FAQ’s on Health Insurance
The largest difference between group and individual health insurance involves evidence of insurability. To purchase individual insurance, a person must usually answer a health questionnaire and undergo a medical examination to provide evidence of insurability to the insurance company. An insurer may decline coverage on the basis of the applicant’s personal habits, health, medical history, age, income or any other factors that bear on risk acceptance. Or the insurer may issue a policy with limitations on coverage. Most group insurance, however, is issued without medical examination or other evidence of individual insurability because the insurer knows that it can cover enough individuals to balance those in poor health against those in good health. The risk of an insurer failing to achieve this balance is diminished as the size of the group increases, or as the insurer underwrites additional group policies and increases the total number of individuals covered. This is known as the “law of large numbers.”
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What is a preexisting condition?
This is normally a physical or mental condition for which medical advice, diagnosis, care or treatment is recommended or received before the effective date of the policy. It can included medications prescribed to the applicant. The definition can vary from policy to policy.
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Can health insurance companies deny my application for individual insurance due to a health condition?
Yes, the company has the right to deny coverage for almost any reason on a new application. However, once you are accepted for coverage, your policy can only be terminated for one of two reasons. The company can cancel your policy for failure to pay your premiums in a timely manner or if you misrepresent information on the application or fail to disclose known information, the company may rescind the policy for material misrepresentation
For an employer that intends to provide insurance protection to its employees, the group approach ensures that all employees, regardless of health, can be covered. Those with known health problems, who might otherwise be unable to obtain individual insurance, can be covered automatically upon employment without evidence of insurability. Although some limits may be imposed on new hires for certain conditions that predate their enrollment in the plan, most employees can receive coverage as soon as they are eligible. Group insurance offers a lower cost per unit of protection than individual health insurance, because the economies of scale resulting from selling, installing and servicing one plan covering many individuals. In addition, group plans are typically more flexible and tend to provide more liberal benefits than individual coverage
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What is an HMO?
A health maintenance organization (HMO) is an organization that provides comprehensive health care to a voluntarily enrolled population at a predetermined price. Members pay fixed, periodic fees directly to the HMO and in return receive health care services as often as needed.
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What is a PPO?
A preferred provider organization (PPO) is an association that contracts with a group of doctors, dentists, hospitals or other health care service providers to provide care at prearranged rates or discounts.
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What is a risk?
The risk an insurance company assumes when it agrees to cover a particular group is the possibility that claims will exceed the expected level. It is the chance of financial loss inherent in the group. Insurance companies use it to determine whether they will underwrite an insurance policy on a particular group. The spread of risk is necessary not only because of the expected variations in a population’s health but also because some policyholders — particulary very small groups — purchase group insurance to cover certain individuals with known health problems. This is a more costly way to obtain coverage for those high-risk individuals, but often the only way possible, given the evidence-of-insurability requirement for individual policies.
The risk an insurance company assumes when it agrees to cover a particular group is the possibility that claims will exceed the expected level. It is the chance of financial loss inherent in the group. Insurance companies use it to determine whether they will underwrite an insurance policy on a particular group. The spread of risk is necessary not only because of the expected variations in a population’s health but also because some policyholders — particulary very small groups — purchase group insurance to cover certain individuals with known health problems. This is a more costly way to obtain coverage for those high-risk individuals, but often the only way possible, given the evidence-of-insurability requirement for individual policies.