Open enrollment explained: the most important terms in plain language.

Open Enrollment (OE) is one of the most important times of the year. It’s when you can choose, change, or update your benefits for the upcoming year. But let’s be honest: benefits jargon can feel like another language.

To make things easier, we’ve pulled together a glossary of the most important terms you’ll see during OE. Whether you’re navigating benefits for the first time or just need a refresher, this guide will help you make confident, informed decisions. HR leaders: feel free to share this with your teams as a handy reference.

1. Enrollment & eligibility

Open enrollment (OE)

• What it means: The annual window when you can sign up for or make changes to your benefits. This often includes health insurance, dental and vision coverage, life and disability insurance, retirement plans like a 401(k), and other voluntary benefits your employer offers.
• Why it matters: If you miss OE, you usually have to wait until the next year unless you experience a qualifying life event.

Qualifying life event (QLE)

• What it means: A major life change (marriage, birth, loss of coverage, etc.) that lets you make benefits changes outside OE.
• Why it matters: Open Enrollment doesn’t always line up with the timeline of big life changes. That’s where QLEs come in: they give you the flexibility to adapt your benefits when your personal situation shifts, so you’re not locked into coverage that no longer fits your needs.

Evidence of insurability (EOI)

• What it means: Proof of health that’s sometimes required to qualify for certain types of coverage, such as supplemental life or disability insurance. This may involve completing a health questionnaire, sharing your medical history, or even undergoing a basic medical exam or lab work.
• Why it matters: Don’t wait until the last minute. EOI can require extra paperwork and approval, and delaying it may limit your coverage options.

Dependent coverage

• What it means: The option to extend your benefits, such as health, dental, and vision insurance, to eligible family members, typically including a spouse, domestic partner, or children.
• Why it matters: Covering dependents is one of the biggest financial decisions during open enrollment. Premiums usually rise by tier (employee-only, employee + spouse, employee + child(ren), or family), so it’s important to compare costs across options. In most cases, you can only add or change dependent coverage during open enrollment, unless you have a qualifying life event like marriage or the birth of a child.

2. Costs & payments

Premium

• What it means: The amount taken from your paycheck to keep your insurance coverage active. Premiums are usually deducted automatically each pay period.
• Why it matters: While premiums are the most predictable benefit cost, the amount you pay can vary based on several factors:
  • Which plan you choose: For example, a high-deductible plan often has lower premiums than a traditional PPO.
  • Coverage tier: Whether you enroll in employee-only, employee + spouse, employee + child(ren), or family coverage.

Understanding how premiums are structured helps you weigh the trade-offs between higher monthly costs and potential out-of-pocket savings when you use care.

Deductible

• What it means: The amount you pay for covered services before your insurance starts sharing costs. For example, with a $2,000 deductible, you’ll pay the first $2,000 out of pocket before coinsurance or other cost-sharing kicks in.
• Why it matters: Deductibles affect both your upfront costs and your monthly premium.
  • Low deductibles = higher premiums but quicker coverage when you need care.
  • High deductibles (HDHPs) = lower premiums but more out-of-pocket spending before insurance pays.
  • Copays: In many plans, you’ll pay a copay for office visits or prescriptions even if you haven’t met your deductible, but in HDHPs, you often pay the full cost until you reach it.
  • Plan ahead: If you expect significant medical expenses (like having a baby or surgery), a lower deductible may save money overall; if you expect minimal care, an HDHP could be more cost-effective.

Copay

• What it means: A flat fee you pay for certain services, such as a doctor’s visit or a prescription drug. Copays are due at the time of service and are separate from your deductible.
• Why it matters: Copays make routine care costs predictable, but how they interact with your deductible depends on your plan:
  • In many traditional plans, you pay the copay whether or not you’ve met your deductible, and that cost usually doesn’t count toward the deductible.
  • In a high-deductible health plan (HDHP), you often pay the full cost of care until you meet your deductible, after which copays or coinsurance apply.

Knowing when a copay applies (and whether it counts toward your deductible) helps you budget more accurately for care.

Coinsurance

• What it means: The percentage of costs you’re responsible for after you’ve met your deductible. Unlike a copay, which is a flat fee (e.g., $25 for a doctor visit), coinsurance is a percentage of the total bill. For example, if your plan has 20% coinsurance, you’ll pay 20% of the bill and your insurance will cover the other 80%.
• Why it matters: Coinsurance is where costs can really add up, especially for expensive services like hospital stays, imaging, or surgeries. If you’re comparing plans, pay attention not just to the deductible but also to the coinsurance rate—this will affect your total costs if you need significant care.

Out-of-pocket maximum (OOPM)

• What it means: The most you’ll pay in a plan year for covered services. Once you hit this amount through deductibles, copays, and coinsurance, your insurance covers 100% of eligible costs for the rest of the year. (Premiums don’t count toward this total.)
• Why it matters: The OOPM is your financial safety net, capping how much you’ll ever have to pay out of pocket. This becomes especially important if you know you’ll need major medical care—for example, a surgery, hospital stay, pregnancy, or ongoing treatment for a chronic condition. In these cases, you’re more likely to hit the maximum, so choosing a plan with a lower OOPM could save you thousands over the year.

3. Plans & coverage

In-network vs. out-of-network

• What it means: In-network providers have contracts with your insurance company to offer care at lower, negotiated rates. Out-of-network providers don’t have these agreements, which usually means higher costs or, in some cases, no coverage at all.
• Why it matters: Choosing in-network providers is one of the easiest ways to keep your healthcare costs predictable and affordable. This is also an important part of electing coverage during open enrollment: if seeing a specific doctor, hospital, or clinic is a top priority for you, make sure they’re included in your plan’s network before you enroll.

High deductible health plan (HDHP)

• What it means: A type of health insurance plan with lower monthly premiums but higher deductibles than traditional plans. By definition, an HDHP must meet certain IRS thresholds for the deductible and out-of-pocket maximum. HDHPs are also the only plans that qualify you to open and contribute to a Health Savings Account (HSA).
• Why it matters: An HDHP can be cost-effective if you’re generally healthy and don’t expect frequent medical care, since you’ll pay less each month in premiums. However, if you need care, especially early in the year, you’ll pay more out of pocket before your insurance starts sharing costs. For people who can set aside money in an HSA, an HDHP can also be a powerful long-term savings tool, since unused funds roll over year after year and can even be invested.

Summary of benefits and coverage (SBC)

• What it means: A standardized document, required by law, that outlines in plain language what a health plan covers and how much it costs. It includes details like deductibles, copays, coinsurance, and out-of-pocket maximums, as well as examples of how the plan would cover common medical situations (like having a baby or managing diabetes).
• Why it matters: The SBC is one of the best tools for comparing plans side by side because every insurance carrier must present the information in the same format. Reviewing the SBC helps you understand not just the monthly premium, but also how much you might pay when you actually use care—making it easier to choose the plan that fits your needs and budget.

Access to care

• What it means: How easy it is to use your health plan to get the care you need, whether that’s seeing a primary care doctor, visiting a specialist, filling a prescription, or accessing urgent care. Access depends on things like the size of the provider network, appointment availability, and whether telehealth services are included.
• Why it matters: Convenience and timeliness can be just as important as cost when choosing a plan. A plan with lower premiums isn’t very helpful if you have to wait months to see a specialist or travel far to reach in-network providers.
• Where you’ll see it during OE: Access to care isn’t usually labeled directly, but you’ll encounter it in:
  • Provider network directories (to check if your doctors and hospitals are covered)
  • Plan comparison charts that highlight telehealth options, urgent care, or mental health access
  • Summary of Benefits and Coverage (SBC) documents, where you can see coverage details for different services

Formulary (drug list)

• What it means: A list of prescription medications that your insurance plan covers, often organized into “tiers.” Lower-tier drugs (like generics) usually cost less, while higher-tier or brand-name drugs come with higher copays or coinsurance. Some medications may not be covered at all unless an exception is approved.
• Why it matters: The formulary directly affects how much you’ll pay for your prescriptions. This is especially important if you rely on an ongoing or specialty medication, since these drugs can be significantly more expensive and may only be covered on certain plans or at certain tiers. During Open Enrollment, review each plan’s formulary to confirm your medications are included (and at what cost) before making your election.

4. Accounts & spending tools

Flexible spending account (FSA)

• What it means: An FSA is a special account you fund with pre-tax dollars that can be used for eligible expenses. There are two common types: healthcare FSAs (for things like copays, prescriptions, and medical supplies) and dependent care FSAs (for childcare, after-school programs, or elder care). Unlike an HSA, FSAs are employer-owned, and most have a “use it or lose it” rule, meaning you must spend the funds within the plan year, though some employers offer a small rollover or grace period.
• Why it matters: Contributing to an FSA lowers your taxable income and helps you save money on predictable expenses you’d be paying for anyway. But because unused funds may expire, FSAs require careful planning. They’re especially valuable if you know you’ll have consistent costs, like daycare, regular prescriptions, or ongoing medical visits, during the year.

Health savings account (HSA)

• What it means: An HSA is a personal savings account you can use to pay for eligible healthcare expenses with pre-tax dollars. It’s only available if you enroll in a High Deductible Health Plan (HDHP). Unlike FSAs, HSAs are employee-owned, meaning the money stays with you even if you change jobs, and the funds never expire. You can also invest your HSA balance once you reach a certain threshold, allowing it to grow like a retirement account.
• Why it matters: HSAs offer triple tax advantages: contributions are tax-free, funds grow tax-free, and withdrawals are tax-free when used for qualified medical expenses. This makes them one of the most powerful long-term savings tools available. In the short term, HSAs help you pay for deductibles, copays, and prescriptions with pre-tax money. Over the long term, they can be used to cover future healthcare needs, even in retirement, making them both a flexible spending tool and a wealth-building opportunity.

5. Additional options

Voluntary benefits

• What it means: Coverage options outside of standard medical insurance that employees can choose to add, usually at their own cost. Common voluntary benefits include dental and vision insurance, disability and life insurance, accident and critical illness coverage, and even nontraditional options like pet insurance or legal assistance plans.
• Why it matters: Voluntary benefits let you customize your package based on your family’s unique needs. For example, vision coverage might be essential if you or your dependents need corrective lenses, while pet insurance could help manage vet costs.

Life insurance

• What it means: A policy that pays a lump-sum benefit to your chosen beneficiaries if you pass away while covered. Employers often provide a basic level of life insurance (e.g., one year’s salary), with the option to purchase additional coverage.
• Why it matters: Life insurance provides financial security for loved ones, helping cover living expenses, debts, or future needs (like education costs) after your death. Open enrollment is usually the main time to increase or add coverage, sometimes without needing to provide Evidence of Insurability (EOI).

Disability insurance

• What it means: Coverage that replaces a portion of your income if you’re unable to work due to illness or injury. There are two main types: short-term disability (STD), which covers weeks to months, and long-term disability (LTD), which can last for years or until retirement age.
• Why it matters: Disability is more common than most people realize, and losing income can be financially devastating. Disability insurance provides peace of mind by ensuring you can cover essentials like rent, groceries, and bills while recovering.

Critical illness insurance

• What it means: A supplemental policy that pays a lump sum if you’re diagnosed with certain covered conditions, such as cancer, heart attack, or stroke. The benefit is paid directly to you, not to your healthcare provider.
• Why it matters: Major illnesses often create costs beyond medical bills, like travel to treatment centers, time off work, or childcare. Critical illness insurance provides extra financial support to cover these expenses, giving you more flexibility during a difficult time.

Accident insurance

• What it means: A supplemental policy that provides financial support if you’re injured in an accident. Covered accidents usually include events like falls, broken bones, burns, concussions, or injuries from car crashes or sports. Benefits may be paid as a lump sum or per specific injury, and they can help with costs like emergency room visits, hospital stays, surgery, or physical therapy. Some policies also provide cash benefits that you can use for non-medical expenses, such as transportation or childcare during recovery.
• Why it matters: Even with health insurance, an accident can create significant out-of-pocket costs, especially if you have a high deductible or coinsurance. Accident insurance helps bridge that gap by covering expenses tied directly to accidental injuries. It can be particularly valuable for families with active children, athletes, or anyone who wants added peace of mind against unexpected mishaps.

Choose your plan with confidence

Understanding benefits terms takes the guesswork out of open enrollment. By knowing what premiums, deductibles, HDHPs, and additional coverage options really mean, you’ll be better equipped to choose the right plan for yourself and your family.

HR leaders: consider sharing this glossary with your team. A little clarity goes a long way in helping employees feel confident during open enrollment.