Thursday, November 20, 2008

The Two Major Components of Health Insurance

Health insurance is different from all other types of insurance. When you buy life insurance, automobile insurance, or homeowner’s property and casualty insurance, you do not expect to have a claim in the near future.

You purchase these types of insurance for financial protection against the occurrence of an unlikely event that you wish to avoid—like a death, an auto theft, or a fire. If such an event occurs, you generally receive money that you are free to spend any way you wish.

In contrast, with health insurance, you expect to have claims in the near future and you almost never receive money when you have one. Instead, your insurance carrier directly pays the medical providers that have taken care of you—typically paying them either a flat monthly fee or a small fraction of what they would charge you directly if you didn’t have health insurance.

This is because what we call “health insurance” in the United States consists of two separate but related components:
  1. Access to a network of physicians, hospitals, and other medical providers who provide services at greatly discounted rates
  2. Financial protection against the medical expenses of an accident or illness.

Here’s the first question you need to ask when choosing a health insurance policy: “How good is the network of doctors included in the plan?” Your policy won’t do you much good if you don’t like the physicians it covers, or if it works only at a hospital many miles from where you live.

Once you have located a few policies that offer access to the medical providers you desire, you need to analyze the financial protection offered by each policy—the monthly premium and how much you will pay out of pocket under different potential scenarios, from a routine physical exam to a catastrophic illness.

2 comments:

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  2. Informative article. This post is really helpful to me as it helped me a lot to understand all about health insurance scheme in detail. I find this article a short and quick guide that describes hidden facts about this policy scheme.
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