CMS maintains a Uniform Glossary to make common health coverage terminology easier to understand and compare. The following table gives a plain-English overview of some of the terms you are most likely to see when shopping for coverage, receiving care, or reviewing a claim.

The premium is the amount you pay for health insurance coverage. HealthCare.gov describes it as the amount paid each month for insurance, although employer arrangements and other coverage can use different payment schedules.

Premiums are different from what you spend when you receive medical care. You may still owe a deductible, copays, coinsurance, or other expenses in addition to the premium.

A deductible is the amount you pay for certain covered health care services before your insurance begins paying according to the plan’s applicable cost-sharing rules.

Meeting the deductible does not necessarily mean all future care is free. Afterward, you may continue paying copays or coinsurance until you reach the applicable out-of-pocket maximum.

HealthCare.gov also notes that many plans cover certain services before the deductible is met. Some plans use separate deductibles for benefits such as prescription drugs, and family plans can include individual and family deductibles.

A copayment, usually shortened to copay, is a fixed amount you pay for a covered health care service under the plan’s rules.

A plan might use different copays for different services. Primary care, specialist visits, urgent care, and prescription drugs can each have their own cost-sharing structure.

Whether a deductible must be met before a particular copay applies depends on the plan, so read the benefit details rather than assuming every copay works the same way.

Coinsurance is your share of the cost of a covered service expressed as a percentage. CMS defines it as a percentage of the allowed amount rather than simply a percentage of whatever amount appears on the provider’s original bill.

Hypothetical Example

Suppose a hypothetical plan requires 20% coinsurance for a covered in-network service after the deductible and the plan’s allowed amount is $1,000. Your coinsurance would be $200 if all applicable deductible requirements were already satisfied and no other plan provision changed the calculation. These figures are illustrative only and are not national averages.

Cost sharing is a broad term for the portion of covered medical costs paid by the member rather than the health plan. Deductibles, copays, and coinsurance are common forms of cost sharing.

Premiums are generally discussed separately because they are the cost of maintaining coverage rather than a charge triggered by receiving a particular covered service.

The out-of-pocket maximum, sometimes called the out-of-pocket limit, is the most you have to pay in qualifying cost sharing for covered services during the plan year under the applicable rules.

For Marketplace plans, HealthCare.gov explains that after qualifying spending on deductibles, copayments, and coinsurance for in-network care reaches the applicable out-of-pocket limit, the plan pays 100% of covered benefits for the rest of that plan year.

The limit does not mean every health-related dollar you spend is capped. Premiums, services the plan does not cover, out-of-network care and services, and certain costs above the plan’s allowed amount generally do not count toward the Marketplace out-of-pocket limit.

The allowed amount is the maximum amount recognized by a health plan for a covered health care service. CMS notes that it may also be called an eligible expense, payment allowance, or negotiated rate.

This is important because a provider’s original charge may be different from the amount used by the plan to calculate benefits and member cost sharing.

A network is the group of facilities, health care providers, and suppliers that have contracted with a health insurer or plan to provide services.

In-Network Provider

An in-network provider has a contractual arrangement with the health plan. Members generally receive the plan’s more favorable network pricing when they follow applicable coverage rules.

Out-of-Network Provider

An out-of-network provider does not have the same network arrangement with the plan. Depending on the plan type and circumstances, you may pay more or have limited or no coverage for non-emergency out-of-network care.

Network status can change, so verify important doctors, hospitals, laboratories, imaging centers, and other providers directly with the plan when the distinction matters.

These abbreviations describe common health plan structures. The labels provide a useful starting point, but the actual plan documents determine the network, referral, and cost-sharing rules.

HMO — Health Maintenance Organization

An HMO generally emphasizes care within a defined provider network and can require members to coordinate care through a primary care provider. Non-emergency out-of-network services may have limited or no coverage, depending on the plan.

PPO — Preferred Provider Organization

A PPO uses a network of contracted medical providers. HealthCare.gov explains that members generally pay less when using network providers but can use out-of-network providers at additional cost, subject to the plan’s terms.

EPO — Exclusive Provider Organization

An EPO generally requires members to use the plan’s provider network for covered non-emergency care. Read the specific plan documents because network and referral rules can vary.

Balance billing generally occurs when a provider bills you for the difference between the provider’s charge and the amount recognized by your plan.

CMS notes that this most often becomes an issue with out-of-network providers. Federal and state laws can restrict balance billing in certain situations, so receiving an unexpected out-of-network bill does not automatically mean the full amount is legally your responsibility.

Prior authorization, also called preauthorization, prior approval, or precertification, is a decision by the health insurer or plan that a service, treatment plan, prescription drug, or durable medical equipment meets specified plan requirements such as medical necessity.

HealthCare.gov notes that some plans require authorization before certain services are received, except in emergencies. Prior authorization is not necessarily a promise that every resulting charge will be covered.

Check authorization rules before scheduled procedures, advanced imaging, expensive medications, durable medical equipment, and other services identified by your plan.

A formulary is the list of prescription drugs covered by a prescription drug plan or another health plan that provides drug benefits. HealthCare.gov also calls it a drug list.

A drug appearing on the formulary does not necessarily mean every prescription has the same cost or can be filled without additional requirements. Plans may place medications in different cost-sharing tiers or apply prior authorization, quantity limits, or other utilization rules.

If you regularly take medication, check the current formulary when comparing plans and periodically afterward according to applicable plan rules.

An Explanation of Benefits, or EOB, explains how the health plan processed a claim. CMS emphasizes that an EOB is not a medical bill.

A typical EOB can show:

• The medical service and date.
• The provider’s charge.
• The allowed charge.
• The amount paid by the insurer.
• The amount shown as your responsibility.
• Codes or explanations showing how the claim was processed.

Compare the EOB with the bill you receive from the provider. A discrepancy deserves review before payment.

A claim is a request for payment or coverage submitted to the health insurer or plan for health care that was provided or is being requested, depending on the type of claim.

In many situations, the medical provider submits the claim directly to the insurer. The plan then applies its network arrangements, allowed amounts, deductible, copay, coinsurance, authorization requirements, and other coverage rules.

Appeal

An appeal is a request for a health insurer or plan to review a decision denying a benefit or payment. If you believe a claim or requested service was incorrectly denied, the denial notice and plan documents should explain applicable appeal rights and deadlines.

External Review

An external review is review of certain plan denials by an independent third party rather than the health plan itself. Eligibility, timing, and procedures depend on the coverage and reason for denial.

The Summary of Benefits and Coverage, or SBC, is a standardized document designed to make health plans easier to understand and compare.

CMS explains that the SBC summarizes important features including covered benefits, cost-sharing provisions, limitations, and exceptions. It also includes standardized coverage examples.

The SBC is a useful starting point, but it is not a substitute for reading the complete plan or policy when you need the exact contractual terms.

A plan year is the period used by a group health plan to administer benefits and cost-sharing rules. It may or may not match the calendar year.

This matters because deductibles and out-of-pocket limits commonly reset according to the plan’s applicable annual period. Check your plan materials rather than assuming every deductible resets on January 1.

Medical necessity generally refers to health care services or supplies determined under a plan’s criteria to be appropriate for diagnosis or treatment. The specific definition can differ among plans.

A doctor’s recommendation does not automatically guarantee that a health plan will determine a service meets its medical-necessity standard. If the plan denies coverage on that basis, applicable appeal and external-review rights may become important.

A referral is an authorization or direction, often from a primary care provider, to receive care from another provider such as a specialist.

Some plans require referrals for certain specialist services while others do not. Referral rules and prior authorization are related concepts but are not necessarily the same requirement.

Health insurance terminology makes more sense when you view the terms as parts of one process rather than isolated definitions.

• You pay a premium to maintain coverage.
• You receive care from an in-network or out-of-network provider.
• The provider submits a claim to your health plan.
• The plan determines the applicable allowed amount.
• Your deductible, copay, or coinsurance may determine part of what you owe.
• Qualifying cost sharing accumulates toward the applicable out-of-pocket maximum.
• You receive an Explanation of Benefits showing how the claim was processed.
• If the plan denies a benefit or payment, you may have an appeal or applicable external review option.

A low premium does not automatically mean a plan will cost less overall. Compare several pieces together before choosing coverage.

• Premium: What will you pay to maintain coverage?
• Deductible: How much could you pay before certain cost sharing begins?
• Copays and coinsurance: What will routine and expensive services cost after applicable plan rules are applied?
• Out-of-pocket maximum: What is your applicable limit for qualifying covered cost sharing?
• Network: Are your doctors, hospitals, and other important providers participating?
• Formulary: Are your medications covered and at what cost-sharing tier?
• Prior authorization: Which services or drugs require plan approval?
• Exclusions and limitations: Which benefits are unavailable or restricted?

The most useful health insurance terms explain either what you pay, where you can receive care, or how the plan decides whether and how much to pay. Premiums, deductibles, copays, coinsurance, and out-of-pocket limits describe costs. Networks, allowed amounts, prior authorization, and formularies describe how covered care is accessed and priced.

Use the Summary of Benefits and Coverage and CMS Uniform Glossary to make health insurance language easier to understand, but rely on the actual policy or plan documents for a specific coverage decision. Definitions, network arrangements, deductibles, authorization requirements, prescription rules, exclusions, and appeal procedures can differ among plans.

• Centers for Medicare & Medicaid Services, Health Insurance Terms You Should Know, August 25, 2026.
• Centers for Medicare & Medicaid Services, Summary of Benefits and Coverage and Uniform Glossary, updated March 13, 2026.
• HealthCare.gov, Health Coverage Glossary, accessed August 2026.
• HealthCare.gov, Deductible, accessed August 2026.
• HealthCare.gov, Out-of-Pocket Maximum/Limit, accessed August 2026.
• HealthCare.gov, Preauthorization, accessed August 2026.
• Centers for Medicare & Medicaid Services, How to Read a Health Insurance Explanation of Benefits, August 25, 2026.