Health Insurance Explained: Basic Definitions

It has come to my attention recently that most people do not understand their own health insurance. I honestly don’t blame you. Insurance is tricky stuff. It took me a long time and a lot of working with it to understand it. The focus of this blog is to run through some definitions with you and help you to start understanding your health insurance. Have more questions after reading this? No worries! There are more blogs to come as well as an e-newsletter and a mailer on insurance. Want to get on our e-newsletter list or our newsletter mailing list? Just email us at Want us to check your benefits for physical therapy to see how your insurance works? Call us today at 414-727-3345 or email us at Alright. Let’s get started!

Definitions to know:

Co-payment (Copay):

  • The flat predetermined amount that you pay at the time of a medical service or at the time you receive medication. These copay amounts vary from plan to plan and insurance to insurance but are usually printed right on your insurance card, making them easy to determine. Insurance companies use copays to help share costs with you. In part, copays are also used to prevent people from seeking medical attention for every little thing. For example, if you have a $40 copay, you are not going to be as likely to go to the doctor for a mild cold than if no copay existed.


  • The fixed amount of money that you have to pay to your insurance company before your benefits begin. The deductible is calculated yearly so if your insurance policy begins January 1st, the deductible will apply until Jan 1st of the next year when it will start over.

Monthly Premium:

  • The amount that you pay per month to be covered by an insurance company. If you get health insurance through the company you work for, the monthly premium is usually paid by the employer. Typically, if the deductible is high the monthly premium is low and vice versa.


  • Also called percentage participation and basically translates into you and your health company sharing in the risk. Once the deductible has been met, your insurance company pays a percentage of the bills and you pay the remaining percentage. These percentages are predetermined and based on your policy. For example, the insurance company may pay 80% of your healthcare bills and then you would be billed for the remaining 20%.

Out of Pocket Maximum:

  • The maximum amount of money you will have to pay the insurance company before they will just cover everything at 100%. This out of pocket max is a combination of your deductible and coinsurance payments. With most insurance companies, you will still have to pay your co-pay even after you have reached your out-of-pocket maximum, although this is not true for all plans.

In Network:

  • An in-network provider is one that is contracted with your insurance company for a certain rate. Basically this just means that there is a discounted price for the services that is agreed upon up front. For example, a physical therapy clinic might charge $200 for a visit but have a contracted rate with an insurance company for $120. This means that the physical therapy clinic will be writing off $80 to provide a discount to people with that type of insurance.


  • An out-of-network provider is one that does not have a negotiated reimbursement rate with your insurance company but this does not mean that you cannot see a provider who is not in network. Many insurance companies have out of network benefits. These benefits range greatly depending on the insurance policy. Sometimes they are almost as good as the in-network benefits and sometimes they are virtually non-existent. As I said, this is dependent on the plan and is always worth checking out! It is important to know both your in and out of network benefits so that you can always make the best decision for your healthcare.


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