Health Insurance Articles
Why Some Medical Insurance Packages Are More Expensive Than Others
2010-10-26
Medical insurance is becoming increasingly important as medical costs rise. There are many types of health coverage available to fit an individual's need. Some policies are beneficial to those that have rare medical expenses; other policies are designed for people with frequent medical problems. This article reviews what causes medical insurance packages to vary in price.
A major factor that causes a disparity in insurance premiums is whether the policy is part of a group plan or not. Group plans are provided through a corporation or other type of group. It involves a contracted rate between the group and the insurance company. Normally, the corporation will pay a part of the premium. This results in a lower monthly premium cost for the employee. An individual policy creates more risk for an insurance company and a higher premium cost for the individual. In addition, individuals can be underwritten at a higher premium based on previous health conditions. Tobacco usage also raises the premium an individual has to pay. Because tobacco users generally have more medical expenses than non-tobacco users, health coverage costs more for tobacco use.
Customizable options on medical insurance policies impact price of premiums. The first option is the deductible. Because insurance premiums are based on the risk of the insurance company having to pay a claim, a higher deductible means less risk for the insurance company. When an individual opts for a lower deductible, the risk is increased for the insurance company, leading to a higher monthly premium.
Another customizable option is coinsurance. Coinsurance is the amount the insured has to pay after paying the deductible and co-pay. Coinsurance ranges from nothing to 50 percent, or more. Coinsurance is just like the deductible in how it affects premium; the lower the amount of coinsurance, the higher the risk for the insurance company. Sometimes insurance policies have co-pays in addition to or instead of coinsurance. This is the same as coinsurance in that higher the amount the insurance might have to pay, the higher the insurance premium is.
When choosing a health insurance package, carefully weight your lifestyle and insurance needs with the premium costs. Health insurance plans that have a high deductible and higher amount of coinsurance will have a lower premium than an insurance plan with a low deductible or low coinsurance. Also keep in mind your employment status. If you are eligible for coverage within your employer's group health policy, your monthly premium cost may be substantially lower than insuring yourself through individual plan. The best person to ask for advice on medical coverage is an insurance agent or broker because they can see the many options available to you.
