Understanding Health Insurance Terminology: What People With Cancer Need to Know
It is important to understand how health insurance works. If you have never managed a long-term, complex illness with your insurance, there may be terms you don't understand. Take time to learn about your insurance policy, what it covers, and what it doesn't.
Understanding health insurance terminology
What is fee-for-service health insurance?
This is a private health insurance plan. Healthcare providers are paid a fee for each service they provide to the patient. With these plans, you can go to any provider willing to see you. You will pay a portion of the costs, and insurance will pay the rest.
What are Managed Care Programs?
With these plans, health care providers contract with an insurance company to be part of their network. If you go to a provider in the network, the provider has agreed to a payment rate for treating you. This is the allowed amount. The allowed amount will determine your financial responsibility. Refer to your plan to determine the portion.
What are common types of Managed Care Plans?
Health Maintenance Organization (HMO): This plan requires a referral from your doctor in most situations. It does not require a referral in an emergency. HMOs have a smaller network of providers. Providers outside of your network will not be covered. Though you may have fewer provider choices, HMOs are often less expensive.
Exclusive Provider Organization (EPO): EPOs have a larger provider network than HMOs, but they still will not pay for service outside of their network. You also do not have to go through your primary care physician to get treatment.
Preferred Provider Organizations (PPO): PPOs have the largest network of providers. Like EPOs, you do not have to start with your primary care physician to get treatment from another doctor such as a specialist. But they still have a network and most PPOs have some out-of-network providers. Staying in your large network will still offer lower out-of-pocket costs. Generally PPOs may cost more than HMOs but you have more provider choices and more control. This is important if you have multiple specialists.
HEALTH INSURANCE TIP: When choosing a plan, don't just consider premium costs. Make sure your providers will be covered.
What is a premium?
This is what you pay to the insurance carrier monthly to have coverage. This is paid even if you don't use your insurance.
What are out-of-pocket costs?
This is what you pay based on your specific plan when you receive medical care.
What is an annual deductible?
This is what you must pay each calendar year before your health insurance pays for anything.
What is a co-payment?
This is a fixed dollar amount you pay when you get medical care, such as a doctor's visit. You pay your co-payment, also called a copay, at the time you receive care.
What is coinsurance or cost-share?
This is the percentage that your insurance will pay and your financial responsiblity. For example, an 80/20 plan means your insurance will pay for 80% of the medical expenses and you will pay 20%.
What are out-of-pocket maximums?
This is a fixed dollar amount that is the most you will have to pay out of pocket during the calendar year. This amount varies by plan. Generally, the out-of-pocket encompasses your deductible and any copayments. It includes everything except your insurance premiums.
Once your out-of-pocket max is met, insurance will pay 100% for the rest of the year. Generally out-of-network visits won't apply to maximums. Some employer plans may have specific benefits that are "carved out" from the plan. These carve-outs can impact what your costs are.
Understanding prescription costs
What is a generic/biosimilar?
A prescription drug that contains the same chemical substance as the brand-name drug for the same treatment. On average, biosimilars are 50% cheaper than the brand-name version.
What are specialty drugs?
These drugs have a higher cost, high complexity, and/or require a high touch. Many cancer drugs are considered specialty drugs.
What is a formulary?
A formulary is a list of prescription drugs that a health plan will cover and for how much. This will vary between plans. Using a plan's formulary will help you save money on medications. There are several levels or tiers in the plans. The higher the tier, the higher the out-of-pocket costs. Drugs that are a higher tier are considered specialty drugs. The copayment and coinsurance amounts will depend on the tier of the prescription drug you are taking.
What is prior authorization?
Prior authorization is when your health insurance requires advance approval for some services. If your plan requires prior authorization, you will need this approval to get some treatments covered.
What is step-therapy?
Step-therapy is generally required in the prior authorization process. This is when an insurance company requires patients to try a generic or lower-cost drug before getting a brand-name or more expensive drug. If the lower-cost drug doesn't work or causes a bad reaction, the patient would be allowed to "step up" to another medication.
What is the Patient Protection and Affordable Care Act?
Often known as Obamacare or the ACA, the Patient Protection and Affordable Care Act was passed in 2010. It helps make affordable health insurance available to more people. Through the ACA, households with incomes between 100% and 400% of the federal poverty level can get subsidies to help afford insurance. Through the ACA, some states expanded their Medicaid program to cover all adults with income below 138% of the federal poverty level.
What is the Health Insurance Marketplace?
As part of the ACA, you can find health insurance plans through the Health Insurance Marketplace. These are provided by private insurance companies but the marketplace is managed by the federal government at Healthcare.gov. Some states run their own marketplaces. Find out where to access your marketplace at healthcare.gov.
Frequently Asked Questions: Health Insurance Plans
What should I consider when choosing a health insurance plan?
It is important to consider:
What is your actual cost?
Are your current healthcare providers and facilities included in the plans network?
Does the plan cover your prescription drugs and the pharmacies you use?
What are my health insurance options?
Your health insurance options will depend on where you live, your age, your employment or work history, marriage status, your income level, and other factors.
How often should I review my insurance options?
You should review your plan yearly to make sure it still fits your needs.
What are the benefits to a marketplace insurance plan?
There are several benefits to a marketplace insurance plan:
You have an out-of-pocket maximum cap that is often lower than some employer plans. They must include everything you spend for deductibles, copayments, and coinsurance for in-network providers.
Standardized plans based on their level of cost sharing:
Bronze plans: Have a 60/40 cost-share and generally have a lower monthly premium but higher out-of-pocket costs.
Silver plans: Have a 70/30 cost-share.
Gold plans: Have a 80/20 cost-share.
Platinum plans: Have a 90/10 cost-share with higher monthly premiums but lower out of pocket costs.
What is the open enrollment period for the marketplace?
The open enrollment period takes place from November 1st to December 15th for plans that begin the following January 1st. States that have their own marketplace may have open enrollment periods that last longer.
How does my income affect the cost of my marketplace insurance plan?
Financial assistance for marketplace insurance plans is based on income level. You may qualify for premium tax credits if you have a low income. Most financial assistance was terminated in December 2025. These limited cost-sharing subsidies can lower copayment amounts, deductibles, and coinsurance amounts.
What happens if I have other insurance but lose my coverage after the enrollment period?
If you have a life-changing event, you may qualify to enroll during a special enrollment period which is 60 days from the onset of the event.
What is a qualifying life-changing event?
Life-changing events include:
End of COBRA, which is temporary insurance coverage that is available to you if you lose your job
Loss of eligibility for Medicaid, Medicare, or Children's Health Insurance Program (CHIP)
Loss of coverage through a family member
Change in residence
Move to or from school
Marriage (you must choose a plan within 60 days of the event and coverage will start the first day of the next month)
Birth or adoption of a child or placement of child in foster care
Divorce or legal separation
Death of someone on your marketplace plan
What options do you have if you lose employer-sponsored coverage?
You can apply for COBRA, apply for a Marketplace plan, or go on your spouse's employer plan.