What It’s All About  The basics of health insurance


The basis of health insurance is that you pay an amount regularly, a premium, to an insurance company who then gives you coverage. This means that when you do need to go to the doctor or there is an emergency, your insurance will pay part of or the entire bill. Insurers make money because people do not usually need to go to the doctor frequently, so during months when you pay your premium but are not seeing a doctor or receiving medication, the insurer gets to keep your premium without having to spend money on you. The reason why insurers would exclude people with pre-existing conditions is because they assumed those people would use doctors more and would then cost the insurers more money as a result.
Healthcare is cheaper when people are counted in groups rather than individually because people who are generally healthy pay their premiums but are not spending that money on doctors or hospitals. This offsets or balances out the costs of people who are sick and require more medical attention, and thus cost the insurer more money. This is why most people get their health insurance through an employer, or their job. Because the employer has many people working for them, all the people working for a company get pooled together, healthy people balancing out unhealthy people and offsetting costs to the insurer.
Many of the people who do not have health insurance cannot get it through their jobs. This is because for small companies or people who work for themselves, there are not enough people to balance the costs for sick vs. healthy so instead, the insurance company increases premiums, making it very expensive to buy health insurance. These people are referred to as “non-group” because they are not part of employer based health insurance or government based ones, such as Medicare and Medicaid.


Actuarial value: this is a ratio that puts the scope of insurance coverage, which is what benefits and services are included/paid for, over the share of the costs of the services. Thus the actuarial value represents the portion that your insurance will pay of your total costs across your healthcare policy.
Premium: the premium for a health insurance policy is the amount the policyholder has to pay regularly to have coverage. Insurers calculate that amount by adding the average amount that they expect to pay for services under the plan plus an additional amount to cover the insurer’s administrative expenses and overhead any taxes or fees) and profits, in the case of private plans.
Exchanges: these are marketplaces where insurance companies will offer enrollment in healthcare plans to the nongroup individuals en masse, thus creating a large group which makes the insurance plans more competitive and affordable than individual nongroup purchasing.
Nongroup: this is the portion of insured people who buy health insurance themselves or their family directly.
Small group: this denotes the portion of insured people who buy health insurance through an employer that is a company with fewer than 50 employees.
Large group: this denotes the portion of insured people who buy health insurance through an employer that is a company with more than 50 employees.

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