health insurance basics
Health insurance seems like a simple exchange. You pay an insurance company a premium and insurance pays your bills. You get rid of risk and the insurance company takes your risk. However, there is more to it that this. What does the insurance company do with your risk? Do they keep it? Do they also get rid of it somehow? When you understand what the insurance company does with your risk, then you can better evaluate your options and perhaps get a better deal on health insurance.
When the price of something goes down, people tend to buy more of it. Is this true for health care?
A "Premium" is the price paid in advance for an insurance policy. With "Community Rating," everyone pays the same premium. An insurer using community rating to set insurance premiums ignores any differences in expected costs among insured groups or people. If an insurer uses community rating, but people know and use their expected costs to decide whether or not to buy insurance, then only the sickest people may wind up signing up for insurance.
Basic Health Insurance or Hospital-Surgical Insurance generally covers the room charge, basic hospital services, and physician services during a hospital stay. Most basic health insurance policies only pay a fixed amount per day and you pay the rest. Major Medical or Catastrophic insurance pays expenses above a high deductible. Comprehensive Health Insurance can act like basic and major medical insurance combined.
At first, health insurance that covers 100% of health care costs sounds great. However, it can be very expensive. It also can be inefficient due to moral hazard. You generally wind up paying for services whose costs outweigh their benefits even if you do not use them. Even if your employer pays for your insurance, you probably pay for it indirectly because your take-home wages are lower.
The greater your chances of having high health care costs next year, the more important it is for you to have health insurance. What your health care costs will be next year depends on your chances of illness or injury and the cost of treating such conditions.
People buy health insurance for different reasons. The following are ten of these reasons. Please look them over and consider which reasons apply to you and which do not. This will help you to evaluate what type of health insurance will best meet your personal needs.
