limit for covered Part A and Part B services. Part D prescription costs have separate rules.

The people and places providing care

Network

The doctors, hospitals, and other providers contracted with an insurance plan. Check the exact plan, not just the insurance company’s name.

In-network / out-of-network

Whether a provider participates in that network. Out-of-network care may cost more or may not be covered, depending on the plan and situation.

Primary care provider

A clinician who handles routine care and helps coordinate other services.

Referral

A direction or order from a provider to see another provider or receive certain services. Some plans require it.

Coverage and paperwork

Formulary

The list of drugs a plan covers. Drug tiers, pharmacy choices, and restrictions can affect cost and access.

Prior authorization

Approval a plan may require before certain services or drugs. Approval requirements are different from a referral.

Explanation of Benefits (EOB)

A statement explaining how an insurance claim was processed. It is not a bill. Compare it with any bill you receive.

Preventive service

Care intended to help prevent illness or detect a problem early. Cost sharing depends on the service, coverage rules, and provider.

Open enrollment

A defined time to enroll or change coverage. Medicare, Medigap, employer insurance, and Marketplace plans have different enrollment rules.

When a term is unclear, ask how it applies to your specific plan and service. Jesse Young can help you turn insurance language into practical questions.