|  | Healthcare Industry | Health Insurance

How Does the Limit for Health Insurance Work?

Health insurance offers coverage for particular medical expenses. In a traditional health insurance policy, the policyholder pays a monthly premium to the insurance company. In return the insurance company offers a policy that details the different types of medical expenses that it will cover, when it will cover them, and how much it will pay. Insurers offer both group and individual health insurance, but they place limits on all types of insurance. This is primarily a business decision: Insurance companies use limits to control their own profits.

  1. Deductibles and Copays

    • Deductibles and copays are two of the most common limits in health insurance policies. Deductibles are the amount that policyholders must pay on their own medical expenses before the insurance takes over and begins to pay. Deductibles differ, and the higher the deductible limit. the less the policy costs. A typical deductible may be $500 to $1,000. Copays are similar, but are set limits on basic medical activities like doctor visits that policyholders must pay per visit.

    Out-of-Pocket

    • The out-of-pocket limit is an annual limit closely connected with deductibles and copays. While insurance companies want to make a profit whenever possible and do not want to cover small medical expenses, they recognize that policyholders make have to visit many doctors and undergo many different treatments within a short time. If deductibles and copays reach the out-of-pocket limit for the year, the insurance company will cover all other costs for that year.

    Caps

    • Insurers also place limits on how much they will pay for a particular expense. Some companies specify how much they will pay for a particular course of treatment or operation, after which the policyholder must pay the rest. Other companies set an annual limit, after which policyholders must pay for all expenses themselves. This also helps insurance companies make a profit by limiting how much they have to pay for very expensive treatments. Caps on particular illnesses are also set.

    Lifetime Limits

    • The lifetime limit is used with or instead of allowed charges limits. This is the total limit that the insurance company will pay as long as the plan exists. After this limit is reached, the company will no longer pay for any treatments or procedures, regardless of its coverage options. For most plans, this limit is set at one million dollars.

Health Insurance - Related Articles