Important Terms in Health Insurance

Health insurance is one of the largest and most important sectors of the insurance industry. Providers guarantee medical benefits payments for various types of covered events in exchange for premium payments. Health plans are often purchased by employer groups in which members pay the same premiums. You can also buy health insurance privately as an individual or family.

Benefits

• Health insurance benefits include payments for routine medical check-ups, labs and procedures, hospital visits, prescription drugs, and other health care needs. Policy terms and level of benefits vary greatly by product and provider. The broader your protection and the higher your benefit payments, the more expensive your premium costs.

Insurance Premiums

• Health insurance premiums are the costs you pay to an insurance provider in exchange for the guarantee of benefits payments on claims for covered events. As with any insurance, your premiums are based on the risks of payout for the provider. Group policies offer huge benefits in that all employees pay the same premiums regardless of health history and risk factors. Buying private health insurance can be more challenging if you have preexisting conditions (diseases or disorders) or riskier health behaviors such as smoking.

Insurance Network

• Insurance networks have expanded in the 21st century with employer group insurance plans. Examples include HMOs, PPOs and POS. These are mutually beneficial collaborations between health care providers and insurance companies. Providers agree to contractually lower fees for various service types in exchange for participation in the network. Health care providers get wider exposure to network members or insured participants. The insured participants get better benefits because of the reduced costs on claims for insurance companies.

Private Health Insurance

• Private health insurance is a sector of the insurance industry for self-employed people or others not able to participate in group health plans. It is more difficult to find affordable policies unless you are in your 20s and 30s and in excellent health. Buying as an individual or family means you are assessed based solely on your health situation. People with preexisting conditions or high risk factors may struggle to find a policy, and if one is found, it may be extremely expensive.

Service Expenses

• Health plans typically include deductibles, co-payments and co-insurance. Deductibles are the amount you must pay toward a covered service before benefits begin. If you have a $250 hospital deductible, for instance, you must pay the first $250 before your insurance benefits begin. Co-payments are amounts you pay for typical office visits or prescriptions. Co-insurance is a percentage share of the total service costs that you would be responsible for on a covered event.