Page 22 - Ebook health insurance IC27
P. 22
The Insurance Times
Questions and Answers
Q1. What is health Insurance ?
Ans. Health Insurance is a way to distributethefinancial risk associated with thevariation
of individual's health care expenditures by pooling costs over time (pre-payment)
and over people (pooling). Thus, Health Insurance collects upfront premiums,
pools it over many people, primarily for health expenses of the individual.
The health insurance offered through insurance companies is known as Private
Health Insurance or commercial health insurance ( this clears the confusion
between government owned insurance companies and private owned insurance
companies). Commercial Health Insurance refers to the coverage of a defined
set of health services financed through private payments in the form of a premium
to the insurer.
The insurer, a non-governmental entity, assumes much or all of the risk for paying
for those services under a contractual arrangement, the health insurance policy.
Health insurance is unique as it involves a third party other than the insurer and
the insured, the healthcare provider.
The healthcare provider pays a major role in determining what services are used,
how much services are used and how much the cost - which makes it different
and complex. Economists describe health insurance as an 'imperfect market'
where normal market forces do not work as expected. The imperfections include
the following concepts like Information Asymmetry, RiskSelection, Moral Hazard
etc.
2 6 Guide for Health Insurance
