Understanding Health Insurance Terms

As a member of an insurance plan, you must understand the terms of your plan, what your insurance company expects of you, and your out-of-pocket costs. Familiarizing yourself with the language of insurance is a good first step. Below are definitions of terms you will see in communications with your insurance company, physicians, and hospitals.

1. Copay is a charge set by your health insurance plan for specific services. Your copay is due at the time of service and varies for different services. For example, a visit to your primary care doctor will be different from a visit to the emergency room or a specialist. Your copay amount is typically based on your specific insurance plan.
2. Coinsurance is the amount you are responsible for after you have paid your copay and met your annual deductible. Coinsurance is typically done with a percentage of covered costs. After the deductible is met, your insurance will pay a percentage of the balance. For example; if your insurance pays 80% of the covered services, you are responsible for 20% of those charges.
3. Cost-sharing is the general term for any charges the patient is responsible for under the terms of their healthcare plan. This includes copayments, coinsurance, and deductibles. Most healthcare plans include a maximum cost-sharing amount that sets an annual maximum out-of-pocket limit to the financial responsibility of the patient. See your specific health plan for details.
4. Deductible is a set dollar amount that your insurance company requires you to pay out-of-pocket (yearly) before your insurance provides payment of claims. The amount of your deductible is based on your specific health plan. Not all plans have a deductible.
5. Explanation of Benefits (EOB) is an overview of the medical services you received.

• Amount billed – the cost of services (charges) by a provider or facility submitted to your insurance company.
• Allowed Amount – the amount of money your insurance company has determined is reimbursable to the provider or facility for medical services.
• Paid Amount – the amount of money paid towards the “allowable amount” by your insurance company.
• Patient Responsibility – any unpaid portion of the “allowable amount” that was not paid by your insurance company due to the patient copay, deductible, and coinsurance that was not paid.
• Balance Bill – this is the remainder of the amount of billed (charges) that were “not allowed” by your insurance company. You should never be billed for balances of charges that are “not allowed,” but you should expect to be billed for unpaid “allowed amounts” that your insurance company has cost-shared with you. Balance billing for charges not allowed by your insurance company is illegal under the No Surprise Act passed by Congress and enacted in January 2022