Health insurance is one of the most essential types of insurance for the average person, because everyone will likely face health problems eventually. Health insurance companies agree to pay for certain medical costs in exchange for a monthly fee premium. Understanding how health insurance companies determine their rates and the additional costs that you may incur can help you save money on coverage.
Health Insurance Rate Basics
The rates or premiums you pay for health insurance are based upon the likelihood you will have to receive medical treatment and the extent to which treatments are covered under the terms of the insurance plan. Individuals who are more likely to need medical care present a greater risk for health insurance companies and will typically face higher insurance rates. Similarly, health insurance plans that cover more types of care and that have higher benefit limits will tend to charge higher premiums than those that cover fewer types of care and have lower benefit limits.
Common Risk Factors
Customers who present certain common risk factors will tend to pay higher insurance rates. According to the Arkansas Insurance Department, risk factors that insurance companies may use to help determine your rates include age, sex, where you live and factors such as whether you smoke or have had serious health problems in the past. People who have had major health problems may have difficulty finding an insurer.
Deductibles
While you must pay your monthly premiums to maintain health care coverage, health plans typically require that you pay a deductible if receive certain types of care. A deductible is an upfront cost you must pay before your insurance company will pay for care. For example, if your plan includes a $2,000 deductible for surgical operations, it would only cover $1,000 of a $3,000 operation. Oftentimes routine care like yearly checkups and preventative screenings are covered without deductibles. Accepting higher deductibles can reduce premiums.
Other Costs
Even after paying your premiums and deductible, you might face other costs such as co-payments and co-insurance. Co-payments are flat fees you must pay each time you receive care. Co-payments are often applied to prescription drug purchases. Co-insurance requires the insured party to split the cost of care with the insurance company at a pre-set percentage. For example, if you have 10 percent co-insurance on surgery, you must pay 10 percent of the cost of surgical operations while the insurance company will pay 90 percent.