Decoding Health Insurance Jargon: A Beginner’s Glossary

While health insurance ownership has grown notably, from 29% in 2015–16 to 41% in 2020–21 (NFHS-5), a significant portion of the population still remains uncovered, highlighting the need for greater awareness and understanding of policy terms. Understanding the health insurance terms explained can often feel overwhelming.

Terms like deductible, co-pay, or pre-authorisation may appear unfamiliar and confusing. However, once these terms are clearly understood, navigating your health insurance policy becomes significantly easier. This glossary provides simple explanations for commonly used insurance terms to help you make informed decisions.

Health Insurance Terms You Must Know

Health insurance terms sound more complicated than they are. This glossary clears up the most common terms you’ll come across. Let's explore!

1. Co-pay

A co-payment refers to a fixed amount that a policyholder is required to pay for specific medical services, such as doctor consultations, diagnostic tests, or emergency visits. This amount remains constant, as stated in the policy, regardless of the overall cost of treatment.

Example: If your health insurance plan specifies a co-pay of ₹500 for outpatient consultations, you will pay ₹500 each time you visit a doctor, and the insurer will cover the remaining amount.

Also, the co-pay keeps things predictable. That's because you will know exactly how much you're going to pay when you book that appointment.

Why it matters: Co-pays are low for basic consultations but may be higher for specialists or emergency visits. If you’re someone who goes to the doctor frequently, add up your total yearly co-pays.

2. Deductible

A deductible is the amount you have to pay from your own pocket every year before your health insurance starts covering your bills. Some services, like preventive check-ups or vaccinations, may not count toward your deductible. They might be covered from the get-go. So, it’s always worth checking your policy’s list of inclusions. Deductible vs Co-pay: A deductible is what you pay before insurance starts helping. A co-pay happens each time you use a covered service. They can both apply to the same policy. This means you might first meet your deductible and then still pay a co-pay for future visits.

3. Sub-limits

Sub-limits are small print rules within your larger insurance cover. Even if your policy covers ₹5 lakh, a sub-limit may apply to hospital room rent, certain surgeries, or consultations.

Example: If your policy has a room rent sub-limit of INR 4,000 per day, and you choose an INR 6,000 room, you'll have to pay the INR 2,000 difference from your own pocket. Plus, some insurers may scale down other benefits, too, such as doctor charges and surgery costs.

Sub-limits are most common in policies with lower premiums. They keep the insurance cost down if you’re unaware of the restrictions. Here are a few areas where sub-limits often apply:

• ICU Charges: May be capped separately.
• Room Rent: Daily maximum allowed (INR 3,000 - INR 5,000 is typical).
• Maternity Cover: Comes with limits per delivery (e.g., INR 50,000).
• Cataract Surgery: Often capped at INR 20,000 - INR 30,000 per eye.
• Doctor’s Visit: Sometimes capped per consultation.

4. Out-of-Pocket Maximum (OOPM)

The Out-of-Pocket Maximum (OOPM) is the ceiling on how much you’ll pay from your own money for medical expenses in a year. Once you get this number, your insurance covers 100% of the allowed expenses.

Let’s break this down clearly.

Your out-of-pocket costs can include:

• Deductibles
• Co-pays
• Co-insurance (your share of a bill after the deductible is met)

Example: Say your policy has an OOPM of INR 1 lakh. You first pay an INR 10,000 deductible. Then, for every bill, you pay 20% as co-insurance. Once your share adds up to INR 1 lakh during the year, the insurer pays the rest of your expenses at 100%.

This feature is most helpful for families dealing with ongoing treatments, surgeries, or chronic conditions. It stops you from draining your savings in case of prolonged illness or multiple admissions in a year. Not every Indian policy has a clear OOPM, but it’s starting to show up in more premium policies.

5. Premium

Your premium is the fixed amount you can pay every month, quarter, or year to keep your health insurance policy running. You pay it whether you use the policy or not, just to keep the coverage available.

Premiums are based on a mix of factors:

• Your age: Younger people usually pay less.
• Coverage amount (sum insured): The more cover you want, the higher the premium.
• Type of policy: Individual plans cost less than family floaters, covering multiple people.
• Medical history: Pre-existing health conditions may raise the price.

A low premium comes with restrictions like sub-limits, fewer hospitals in the network, or higher deductibles. On the other hand, a higher premium gives you broader benefits and fewer out-of-pocket expenses.

6. Preferred Provider Organisation (PPO)

A Preferred Provider Organisation (PPO) is a type of health insurance arrangement where the insurer ties up with a list of hospitals, clinics, and doctors. These are called network providers. If you use them, your claim process is quicker, and the insurer settles most bills directly with the hospital.

Cashless treatment: You don’t have to pay upfront and wait for a refund. Just show your insurance card, and the hospital and insurer handle the billing.

Lower costs: PPO hospitals agree to pre-negotiated rates with your insurer. This means lower charges for tests, treatments, and rooms.

Better service turnaround: Network hospitals are familiar with the claim process and are more responsive during admission and discharge.

But if you go outside the PPO network, you might have to pay first and then file for reimbursement. And your claim could be reduced if the hospital charges are higher than what the insurer allows.

Before picking a policy, check the PPO list. See if your preferred hospitals are included. It’s even more important in smaller towns or when you have a preferred specialist in mind. A good PPO network can save you time, money, and a lot of stress during emergencies.

7. Pre-Hospitalisation

When we talk about health insurance terms, this one often gets skipped over. Pre-hospitalisation refers to the medical expenses you incur before you get admitted to the hospital.

Here’s how it will work:

Let’s say you start feeling unwell and visit a doctor. They prescribe tests, scans, or specialist consultations. A few days later, they recommend you get admitted for surgery. The pre-hospitalisation phase covers those doctor visits, diagnostics, and medications that lead up to the actual admission. Most insurance plans cover this window for 30 to 60 days before your hospital stay.

Here’s why it’s important:

• Big illnesses often need a lot of investigation before you're even admitted.
• If you don’t have this cover, those bills are on you.