Califonia Bountiful

Understanding health insurance lingo

May/June 2009 California Country magazine

Speak confidently with your health care company with these definitions.

If you think health insurance “lingo” is a bit confusing, you’re not alone. Terms like deductible and coinsurance can leave you wondering, “What does that mean?”

The following definitions should shed a little light on commonly used health insurance terms so that you feel more confident when speaking with your health care company or physician’s office about your heath care benefits.

  • HMO (health maintenance organization) is a health plan that provides access to health care services through doctors, hospitals and other providers who have a contract with the HMO. Most HMOs require members to select a primary care physician (PCP) to direct their medical needs and provide referrals as needed. Members must use providers within the contracted network for services to be covered, except for emergency care.
  • PPO (preferred provider organization) is a health insurance plan designed to provide benefits for covered medical services from doctors, hospitals and other providers both in- and out-of-network. Members using in-network providers (providers contracted with the insurance company at a discount rate) generally pay lower out-of-pocket costs than members who use out-of-network providers (non-contracted providers).
  • Copayment is the fixed dollar amount you pay for certain covered services at the time you receive care.
  • Deductible is the amount you pay for covered services each calendar year before an insurance plan begins to pay benefits for certain covered services.
  • Coinsurance is a percentage of medical costs you pay for most covered services after you have received care and your claim has been processed.
  • Out-of-Pocket Maximum is the limit to the total amount of copayments, coinsurance and/or deductibles you pay each calendar year. Certain expenses may not apply to the out-of-pocket maximum. Individual maximums can be different from family maximums.
  • Lifetime Maximum is the dollar amount of covered services and supplies your health insurance policy will pay for the duration of your lifetime.
  • Contracted Rate is the amount a contracted PPO provider agrees to bill for their reimbursement, as agreed upon through their contract with the health insurance company.

Next time your health care company or physician references a term you don’t understand, don’t be shy. Ask them to explain what it means. You’ll walk away with a better understanding about what it means to you and your benefit coverage. Refer to your health certificate of insurance or insurance policy for plan details.

Sam Cole is a regional vice president for Health Net of California Inc. He can be reached at 916-935-1215 or

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