Understanding essential health insurance terminology is crucial during the open enrollment period. Below, we define some of the most important terms you need to know to make informed decisions about the health plan that best meets your needs.

1. Open enrollment period

The time of year when you can sign up for health insurance or make changes to your existing plan. Knowing the dates of the open enrollment period is crucial because it is the only time you can enroll in or change your health insurance plan without a qualifying life event (like getting married, having a baby, or losing other health coverage). At Cigna Healthcare, plans that are effective on January 1 have an open enrollment period from November 1-December 15 of the year before, in most states.

2. Premium

Your premium is the amount you pay to your insurance company to keep your health insurance policy active. It's usually paid monthly, quarterly, or annually. Knowing your premium helps you budget for the year and compare different plans to find one that fits your financial situation.

3. Deductible

The deductible is the amount you must pay out-of-pocket for covered health care services before your insurance plan starts to pay. For example, if your deductible is $2,000, you'll need to pay that amount before your insurance kicks in. Understanding the deductible is crucial because it affects your out-of-pocket costs and helps you determine how much you need to pay before your insurance starts covering costs.

4. Copayment (Copay)

A copayment is a fixed amount you pay for a covered health care service, usually when you receive the service. For instance, you might pay $20 for a doctor's visit. Knowing the copay amounts helps you estimate your costs for doctor visits and other services, aiding in the selection of a plan that suits your needs.

5. Coinsurance

Coinsurance is the percentage of the cost of a covered health care service that you pay after you've met your deductible. For example, if your coinsurance is 20%, you pay 20% of the cost, and your insurance pays 80%. Understanding coinsurance is important because it affects how much you will pay out of pocket for services once you’ve met your deductible, as this varies by plan.

6. Out-of-pocket maximum

Your out-of-pocket maximum is the most you will have to pay for covered services in a plan year. Once you reach this limit, your insurance will cover 100% of the costs for the rest of the year. Knowing this limit helps you plan for the worst-case scenario and protects you from excessive medical expenses.

7. Network

A network is a group of health care providers (doctors, hospitals, etc.) that have agreed to provide services to your insurance plan’s members at a discounted rate. Understanding which providers are in-network ensures you receive the highest level of coverage and minimizes out-of-pocket costs.

8. Formulary

A formulary is a list of prescription drugs that are covered by your insurance plan. It often includes information about cost-sharing for each drug. If you take medications, definitely check out the health plan’s formulary to confirm that your medications are covered before selecting a plan.

9. Health maintenance organization (HMO)

An HMO is a type of health insurance plan that usually limits coverage to care from doctors who work for or contract with the HMO. It won’t cover out-of-network care except in an emergency. When choosing a plan make sure you understand HMO restrictions such as the limited provider network and referral requirements.

10. Preferred provider organization (PPO)

A PPO is a type of health plan that contracts with medical providers, such as hospitals and doctors, to create a network of participating providers. You pay less if you use providers that belong to the plan’s network. Understanding the flexibility of a PPO plan can help you decide if the higher premiums are worth the ability to see out-of-network providers.

11. Explanation of benefits (EOB)

An EOB is a statement from your health insurance company explaining what costs it will cover for medical care or products you’ve received, how much money you saved by visiting in-network providers, and any out-of-pocket medical expenses you will be responsible for. Understanding EOBs helps you review and verify charges and coverage details, ensuring that you are not overcharged and that your benefits are applied correctly.

12. Health savings account (HSA)

An HSA is a special savings account that lets you set aside money – tax free – to pay for medical expenses like doctor visits, prescriptions, and even dental or vision care. It’s only available if you’re enrolled in a high-deductible health plan, and the money you don’t use rolls over year to year. During open enrollment, it’s important to understand HSAs because choosing a plan that qualifies could help you save significantly on health costs now and in the future, especially if your employer contributes to your HSA or offers wellness incentives.

13. Health reimbursement account (HRA)

An HRA is a type of benefit that your employer funds to help you pay for certain medical expenses. You don’t put money into it — your company does. Think of it as a pool of money set aside just for you to use on things like:

• Doctor visit copays
• Prescription medications
• Dental or vision care
• Deductibles and other out-of-pocket costs

It’s tax-free and can make a real difference in how much you spend on health care. Just remember: If you leave your job, you usually lose access to the funds, since the account is owned by your employer.

14. Flexible spending account (FSA)

An FSA lets you set aside pre-tax money from your paycheck to pay for eligible health care expenses. There are three types of FSAs: 

Remember that you need to actively enroll and estimate how much to contribute to an FSA since unused funds may expire at year’s end, so planning ahead helps you avoid losing money and manage out-of-pocket costs more effectively.