What Is Health Insurance?

 

Health insurance is a type of insurance coverage that covers the cost of an insured individual's medical expenses, such as doctors visits, medicines, surgical expenses, and so on. Depending on the type of health insurance coverage, the insured makes payments to their health provider or pays costs out-of-pocket and is then reimbursed. In health insurance terminology, the "provider" is a clinic, doctor, hospital, health care practitioner, or pharmacy. The "insured" is the person with the health insurance coverage and usually the owner of the health insurance policy.

 

The five main types of health insurance plans:

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Understanding the differences between different kinds of plans is useful and extremely important when you are considering choosing one for yourself, your family, or employees. There are five main kinds of health insurance plans:

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1) HMOs (Health Maintenance Organization) – HMOs are developed to deliver care directly to the insured; A set premium is paid, which in return offers a range of services, including preventive care. The insured will also have to make a co-payment for some services. This is usually the most cost effective type of health insurance.

2) HSA (Health Savings Account) – HSA has tax-benefits for policy holders. Insurers put money in a ‘health account’ and that money is used for medical and health related purposes to make payments and such. This is recommended for healthy, young individuals that do not see a doctor regularly.

Definitions:

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Copayment - in most cases, the insured will also have to make a copayment for some services. Some HMOs may not require copayments for hospital stays.

Deductibles - the amount of covered expenses the insured has to pay before the insurance company pays or covers medical costs. Deductibles are different for all policies and totals may range from $100 to $300 per person annually, or from $500 to $1,000 annually for a whole family.

Out-of-pocket maximum - as soon as the insured's expenses reach a certain amount during a 12-month period, the plan will cover everything thereafter. Remember that any charges above what are considered as usual and customary by the insurance company will have to be paid for by the insured.