Health insurance is a widely discussed subject. It’s constantly in the news. It’s on TV, on radio, in magazines and newspapers. All the political candidates have it on their agenda. It basically touches the lives of everyone. It does not matter if you are insured, uninsured, underinsured or uninsurable. Everyone seems to be affected in one way or another.
It’s surprising how many individual do not understand basic health insurance terminology. They need this knowledge to make informed decisions when it comes to their healthcare needs. There is no way I can cover them all but I have attempted to list a few of the more common frequently asked questions. I’ve broken them down into a series. Here is Part I.
Q: “What is health insurance?”
Basically, health insurance is the promise by an insurance company or a health plan to provide or pay for health care services in exchange for a payment of premiums.
Q: “What is the main difference between individual and group insurance?”
It usually comes down to evidence of insurability. When someone is purchasing an individual insurance policy, they generally will be required to answer a health questionnaire and undergo a medical examination to provide evidence of their insurability. The insurer may decline coverage on the basis of the applicant’s medical history, health, personal habits, age, income or any other factors related to risk acceptance. Or the insurer may issue a policy with some limitations on coverage. On the other hand, most group insurance, however, is issued without the need for medical examinations or other evidence of individual insurability because the insurer will be insuring a large pool of individuals. There should be enough individuals to balance those in poor health against those in good health.
Q: “What is a deductible?”
A deductible is the amount that an individual must pay or incur each calendar year before health insurance benefits are paid for covered medical expenses. As a general rule, the higher the deductible, the lower the cost of the health insurance.
Q: “What is a copayment?”
A co-payment is the specific amount you pay for a particular service. For example, your health insurance plan may require you to pay a $10 copay for an office visit or a brand-name prescription drug, after which the insurance company will pay the remainder of the cost.
Q: “What is coinsurance?”
Coinsurance is the specified percentage of the cost of treatment the insured is required to pay for all covered medical expenses that remain after the policy’s deductible and co-payment have been met. The insurer and the insured share the expense of the medical expense.