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How does health insurance work?

Many people are overwhelmed do to the complexity of “Health Insurance” and can become annoyed with the process. The purpose of Health Insurance is that it is the primary delivery system for U.S. health care for Americans.

This is just like insurance for your car or home in that it is to protect your life savings from what can be a devastating cost due to major medical emergencies, chronic disease or accidents.

There are 2 goals for health insurance – by designed it is to protect your assets and allows you to get health care when you need it.

When becoming a member of a health care plan you have joined a group of people who also chose that plan. The insurers call this a risk pool. Insurers measure what amount of risk is then associated with that group of people.

Those who are not in good health are considered high risk and are more likely to use many of the medical services provided. Then those who are considered low risk because they are found to be healthy individuals. Amongst both high and low risk individuals there are unexpected illnesses and or injuries that may happen to anyone at any time.

Health insurers do a lot of calculations in an effort to create an estimate of how much money it will actually cost in order to cover the medical expenses for everyone with in your plan. Then each member of this plan will pay a monthly rate or premiums based on this cost.

Then you and your insurer will share the covered medical costs when you need health care through out of pocket expenses, co-pays, deductibles, as well as coinsurance which is all outlined in your chosen plan.

There may be some years that require a lot of medical services while other years less medical services are required yet the whole point you don’t have to pay the full cost of all medical services on your own. Your insurer may adjust your rates or premiums from time to time if your medical costs are exceptionally high.

 

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