Definition of Health Insurance

887 WordsJun 21, 20184 Pages
Definition Health insurance is insurance against the risk of incurring health care related expenses. It indemnifies the insured for the related financial loss. It is important to note that health insurance is a form of short term insurance. Disability, critical illness and long-term care insurance are all subclasses of health insurance. When an individual buys health insurance, he/she enters into a contract (policy) with the insurance company so that for a monthly premium, the insurance company will provide cover for medical expenses incurred. The level of cover and the health care providers allowed will range between different products. Coverage will include visits to doctors or hospitals, prescriptions, cost of medical examinations or…show more content…
(Obringer & Jeffries, 2006) There are many different types of health insurance, the main forms include: • Health Maintenance Organizations (HMOs) and Exclusive Provider Organizations: Where you choose a primary care physician. You are then cover for care received from specifies hospitals and doctors, all other care providers are not covered. • Preferred Provider Organizations (PPOs): You pay higher fees for care received from a preferred provider list and higher fees for all hospitals and doctors visited that are not on the list. • Point-of-Service plans (POS): Combination of HMO and PPO. • High Deductible Health Plan (HDHP): A cheap form of health insurance with higher deductibles. • Catastrophic Health Insurance Plan: Provides cover in the event of an accident or serious illness. (HealthCare.gov, 2014) Other health care related products that aren’t indemnifying include: • Hospital Cash cover: Provides a cash lump sum per day that you are in hospital. Can also provide some cover from loss of income. • Medical Gap Cover: insures you against the event that there is a shortfall between the cover your medical scheme provides and the actual payment required. The two main risks that all standard health insurance products provide cover for are: • Pharmaceutical expenses, doctor visits and tests: High frequency and low cost. • Hospitalization: Low frequency and high cost. (Rosner, Leppert,
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