Glossary of Health Insurance Terms

Navigating health insurance is hard enough — but the endless jargon and acronym soup only adds to the confusion.

It’s like trying to read a map but the directions are all written in code! The system is complicated on purpose, and unfortunately, patients are left to decode it while trying to get the care they need. That’s why we’ve pulled together a plain-English glossary of common insurance terms and acronyms — to help make sense of it all.

Whether you’re reading a bill, calling your insurer, or helping someone else through it — we hope this helps cut through the chaos.

• Allowed Amount

  The maximum payment your insurance will make for a covered service. Also called “eligible expense” or “negotiated rate.”

• Appeal

  A request to your insurance company to reconsider a denial or payment decision.

• Authorization / Prior Authorization (PA)

  Approval from your insurance before you get a service, prescription, or procedure to confirm it's medically necessary.

• Balance Billing

  When a provider bills you for the difference between what they charge and what your insurance pays. This is illegal in some cases (like with emergency services or in-network providers in certain states).

• Cell Therapy

  Item descriptionA type of regenerative medicine that uses living cells to treat or regenerate damaged tissues or organs. This can involve stem cells or modified immune cells (such as in CAR-T therapy) to replace or repair cells, promote healing, or stimulate tissue regeneration. The cells used may be autologous (from the patient) or allogeneic (from a donor), and cell therapy is being explored for conditions like cancer, autoimmune diseases, and genetic disorders. Unlike traditional small or large molecule therapies, cell therapy involves the use of living cells rather than chemical compounds or biologics.

• Claim

  A request for payment sent to your insurance company after you receive care.

• Consolidated Omnibus Budget Reconciliation Act (COBRA)

  A federal program that lets you temporarily keep your employer-sponsored insurance after you leave your job — but often at a high cost.

• Coinsurance

  The percentage of a covered service you pay after meeting your deductible. Example: Insurance pays 80%, you pay 20%.

• Copayment (Copay)

  A fixed dollar amount you pay for certain services — like $25 for a doctor visit.

• Deductible

  The amount you pay out-of-pocket each year before your insurance kicks in to cover most services.

• Essential Health Benefits (EHB)

  A set of 10 categories of services that health insurance plans must cover under the ACA, including emergency care, maternity care, and prescription drugs.

• Explanation of Benefits (EOB)

  A document from your insurance company that breaks down what they covered, what they didn’t, and what you owe — not a bill.

• Exclusive Provider Organization (EPO)

  A plan similar to a PPO but with no out-of-network coverage (except in emergencies). You don’t usually need a referral for specialists.

• Employer-Sponsored Insurance (ESI)

  Health insurance provided by your employer, often partially paid for through payroll deductions.

• Formulary

  A list of prescription drugs your plan covers. Often includes tiers that affect how much you pay.

• Generic Drug

  A medication with the same active ingredients as a brand-name drug, usually at a lower cost.

• High-Deductible Health Plan (HDHP)

  A plan with a higher deductible and lower monthly premium. Often paired with a Health Savings Account (HSA).

• Health Maintenance Organization (HMO)

  A type of insurance plan that usually requires referrals to see specialists and only covers care from in-network providers.

• Health Savings Account (HSA)

  A tax-advantaged savings account you can use to pay for medical expenses, available if you have a high-deductible health plan (HDHP).

• Individual Coverage Health Reimbursement Arrangement (ICHRA)

  An employer-funded benefit that reimburses employees for individual health insurance premiums and sometimes other medical expenses.

• In-Network / Out-of-Network

  “In-network” providers have a contract with your insurer and cost less. “Out-of-network” providers don’t — and usually cost a lot more.

• Large Molecule Therapy (Biologics)

  ItemBiologics, or large molecules, are complex proteins or other substances that are usually made from living organisms through biotechnology processes. These drugs tend to be high in molecular weight, and are typically administered by injection or infusion because they are too large to be taken orally. Biologics often target specific components of the immune system and are used for conditions like autoimmune diseases, certain cancers, and other chronic conditions.

  Example: Monoclonal antibodies (e.g., Humira, Avastin), Insulin (for diabetes). description

• Medically Necessary

  Services or supplies needed to diagnose or treat a health condition, as determined by an insurer. The definition of "medically necessary" can be subjective, varying based on the insurer's criteria, clinical guidelines, and the specifics of an individual's health plan. It's a key term insurers use to decide what care will be covered, but different insurers may interpret it differently depending on the situation.

• Out-of-Pocket (OOP) Costs

  The costs you’re responsible for paying yourself—like deductibles, copays, and coinsurance—after insurance contributes.

• Out-of-Pocket Maximum (OOP Max)

  The most you’ll pay in a year for covered care. Once you hit this number, insurance covers 100% of services.

• Over-the-Counter (OTC)

  Medications you can buy without a prescription—like aspirin or allergy meds.

• Patient Assistance Program (PAP)

  Programs offered by drug manufacturers to help cover medication costs for patients who qualify.

• Pharmacy Benefit Manager (PBM)

  A third-party company that manages prescription drug benefits on behalf of health insurers, employers, or government programs. PBMs negotiate prices with drug manufacturers and decide which medications are covered by insurance plans (formularies). They also determine patient cost-sharing amounts — and play a major, often opaque, role in setting drug prices and access.

• Primary Care Physician (PCP)

  Your main doctor for general health needs, checkups, and care coordination. Often required in HMO plans.

• Point of Service Plan (POS)

  A hybrid of HMO and PPO: you choose a PCP and need referrals, but you can still see out-of-network providers at a higher cost.

• Preferred Provider Organization (PPO)

  A type of health plan that offers more flexibility when choosing doctors and hospitals. You don’t need a referral to see specialists, and you can see providers both in and out of network (though in-network is cheaper).

• Premium

  The amount you pay every month to have insurance, even if you don’t use it.

• Qualifying Life Event (QLE)

  A major life change (like losing a job, getting married, or having a baby) that makes you eligible to enroll in or change your health insurance outside of the annual open enrollment period.

• Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)

  A type of HRA available to small businesses (fewer than 50 employees) to reimburse employees tax-free for certain medical expenses, including individual insurance premiums.

• Summary of Benefits and Coverage (SBC)

  A standardized document that explains what a health plan covers and how much it costs.

• Special Enrollment Period (SEP)

  A limited time when you can enroll in a health plan due to a qualifying life event (QLE).

• Small Molecule Therapy

  Small molecules are chemically synthesized drugs that are made up of small atoms (like carbon, hydrogen, and oxygen) and are typically low in molecular weight. These drugs are usually taken orally and work by interacting with specific enzymes or receptors in the body. Small molecule drugs are often used for a variety of conditions, including cancer, heart disease, and infections. Example: Aspirin, Statins.

• Step Therapy

  A requirement to try lower-cost medications first before “stepping up” to more expensive options — even if your doctor prescribed the higher-cost one first.