Health Insurance Glossary: A-Z Definitions & Terms

Comprehensive definitions for health insurance, employee benefits, tax-advantaged accounts, and Section 125 terminology — written for employers and employees navigating coverage decisions.

Insurance Basics

Deductible

The amount you must pay out-of-pocket for covered healthcare services before your insurance plan begins to pay. For example, a $1,000 deductible means you pay the first $1,000 of covered services each plan year.

Premium

The recurring amount — monthly, quarterly, or annually — paid to maintain health insurance coverage, regardless of whether you use medical services.

Copay

A fixed dollar amount you pay for a covered healthcare service at the time of service, such as $20 for a primary care visit or $10 for a generic prescription.

Coinsurance

Your percentage share of covered healthcare costs after meeting your deductible. If coinsurance is 20%, you pay 20% and insurance pays 80%.

Out-of-Pocket Maximum

The most you must pay for covered services in a plan year. After reaching this limit, your health plan pays 100% of covered costs.

Network

The group of doctors, hospitals, and other providers that have contracts with your insurance plan. Using in-network providers costs less than out-of-network.

Open Enrollment

The annual window when employees can enroll in or change their health insurance plan. Outside this period, changes require a qualifying life event.

Qualifying Event

A life change — such as marriage, birth of a child, loss of coverage, or job change — that allows health plan changes outside of open enrollment.

COBRA

Consolidated Omnibus Budget Reconciliation Act. Allows employees to continue employer-sponsored insurance after leaving a job, paying the full premium plus administrative fees.

Prior Authorization

Approval required from your insurer before receiving certain medical services or prescriptions. Your provider must demonstrate medical necessity.

Pre-Existing Condition

A health condition that existed before your insurance coverage began. Under the ACA, insurers cannot deny coverage or charge more for pre-existing conditions.

Explanation of Benefits (EOB)

A statement from your insurer showing what was covered for a medical claim, what the plan paid, and what you owe. It is not a bill.

Waiting Period

The time between enrollment and when coverage begins, ranging from immediate to 90 days depending on the plan.

Tax-Advantaged Accounts

HSA (Health Savings Account)

A tax-advantaged account for individuals enrolled in a High Deductible Health Plan. Contributions are tax-deductible, growth is tax-free, and qualified medical withdrawals are tax-free.

FSA (Flexible Spending Account)

An employer-sponsored pre-tax account for qualified medical expenses. Funds are typically forfeited if not used within the plan year.

Employee Benefits

Section 125 Cafeteria Plan

An IRS-approved benefit program under Section 125 of the Internal Revenue Code. Allows employees to pay for qualified benefits with pre-tax dollars, reducing FICA taxes for both employer and employee. FICA savings of approximately $91.81 per employee per month can fund healthcare at zero net employer cost.

Employer Contribution

The portion of health insurance premiums paid by the employer on behalf of employees, ranging from 0% to 100% of the total premium.

Employee Contribution

The employee-paid share of health insurance premiums, deducted from payroll. Under Section 125, these deductions are pre-tax.

Wellness Program

Employer-sponsored programs promoting employee health through screenings, fitness initiatives, mental health support, and health education.

Taxes

FICA Tax

Federal Insurance Contributions Act tax. Employers and employees each pay 7.65% (Social Security 6.2% + Medicare 1.45%) on taxable wages. Section 125 plans reduce taxable wages and therefore reduce FICA for both parties.

Pre-Tax Deduction

A payroll deduction taken before federal taxes are calculated, reducing taxable income. Section 125 benefit elections are a common form of pre-tax deduction.

Plan Types

PPO (Preferred Provider Organization)

A health plan offering flexibility to see in-network and out-of-network providers without a referral. Out-of-network care costs more.

HMO (Health Maintenance Organization)

A health plan requiring a primary care physician and referrals for specialists. Generally lower premiums and out-of-pocket costs but less provider flexibility.

HDHP (High Deductible Health Plan)

A health plan with higher deductibles and lower premiums that qualifies account holders for an HSA. Minimum deductibles are set annually by the IRS.

Financial Assistance

Tax Credits

Government subsidies that reduce the cost of Marketplace health insurance premiums, available to individuals and families who meet ACA income requirements.

Subsidy

Financial assistance from the federal or state government to help pay for health insurance premiums, based on income and household size.

Healthcare Services

Telemedicine

Remote healthcare services delivered by video, phone, or secure messaging. Often faster and more affordable than in-person visits for routine consultations and follow-ups.

Prescription Drugs

Formulary

The list of prescription drugs covered by an insurance plan, typically organized into tiers that determine copay amounts.

Compliance

MEC (Minimum Essential Coverage)

Health coverage that meets the ACA's minimum requirements for qualifying health insurance, preventing applicable penalty exposure.

Alternative Coverage

HealthShare

A membership-based program where members share eligible medical costs. Not traditional insurance, but can supplement or replace coverage for major medical expenses. Typically $125 to $200 per month.

WoW Health Plans

Affordable membership-based healthcare for businesses with 1 to 4 employees, sole proprietors, and subcontractors providing comprehensive benefits at low monthly rates.