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How Health Insurance Functions For Consumers

May 13, 2008
Health insurance is an insurance that can be used to pay for a person's medical expenses in the case of an accident or illness. Health insurance is purchased as premiums. A person can purchase insurance sponsored by the government as social insurance, or receive insurance from a private company. Plans can be purchased by individuals or in groups, such as when company's use insurance as benefits for the employees. Health insurance prices are estimated by the likely hood an insurance holder has to be in need of medical help. For example a healthy young insurance holder will probably pay less for insurance than an older or sicker insurance holder.

Health insurance was founded by a man named Hugh Chamberlen in 1694. Health insurance was originally called accident insurance. It was run similarly to today's disability insurance.

Health insurance was founded by Hugh Chamberlen in 1694. Accident insurance was the label originally given the idea. It was run similarly to the way disability insurance is today.

The amount the insurance holder is forced to pay before the insurance company will pay their share is called the deductible. In some cases a co-payment must be paid by the holder out of their own pocket. This can be done each time the policy holder goes to the doctor for a visit. This can all be avoided by the policy holder purchasing coinsurance. This plan allows the holder to pay only a certain percentage of the total cost of their medical expenses.

The amount the insurance holder must pay in order for the company to pay its share is called a deductible. In some cases a co-payment must be paid by the insurance holder with his or her own money. This could be done each time the insurance holder goes to the doctor for a checkup. An insurance holder can avoid this by purchasing coinsurance. With this plan the holder pays a certain percentage of the total cost of his or hers medical expenses.

All policies have limits and exclusions. Not all services are covered by the insurance company. If a situation in which a medical expense is not covered the policy holder will be forced to pay the bill with their own money. When the medical expenses of the policy holder surpass the amount agreed upon in the policy the holder will be forced to pay the remainder of the bill.

Maximums that are almost the opposite of coverage limits are called out-of-pocket maximums. These maximums are the amount that the policy holder is allowed to pay by themselves. After this limit is exceeded the obligation the insurance holder has to the insurance company stops. Capitation is the amount of money paid by the insurance company to the provider of the healthcare. In-network providers are healthcare providers that can be found on a list that was made by the insurance company. If the insurance holder goes to one of these healthcare providers they can receive discounts or additional benefits to the policy.

One of the largest problems with health insurance is the moral hazard issue. Moral hazard occurs when the healthcare provider and the insurance holder agree to tests that are deemed unnecessary by the insurance company. Most of the time the insurance company is still forced to pay for the expenses but this can cause problems between the company and the insurance holder in the future.
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