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A health insurance policy is a way of paying for your health care. When you’re injured or ill, your health insurance will protect you from paying the total cost of medical services. A health insurance plan works in much the same way as a car or home insurance: you or your employer chooses a plan and pays a monthly premium, while your health insurer pays a portion of your medical bills.
Health insurance terms – Many words are used in Health insurance, like Deductibles, premiums, network, claims, and benefits, what do all these words actually mean?
In order to simplify the process of understanding what health insurance is, we’ve compiled a list of terms you might encounter and provided quick definitions that help explain what each word means.
Know About Risk Pool – The medical costs of a group of people are combined to calculate premiums for a risk pool. In general, the larger the risk pool, the lower the premiums may be. Healthier people tend to have lower costs, counterbalancing those who require more medical care and have higher costs.
How Health insurance settlement works – The premium you pay for your health insurance covers most or all of the medical care you receive — including prescription drugs, doctor visits, health improvement programs, and customer service, A health insurance plan’s monthly cost, benefits, and medical services are what most people consider when choosing it. You also need to consider other factors, such as what you will have to pay when you visit a doctor or visit a healthcare center.
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There are several types of out-of-pocket payments and it’s important to understand their differences:
- Out-of-pocket maximum – During a plan period (usually one year), your out-of-pocket maximum is the amount you will have to pay for covered healthcare services provided by doctors and hospitals in the network. For each plan period, you will not be charged more than this amount for covered services, Health insurers typically pay claims based on discounts they negotiate with doctors and hospitals. Doctors, hospitals, and other healthcare providers within the network of your plan will be paid according to the rates they have agreed to.
- Deductible – Health insurance plans usually include deductibles, which are the amount you pay each year before your insurance company starts paying for covered services. For example, if your plan has a $1,000 deductible, you will have to pay the first $1,000 of health care costs.
- Copay – When you go to the doctor or get some other covered service, such as an emergency room visit, you pay a copay, such as $20 for doctor’s visits, but $200 for emergency room visits.
- Co-insurance – Coinsurance is a percentage you pay for some covered services, such as a trip to a specialist or a certain medical test. In the case of a 20 percent co-insurance level, your health insurance company pays 80 percent of the cost of covered services, while you are responsible for the remaining 20 percent.
