Question

Discuss how the concept of premium, covered services, and cost sharing apply to health insurance. what is the difference between experience rating and community rating?

Answer 1

Premium is the amount which is paid to the insurance company or health plan to provide health coverage. It may be monthly, quarterly or yearly basis. After premium we pay other cost like deductibles, coinsurance, and copayments. Premium depends on the age, location etc.

Covered services- covered services are the service that covered by health care plan. The service in which insurance companies agrees to cover the cost of different types of benefits that is listed in the policy. The list includes the kind of service which is covered by the insurance company and also includes the kind of service which is not covered by the insurance company. Health services cover different medical issues.

Cost sharing- Cost sharing means that we and our health insurer both pay some portion of medical costs during the year. Cost sharing is the share covered by the insurance that we pay from our pocket after premium. It includes deductible, copayments and coinsurance. The main purpose of the cost-sharing is to reduce the misuse of insurance benefits. There are three main types of cost sharing that are utilized in private health insurance, that is deductible, copayments and coinsurance. It controlcontrols the utilization or overuse of health care services.

Experience rating:- under this type the insurance premium depends upon the health condition and risks of an individual or group. So the one with more health risks will have to pay more premium as compared to the one who is healthy.

Community rating:- under this type the same amount of premium is applied on every indvidual in a group or area. So basically we can say that the healthy individual pays for the sick one. This type of insurance is usually provided by organizations to there employees.