Health Insurance Terms Every Employee Should Know

Understanding your health insurance can feel like learning another language. Every year, employees across Pennsylvania flip through their Summary of Benefits and wonder what half of those words actually mean. To help make sense of it all, here’s a clear and simple breakdown of the most common terms you’ll see, and what they really mean for you.

Premium

Your premium is what you pay every month to keep your coverage active. Think of it like a subscription fee for your health plan. Many employers split this cost with you, so the amount shown on your paycheck deduction is usually just your portion.

Deductible

Your deductible is the amount you pay out of pocket for covered services before your plan starts sharing the cost. For example, if your deductible is $1,500, you’ll pay the first $1,500 in eligible medical expenses before your insurance kicks in. After that, you start sharing costs through copays or coinsurance.

Copayment (Copay)

A copay is a flat amount you pay for a specific service, like $30 for a primary care visit or $10 for a generic prescription. You usually pay it right at the doctor’s office or pharmacy. The rest of the bill is covered by your plan.

Coinsurance

Coinsurance is your share of the costs after you’ve met your deductible. Instead of a flat fee, it’s a percentage. For instance, if your plan covers 80% of a hospital stay and your coinsurance is 20%, you pay that 20% of the allowed amount.

Out-of-Pocket Maximum

This is the most you’ll have to pay in one plan year for covered care. Once you hit that limit through deductibles, copays, and coinsurance, your insurance pays 100% of covered services for the rest of the year. It’s the built-in safety net that keeps your expenses from spiraling.

In-Network vs. Out-of-Network

In-network doctors and hospitals have agreements with your insurance company to charge discounted rates. Staying in-network helps you save money and simplifies billing. Out-of-network providers may cost more or may not be covered at all, depending on your plan.

Preventive Care

Preventive services like annual checkups, vaccines, and screenings are fully covered when you visit in-network providers. That means no copay or deductible for things like your yearly physical or flu shot.

Emergency Room vs. Urgent Care

Both have their place, but they come with very different price tags. The emergency room is for life-threatening situations, while urgent care is for issues that need attention soon but aren’t emergencies. Knowing the difference can save you hundreds of dollars and hours of waiting.

Generic vs. Brand-Name Drugs

Generic medications have the same active ingredients as brand-name versions but usually cost much less. If your doctor prescribes a brand drug, ask if a generic equivalent is available. It’s one of the simplest ways to lower your healthcare costs.

HSA, FSA, and HRA

These are special accounts that let you set aside money for medical expenses, often tax-free.

• HSA (Health Savings Account): Used with high-deductible plans, and your money rolls over each year.

• FSA (Flexible Spending Account): Use it or lose it; funds typically expire at year-end.

• HRA (Health Reimbursement Arrangement): Funded by your employer to help cover eligible expenses.

Prior Authorization

Sometimes, your insurance company needs to approve a procedure or medication before it’s covered. That’s called prior authorization. It’s their way of confirming that the service is medically necessary, and it can help prevent surprise bills later on.

Referral

Some plans require a referral from your primary care doctor before you can see a specialist. It’s a way to make sure you’re seeing the right provider and that your care stays coordinated. Always check your plan before scheduling a specialist appointment to avoid unexpected costs.

The Bottom Line

Understanding these terms helps you use your health plan with confidence. When you know what you’re paying for and why, you can make smarter choices for your health and your wallet. And if you ever have questions, Swift Kennedy is always here to help you navigate your options.