Health insurance is an option for making health care more affordable for you and your family. Purchasing health insurance for you and your dependents will make it easier for you to get proper health care when you need it, because your insurance will help defray the cost.
Group or Individual
Health insurance is available through two types of plans, Group Plans and Individual Plans. A group plan and individual plan may provide identical coverage. The difference is in the way the two types are accessed. Group Plans are offered through an employer or association; individual plans are purchased independent of any affiliation.
Although most group policies are suited to the average person, often with provisions to cover family members, group policy premiums usually cost less than premiums for individual plans.
Choosing Health Coverage
Consider the following features when comparing health care coverage.
How much will you pay out-of-pocket?
Deductible: This is the initial dollar amount you must pay before your insurance company begins paying for health services. Usually, the higher the deductible, the lower your premium. However, do not choose a deductible so high that you cannot afford to pay it. The contract will dictate the specific amount you pay per year for your family. You must pay a deductible each year, which will vary depending on the number of people covered by the policy.
Coinsurance: Coinsurance is the share or percentage of covered expenses you must pay in addition to the deductible. For example, your policy may pay 80 percent of covered charges after you pay the deductible. You would then pay the remaining 20 percent as coinsurance.
Copayment: A copayment is a specified dollar amount you pay, as a subscriber to a managed care plan, for covered health care services. It is paid to the medical provider at the time the services are rendered.
Premium: The monthly or annual amount you will pay for your insurance policy.
Coordination of Benefits Provision: Even if you have more than one group policy, you cannot receive more benefits than your actual hospital and medical expenses.
Even if a husband and wife each have family coverage under separate group policies, they cannot collect on the same claim twice, even if they have paid two premiums.
Renewal and Premium Increase Provisions: These provisions determine the conditions under which you lose your eligibility, without a medical exam to prove you are in good health.
Questions and Answers about Premiums
Q. Why do companies raise premiums?
A. Insurance companies raise premiums when the cost of claims they must pay increases at a faster rate than expected. One main cause of premium increases is medical cost inflation, which measures how much more a particular procedure costs each year.
Medical Utilization, or the number of times doctors perform a procedure each year, can also cause premiums to increase.
Cost Shifting is also responsible for an increase in premiums. Cost shifting occurs when hospitals charge paying patients more money for their stay in the hospital. This offsets their cost of caring for non-paying or indigent patients.
New technologies and medical malpractice claims also increase the cost of health insurance.
Q. What do your premiums pay for?
A. Premiums help pay policyholders' claims, and other expenses, such as producers' commissions, premium taxes, and administrative expenses.
Q. How are premiums determined?
A. An insurance company considers many factors when setting premiums. Some of these include:
- Medical care costs
- Age of policyholder when policy is issued
- Current age
- Habits (such as smoking)
- Geographic area
- Waivers (a waiver of premium if you choose this option, you would pay more each month in premiums. In return, if you became sick and could not pay your premium, the company would pay it.
(From: ALDOI Explanation of Health Insurance)