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How to Read Health Insurance Policies

A brief overview...
  • Health insurance policies are written in legal language
  • It’s your responsibility to understand your policy
  • Contacting an agent is the best way to get clarification on a policy

The most effective way to use your health insurance is to understand it. The Affordable Care Act (ACA) has worked to simplify the health care system, but understanding your policy is still difficult, especially when you don’t understand the lingo. To help you get the most out of your insurance, we’ve described several ways to help you understand your health insurance policy.

Still need coverage? Learn about basic health insurance terms in this article, then enter your zip code above to put your newfound knowledge to good use by comparing free quotes!

Common Health Insurance Terms and their Meanings


Health insurance is written in legal language, which can make the policy hard to understand. Below, we’ve gathered definitions for the most common health insurance policy terms.

  • Premium — The amount you or your employer pays for health insurance coverage monthly.
  • Deductible — The amount of medical costs you will pay before your insurance will kick in.
  • Coinsurance – Percentage of medical costs you are responsible for after insurance pays.
  • Copay – The dollar amount you are required to pay for doctor’s offices, prescriptions, urgent care, and emergency room visits. It usually is due at the time of service.
  • Maximum Out-of-Pocket ExpenseOut-of-pocket expenses have a cap with most insurance companies. When you use an in-network physician or facility, you will not be responsible for more than the maximum out-of-pocket expense allowed by your policy. Premiums and expenses not covered by your plan do not count towards your out-of-pocket maximum.
  • Covered Person Any eligible person who can receive benefits on your health insurance plan.
  • Explanation of Benefits — The Explanation of Benefits (EOB) confuses some people because it looks like a bill. Instead, it’s a statement of benefits used. It usually arrives via email or USPS. It is designed to explain what actions the insurer took on your recent health insurance claim.
  • Pre-Authorization — A decision your health insurance makes to approve a service, treatment plan, prescription medication, or medical equipment. Pre-authorization isn’t always required, but if it is needed, benefits will not be received unless a pre-authorization was in place before services were rendered.
  • Preventive Services — Under the Affordable Care Act, many preventive services must be offered for free. Examples of preventive services are vaccines, screening tests, diabetes screening test, mammograms, and cancer screening tests.

Understanding Different Health Insurance Plans


Many health insurance plans have three letter acronyms associated with them. It’s important to understand these acronyms because it depends on what type of services you can expect. Below are the most common types of health insurance plans.


The Exclusive Provider Organization includes a narrowed network plan of providers. No referrals are required in this plan, if you see a network provider. No benefits will be issued when a non-network doctor or facility is accessed.


A Health Management Organization plan is similar to an EPO. However, with this type of plan, you must choose a primary care physician (PCP). Your PCP must be your first point of contact for all medical services.


The Preferred Provider Organization uses a network of healthcare providers. Members can use this network or stray outside the network without a referral.


Point of Service plans are like an HMO. Members must choose a PCP in the carrier’s network of providers.

Read Your Summary Plan Description Page


If all this information is confusing. You need to find your carrier’s Summary Plan Description (SPD). The SPD is a declarations page with a high-level overview of your plan. It also contains information on how to find out more about your plan. The most important information on your SPD is:

  • Plan Name
  • Plan Numbers
  • Plan Type
  • Benefit Information
  • Effective Dates
  • Health Insurance Advice

Understanding the terms above will help you understand your insurance better. If you have any questions about coverage, it’s important to contact an agent or insurer for clarification.

Keep a Summary of Benefits Nearby

When you receive the paperwork for your new insurance policy, it’s important not to tuck the papers away and never read them. You need to read the documents and understand them. Keep all health insurance documents in a designated folder with your other important files; this way, you’ll always be able to refer to them for clarification as well as any future health insurance claims and for tax purposes.

Be Prepared by Shopping for Health Insurance Early


People with health insurance are not allowed to change carriers anytime they please. However, during open enrollment periods, families or individuals can change policies as necessary. Since there is only a short open enrollment period, it’s vital that you shop for health insurance all long; especially if your policy doesn’t match your needs.

Start shopping now so you’re ready when open enrollment rolls back around; enter your zip code below to get free private individual and family health insurance quotes today!

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