Understanding Common Health Insurance Terms

Dealing with health insurance can feel overwhelming at times. Understanding the terminology used in health insurance policies can help. Here are a few common health insurance terms.

Allowed amount

Allowed amount is also known as “payment allowance”, “negotiated rate”, or “eligible expense”. This is the maximum amount that your insurer will pay for health care services. You may have to pay the difference if your provider charges more than the insurer’s allowed amount.


This is the percentage of the overall costs that you must pay for a covered health care service. If you haven’t yet met your deductible, you pay the allowed amount in full. However, once you’ve met your deductible you pay coinsurance, or the percentage of the allowed amount.

Copay or Copayment

A copayment, commonly referred to as a copay, is a fixed amount that you pay for health care services covered under health insurance.


A deductible is a set amount that you must pay before your health insurance begins paying for health care services. Once you’ve met your deductible you may pay a copay or coinsurance.


In-network providers contract with your health insurance. In-network providers typically cost less than out-of-network providers.


Providers who do not contract with your insurance are considered out-of-network. You may still receive services from out-of-network providers, but your coinsurance or copay may be higher than with providers within your network.


Out-of-pocket costs are expenses for medical care not reimbursed by insurance. Your out-of-pocket maximum or out-of-pocket limit is the most you pay (in a policy period) before insurance covers 100% of the allowed limit. Not all health insurance policies are the same, so be sure to understand which expenses count towards your out-of-pocket limit.


Preauthorization, also known as prior authorization, is a process where the health insurance approves which services will be covered under your health plan. Preauthorization must be obtained before you receive the service in order for your insurance to pay. Check your insurance plan to determine what requires preauthorization. Generally most outpatient procedures, such as MRIs and CT scans, mammography and colonoscopy require preauthorization.


A premium is the amount that you pay for heath insurance. This could be a monthly, quarterly, or yearly payment.

Primary care physician

Your Primary Care Physician is your regular family doctor, the health professional you see for your regular checkups. This includes licensed doctors and medical professionals who provide or coordinate health care services.


Referrals are recommendations by your Primary Care Physician (PCP)  to transfer your care to a specialist. Health insurers often require this before you see a specialist other than your PCP, if you want the service to be covered.


Specialists are doctors who have completed advanced education and training in a specific area of medicine. Examples of a medical specialist include a Gastroenterologist, Gynecologist, Neurologist, Radiologist or Pulmonologist. These are the medical professionals your primary care provider might recommend you visit when you have a special need or concern.