2.2.1. Health insurance
The function of insurance is to provide protection to
individuals against financial loss. It does so by pooling the risks of each
individual across an entire group of individuals who by paying to be covered.
Thus, an insurer of a particular financial risk faced by an individual was
offer to «cover» that risk in return for payment of a premium. This
premium is determined by averaging the expected losses (during the time period
covered) for the whole group of individuals buying the coverage, and adding a
charge for the administrative and other expenses of the insurer (Jutting, J,
2003:132).
When applied to the area of healthcare, a similar logic
applies for any one person, getting sick or injured can be an unpredictable and
very costly event, but it was happen to relatively few beneficiaries during any
particular time period. By «pooling» the risk of large healthcare
costs over many beneficiaries, health insurance can make necessary healthcare
relatively more affordable and thus more available to all «Pooling»
health risks, however, does not need to be done through commercial insurance
markets. Besides, there are relatively few opportunities to do so in developing
countries where private markets for medical services are mostly small and
underdeveloped (Jutting, J, 2003:132).
Instead, in these countries, the broader function of health
insurance to provide protection against loss of good health has traditionally
been performed by governments' organizing and financing a system for delivering
medical care, when needed, for the whole population. Despite broad scale
efforts and the best of intentions, governments of developing countries have
not been able to cover all of their populations with the needed (acute,
inpatient) services. Often these services that are available have been
delivered inefficiently. Community based health insurance has been introduced
in many countries as a potentially effective way to supplement or to complement
government-sponsored healthcare. Efforts to promote the development of health
insurance in developing countries may therefore be needed as a part of overall
health reform efforts.(Jutting, J. 2000a),
2.2.1.1. Understanding
Health Insurance Terms
According to Schneider and Diop (2001:43), the following
terminologies help in providing an insight about health insurance. There is a
need to understand mutual health which is a term applied to bringing together
different efforts to reduce the severity of something.
Another term is co-payment which implies the mode of sharing
medical costs, where you pay a flat fee every time you receive a medical
service (for example, $5 for every visit to the doctor). The insurance
organization pays the rest. Additionally, there are covered expenses which
means that most insurance plans whether they are fee-for-service, health
maintenance organization (HMOs), or preferred provider organization (PPOs), do
not pay for all services. Some may not pay for prescription drugs. Others may
not pay for mental healthcare. Covered services are those medical procedures
the insurer agrees to pay for. (Schneider and Diop, 2001:43).
Maximum Out-of-Pocket; this involves the
amount of money one is required to pay a year for deductibles and coinsurance.
It is a stated dollar amount set by the insurance company, in addition to
regular premiums.
Non-cancelable policy; this is a policy that
guarantees you can receive insurance, as long as you pay the premium. It is
also called a guaranteed renewable policy.
Premium; this is the amount you or your
employer pays in exchange for insurance coverage.
Provider; this includes any person (doctor,
nurse, dentist) or institution (hospital or clinic) that provides medical
care.
Third-part payer; this means any payer for
healthcare services other than you. This can be an insurance company or any
well-wisher.
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