Table of Content
- Health Insurance Definition
- How Does Health Insurance Work?
- 5 Health Insurance Terms
- What Does Health Insurance Cover?
- 3 Things That Health Insurance Does Not Cover
- 8 Factors Affecting Health Insurance Premium
- 5 Reasons Why You Need Health Insurance?
- When Should One Take a Health Insurance?
Health Insurance Definition
Health insurance is a contract signed between an insurer and the insured that requires the insurer to cover limited or total medical costs in exchange for a premium. The insurance company finances the costs of surgeries, drugs administration, and, in some circumstances, dental services.
In most cases, it is included in employer packages; however, it is deducted directly from the employee’s salary when it is not included. Apart from benefiting from medical costs being covered, other benefits included in health insurance are reimbursement for working time lost due to an illness.
How Does Health Insurance Work?
Like any other insurance, health insurance helps protect a person’s finances and assets in case of a risky event. Health insurance, in this case, helps to lower the costs that you would have to pay for medical costs. However, health insurance can be tricky and confusing, especially if one doesn’t understand the terms used in health insurance.
5 Health Insurance Terms
Coinsurance is the cost that is shared between you and the insurance company. It is calculated in percentage form whereby if a medical cost is x amount of money, then the insurance will be required to pay 75% of X while you will pay 25% of X. coinsurance rates, however, differ from one insurance company to another and the type of service as well.
On the other hand, a copayment is a form of cost-sharing payment where the insured must pay a specific amount of money when receiving a medical service. Copayment is a fixed amount of money, unlike coinsurance, where a percentage is required.
Otherwise known as an annual deductible, is the exact amount an insured must pay each plan year before the insurance company starts paying for the costs.
4. Flexible spending accounts
Are accounts set up by employers which provide a way for employees to set aside some of their salaries to pay for health insurance premiums.
5. Out-of-pocket expenses
Like the term, out-of-pocket expenses mean the amount you must pay when receiving health care. It is connected to all cost-sharing plans discussed above.
What Does Health Insurance Cover?
Health insurance offers several benefits to the insured. They can get the following services covered;
- Drug prescription and administration
- Maternity services
- Emergency services
- Hospitalization services
- Rehabilitation services
- Surgery services
- Vaccination services
3 Things That Health Insurance Does Not Cover
Depending on the plan, some services are not usually covered. However, they may be covered if a specific particular plan is taken to cover them. These include;
1. Cosmetic surgeries
Include plastic surgery, liposuction, and nose jobs, among others.
2. Weight loss surgery
Include things like gastric bypass, which is not usually covered by health insurance.
3. Any experimental treatments
It includes treatments that use new technology that has not been approved yet.
8 Factors Affecting Health Insurance Premium
1. Age and gender
These two are among the most significant factors considered when taking health insurance. The older a person is, the more the health risks involved and the higher the chance of mortality. Therefore the premium paid for the older generation is much higher than that of, the younger generation.
2. Past medical history/ family medical history
A past medical history and a family history are needed to acquire health insurance. It could be helpful for both the insurer and the insured. If the individual has a pretty healthy history, the insurer will lower the premium to pay. However, the medical history of the recurrent diseases will cause a higher premium to be paid.
3. Policy duration
The duration of the policy is also an essential factor. A more extended policy will have a lower premium than a shorter policy.
4. Choice of occupation
Individuals working in complex environments that are dangerous and are filled with toxic substances will pay a higher premium. It is because they are highly exposed to cardiovascular and respiratory diseases.
5. Habits and lifestyle of an individual
An individual’s lifestyle highly affects the premium he will pay to an insurance company. Individuals with smoking and drinking alcohol habits are more at risk of getting heart, lung, and liver diseases. Therefore they are more likely to pay a higher premium than the individuals who live a healthy lifestyle.
6. Geographical location
Different geographical locations pose different dangers to living in those areas. However, some locations are more dangerous than others. An individual living in a city is at risk of getting respiratory diseases and skin diseases due to the pollution going on in urban areas. The ones living in the countryside are at less risk since the air is fresher and hence paying a lower premium. Health risks among other factors in a city make health premiums more expensive.
7. BMI or the body mass index
An individual with a higher body mass index is more at risk of getting diseases such as diabetes, blood pressure, and heart diseases. These individuals, therefore, will require higher premiums due to the multiple doctor visits they will need to attend.
8. Previous Insurance status of a person
If you’ve had insurance before, individuals who have never taken insurance policies before will be charged a higher premium than those who have been taking insurance policies for some time.
5 Reasons Why You Need Health Insurance?
1. Lower out-of-pocket costs
This happens because the medical costs are now a cost that’s shared with your insurance company. It reduces the amount that you would otherwise have provided.
2. Coverage for unexpected costly medical care
Health insurance cover protects the insured from unexpected costs from unexpected diseases that may come up. Some diseases like cancer are entirely unexpected and costly to treat, and a good health insurance policy will significantly save you.
3. Fight lifestyle diseases
The older people get, the more they get lifestyle diseases like diabetes and blood pressure. It will require multiple doctor visits, and getting health insurance will save them a lot of finances. In addition, getting medical services will now be flexible and easy; hence it will be easier to manage the diseases.
4. Protecting your family
A health insurance plan will ensure that your family is well safeguarded. It will take care of children and even aging parents who are more vulnerable to diseases. A suitable health cover will give you peace of mind knowing everyone is protected.
5. Protect savings and assets
An unexpected illness can cause a lot of financial damage, and an uninsured individual may use all the savings in payment of medical costs. Getting health insurance prevents such a situation where all savings are used up and assets are sold to cover medical costs.
When Should One Take a Health Insurance?
1. When the employer offers health insurance
One should take advantage and accept the health insurance. It is because the employer helps cover the medical costs saving you a lot of money.
2. When one has a family
It would be wise for the individual to take health insurance for the whole family. It is to save money from the multiple hospital visits done by different family members.
3. If you are in a position where you are at risk of getting an accident
It would be wise to take insurance, especially if the individual cannot pay for his medical costs.
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