Health Insurance Basics: Understanding Costs, Terms, and Benefits
May 2, 2014
Modified March 24, 2026
Have you ever felt like your health insurance policy was written in another language? Healthcare and health insurance don’t have to be confusing or intimidating. With over 8 million people getting brand new health insurance policies, this is a great time to review some of the vocabulary and jargon people come across when dealing with healthcare. Today, we break down a few common terms to help you manage your healthcare with more confidence.
Why Make Health Insurance a Priority?
It probably feels like health insurance is low on your list of needs right now, but preventive medicine helps young college grads keep from becoming chronic disease statistics. Despite efforts to curtail the escalation of health care costs for millennials, something unexpected like a broken leg can end up costing thousands of dollars without the right insurance policy.
The Affordable Care Act has also changed the health care landscape for Americans. You may find yourself paying a penalty if you don’t make health insurance a priority.
Getting the Lingo Right
Like most industries, there are key terms you’ll want to learn regarding health insurance.
Key Health Insurance Terms to Know
Coinsurance
This amount represents a percentage of a covered healthcare service that you are responsible for paying. Your health insurance pays the remainder. This is separate from any deductibles that you owe. Here’s an example: If the contracted rate for a visit to your medical provider is $100 and your coinsurance rate is 20 percent, you would owe $20. In some cases, if your provider charges more than your insurance is willing to pay, you may responsible for the difference.
Copayment
This amount is based on a fixed rate that you pay for certain healthcare services and is usually due at the time of service. Your health insurance provider along with your employer sets copayment rates. The amount may vary based on the type of service and whether or not the medical provider is in network or out of network.
Deductible
This amount is what you must pay out of pocket for healthcare services before your health insurance starts to pay for any expenses.
Stay tuned for more healthcare and insurance tips from CareSpot!
Premiums
The amount you must pay towards your health insurance, regardless how often you use it. An employer may pay the full amount or may pay part of it with you responsible for the rest of the premium. This is typically a monthly cost.
For example, what is “out-of-pocket expense?” This refers to the maximum you pay towards your annual health care. Even if your hospital bill is $40,000, if your policy carries an out-of-pocket limit of $5,000, that’s all you pay.
Health Savings Account (HSA)
A tax-advantage plan that helps cover the cost of high deductibles by allowing you to contribute “pre-tax” dollars. Employers may contribute to an employee HSA plans as well. An HSA is only available when offered in conjunction with a high-deductible insurance plan.
A Guide to Healthcare: Asking the Right Questions
As a millennial, asking smart questions helps you investigate the health offerings of an employer.
Do you choose a plan or does the employer pick it?
Some employers have a menu system for insurance that helps you to pick the policy that best fits your life.
What is your cost?
This includes the premium; copay, coinsurance, deductible and out-of-pocket expense. Ask the employers to break the total costs down for you, so you understand the full spectrum of your financial responsibility.
Is there a health savings account?
A health savings account is an attractive benefit, because you can make pre-tax contributions that go towards future medical problems along with potential contributions from your employer. The downside is that an HSA is only available for use with a high deductible plan — but if you are generally healthy, it might be worth it.
Can you keep your current medical provider?
You may feel more comfortable continuing with the same practitioner.
Health insurance benefits are part of the package employers use to attract the best talent. Exploring the health insurance options is a strategic approach to job hunting, one that offers the brightest future for new grads.