How Does Health Insurance Work?
Health insurance is an arrangement with an insurance company that can help protect you from the high costs of health care. At its most basic, you pay premiums and the insurance company agrees to pay part of your medical expenses for illnesses or injuries, prescription drugs, and preventive care.
Health insurance works by spreading the cost of care among large groups of people—so insurance paid by one person also helps pay for the care of others. In a large enough group, most people are healthy and use a few health services in a given year. A minority of individuals account for the majority of health care spending for the group. Sharing this risk is a critical part of insurance since it is likely that every person will get sick at some point, and many individuals suffer injuries or even become disabled.
In addition to spreading financial risk, health insurance also improves access to health care services. Numerous studies have shown that, compared to those who are insured, people without health insurance receive fewer options in health services, or their care is delayed. Health insurance not only protects individuals from catastrophic expenses, but it also improves access to important routine, preventive, and primary care services.
There are several different types of health insurance that provide a range of coverage for medical expenses. Expenses vary based on how much coverage someone signs up for and the number of family members he or she decides to cover. Some types of insurance allow individuals to set aside pre-tax income to use at a later date.
Depending on the type of health insurance coverage, either the individual pays costs out of pocket and is then reimbursed, or the insurer makes payments directly to the provider.
After every visit to a health care provider, you will get a document called an explanation of benefits (EOB) that shows how much your insurance will pay and the amount your out-of-pocket expenses will be.
Our Benefits Team is here to help walk you through everything and find you and your employees the coverage that is right for you.