Editor’s note: This story is part of a series of articles designed to help employees better understand and navigate their benefits.
UNIVERSITY PARK, PA. – What's the difference between a deductible and an out-of-pocket maximum? What's an HSA versus an FSA? Understanding what these and other health care-related terms can help employees be smarter consumers of health care and make informed choices.
Ahead of Benefits Open Enrollment at Penn State, Penn State Human Resources is providing resources to help employees pick the plan that best suits their needs. The following overview of health insurance terminology aims to assist in understanding available options and deciding on the best plan for each individual or family.
Costs & payments
At Penn State, the University and employees share the cost for health care coverage, with Penn State paying 75% and employees paying 25%. Employees are responsible for covering at least a portion of the cost of their health care each year. But what they’re expected to cover, as well as how much of the total cost, can vary based on a plan’s specifications.
Terms used to determine those costs are outlined below.
- Premium Contribution: The amount the employee must pay to have a health care plan, deducted from each paycheck.
- Copay: A fixed amount that a plan holder is responsible for paying for a particular service at the time of the appointment or procedure. The copay can differ depending on the service; a primary care doctor visit may be different from a specialist visit, but all emergency room visits will have the same copay. Penn State’s Lion Traditional plan has copays as part of the plan design.
- Deductible: Each year, enrolled employees pay the discounted cost of their health care when using in-network providers until their deductible is reached. If a plan has a deductible of $1,000, the plan holder would need to spend that amount on health care before the plan would begin covering a portion of the cost.
- Coinsurance: After the deductible is reached, a health care plan will begin to cover a portion of the cost for eligible health care. For Penn State employees, the health plan covers 90% of all in-network care after the deductible is reached. Employees pay 10% for most services until reaching the applicable out-of-pocket maximum.
- Out-of-pocket maximum: The out-of-pocket maximum includes deductible and coinsurance and is the most a plan holder will pay for certain health care expenses in a calendar year. Once a plan holder reaches their out-of-pocket maximum, expenses are covered by Penn State at 100% for the remainder of the benefit year.
- Health Savings Account (HSA): Pre-tax funds can be contributed to an HSA account to cover eligible health care costs. These funds roll over from year-to-year and can be used even after leaving Penn State. An HSA is available under the Lion Advantage HSA plan.
- Flexible Savings Account (FSA): Tax-free contributions are added to an FSA to be used within the plan year for eligible health care expenses. The health care FSA is available as part of the Lion Traditional Plan, or if neither Penn State health plan is selected. The dependent care FSA is available to all full-time benefits-eligible employees regardless of health plan enrollment.
Providers & partners
Health insurance companies operate within a network of health care providers. Choosing a provider or medical service may change the cost of the treatment for an individual, depending on the network participation with the insurance company.
The terms below can assist in determining the best options for treatment and provider.
- In-network: The facilities, care providers and suppliers an insurance company has a contract with to provide health care services.
- Out-of-network: Health care services conducted by providers, suppliers or facilities not in a contract with a health care company. Penn State health plan members can still choose to visit out-of-network providers for health care.
- Self-insured: Penn State is self-insured, meaning the University and its employees together assume the risk and cover the full cost of employee health insurance, rather than paying a premium for an external firm to assume the risk for provided health care. Penn State remains committed to covering 75% of health care costs, with employees sharing the remaining 25%.
- Formulary: Prescriptions and drugs covered by a health care plan. Typically, a formulary will have “tiers” that are preferred or non-preferred medications that will then dictate the cost share. Preferred drugs cost less than non-preferred drugs.
Care & services
The term “health care” refers to a variety of services, ranging from hospital visits to routine dental and vision exams. These varying levels of care are covered differently within an insurance plan. When making an appointment or visit, the following terms can help to decide the best path forward.
- Preventive care: Routine health care services, such as screenings, check-ups and counseling, to prevent illness or other health concerns.
- Diagnostic care: Non-routine health care services to diagnose and treat illness or other health concerns.
- Urgent care: Care for an illness, injury or condition serious enough to require care right away, but not classified as an emergency.
- Emergency care: Services to check for an emergency medical condition, or to keep an emergency condition from worsening.
- Prior authorization or preauthorization: A service, treatment or other health care that an insurance company requires approval for before the service is provided, such as admission to a hospital.
Penn State's Benefits Open Enrollment for 2026 will run from Nov. 3 through Nov. 14 at 5 p.m. Employees are encouraged to review the online 2026 Benefits Open Enrollment details and attend a 2026 Benefits Open Enrollment webinar.
Penn State offers a variety of additional programs and services to support employees’ health and well-being. A full listing of employee health and wellness resources can be found on the Penn State Human Resources website.