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Introduction to Health Insurance

Many moons ago, when people needed to see the doctor, they paid directly for his or her advice and services. Wow, things have certainly changed. Advancements in medicine have been breathtaking, providing us with the opportunity to live longer, more active lives, the downside of course being the cost.

Nowadays, most Americans rely on a third party - either an employer, a private insurer, or a public government entity to help finance the cost of providing their family with increasingly more expensive medical coverage.

How Does Health Insurance Work?

Health insurance companies use historical data and analysis to predict the medical expenses for any given group of individuals (usually a company's employees). The premiums they charge are based on the amount of claims they've paid in the past and what they expect future claims to cost. When insurers pay out more in claims than they receive in premiums and when future services are predicted to cost more, premiums go up.

As consumers, we are demanding more medical services than ever before. And the cost of these services is going up. These increased costs are passed on to employers in the form of increased premiums. Insurance companies work with employers to adjust services offered, as well as co-payments and deductibles, to minimize the impact of rising costs.

Take time to understand your health plan -- it can help save healthcare dollars for you and for all Americans. For example, many health plans offer a reduced co-pay if you choose FDA-approved generic prescription drugs, so you pay less. Because the average total cost of a generic drug is three times less than the brand name, it helps keep costs down in your health plan.

Understanding the basics of how health insurance works and how to make the most of your own health plan can help keep healthcare affordable for everyone.

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