How Health Insurance Works

It’s important to understand the terms used by the health insurance industry– words like, “co-pay,” “co-insurance” and “deductible.” Knowing these can help you choose the right plan and understand how to use your insurance.

Learn common insurance terms by watching our video, Meet Jack: An Intro to Health Insurance Terminology

Here are definitions of the terms featured in the video:

Preventive care: Routine healthcare that detects, or helps prevent, illness (e.g. annual check-ups, immunizations). All qualified health plans must provide free preventive care.

In-network clinic:
A clinic where your health insurance works best.

Prescription: A small note, written by a doctor, that gives you permission to buy a medication.

Formulary: A list of prescription drugs that your insurance will help pay for.

Co-pay: A fixed amount that you pay for a healthcare service at the time of that service (e.g. for a doctor’s visit or a prescription).

Deductible: An amount you must pay, each year, for your healthcare before your insurance starts helping you pay for these costs when you’re sick and injured.

Co-insurance: How you and your health insurance company share your healthcare costs (once you’ve paid your deductible).

To learn more, please visit or click here for a glossary of more insurance terms. If you’d like help understanding these terms, or how your particular health insurance plan works, you may contact your insurance provider (check for a phone number on your membership ID Card) or health insurance broker.

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