Among many types of insurance provided by an insurance company, health insurance is one. In this type of insurance, the insurer promises to pay the medical costs incurred by the insured when the insurance policy is in operation. The insurance amount is paid when the insured becomes sick due to the causes covered by the policy purchased or in case of accidents. The insurer can either be a private organization or a government agency.
Functioning of health insurance
When an insured person purchases a health insurance policy, he/she has to pay a fixed amount of money periodically. This payment in insurance jargon is termed as premium. The insuring organization, then pools all this amount paid by individual persons and uses it to pay the medical bills of those insured participants, who are in need of health care. The insuring organization pays only as long as the policy is active or as long as an insured person continues paying the premium amount.
Then how does an insurer know whom to pay among so many policies. To make
the things easy for an organization, the insuring company provides an insurance identification card with a policy number on it to its members. The insured person seeking medical assistance has to present such a card to a hospital or doctor. The hospital authorities or a doctor verifies the card and then contacts the agency that has assured the insured person to pay for the expenses, which in insurance terms is called as making a claim.
The Insurance company, after receiving the claim, checks whether the policy is active or not (that is the insured person is still paying the premium amount or not), and then pays the hospital or doctor the requisite amount directly. However in some cases, the company may reimburse the amount to the insured person, who pays the bills to the hospital or the doctor.
All the Insurance companies provide written instructions to the insured on how to report and document the medical expenses received. This is essential because, every company pays or reimburses only that much amount, which is covered in the insurance policy.
Evolution of Health Insurance Policy
Hugh the Elder Chamberlen belonging to Peter Chamberlen family was the first to propose the concept of health insurance in 1694. However, this concept was not picked up actively by any insurance company till late 19th century. By the late 19th century till 20th century, this concept was accepted by the insurance companies, but was treated more like disability insurance or insurance that covers the cost of injuries that leads to permanent disability. Only in the recent years of the 21st century and late years of 20th century, some of the insurance companies are willing to cover the cost of routine, preventive and emergency health care procedures, under what is called as Comprehensive health insurance programs. Some of these companies even cover expensive prescription drugs also.
Factors to be considered while purchasing insurance
A person while purchasing an insurance coverage has to consider the following factors:
1. How reliable is the Insurance Company With many private insurance companies coming in the market, many irrelevant and unworthy companies are also operating. Therefore, an insuring person has to first check the reliability of the company before purchasing a policy.
2. Premium amount: Every insurance company fixes a premium amount. The insuring person before going for insurance have to check whether this premium amount charged corresponds to the premium amount fixed by the regulating authority or not. If it does not correspond, then it is better not to buy a policy from such an insurance company.
3. Deductible amount: Many insurance companies deduct some amount in lieu of the payment made. Some companies deduct every time an insured makes a claim, some others deduct once annually. An insuring person should therefore check how much he/she is ready to pay for the services provided by the company, before making the purchase.
4. Co-insurance or co-payment: Usually an insurance company, even after deducting the amount for services, never makes 100% payment on the claims. Most of them pay 80%. The remaining 20% is called co-insurance or co-payment. For example: If a person has made a claim of Rs.6000 on medical expenses. Then, the reimbursement made by the company that asks for 13.5% deductible is only Rs.4152 (80% of 5190). The insured person has to pay Rs.1848 from his/her pocket. Therefore while buying an insurance policy, it is necessary to check the co-payment percentage properly.
5. Lifetime/per-occurrence maximums:The insurance companies promise to either pay for any single individual bills or for some specific illness or injury. The person buying an insurance policy has to check this, because some major illnesses cost several times more than the reimbursement promised by the insurance company.
6. Benefit period: Sometimes a few insurance companies may fix the time and amount to be reimbursed for some specific illnesses. In such a case, the policy-holder is at a loss after the time period fixed expires
problems. For example, a company may deny reimbursement for tuberculosis for a person already suffering from tuberculosis.
Many people believe that understanding insurance and then making a decision to purchase a policy for their specific needs is quite complicated. In reality it is not so. Purchasing a policy is like purchasing any other commodity. One has to check it before making a decision, like they check a cloth or a watch before purchasing.