Having a health insurance plan is extremely important even if you consider yourself to be fit and healthy. Most people do not understand much about health insurances and the purpose they serve. Here is a short list of frequently asked questions that can help you understand what a health insurance plan is.

What is the main purpose of health insurance?

The purpose is to protect the insured from the high costs of health care by providing coverage for various health care services. A monthly premium is required to be paid by the insured along with either co-insurance or co-payments. The amount that is paid on a monthly or quarterly basis is far less than what the insured will have to pay out of his pocket in times of need. This can be if the insured was involved in an accident or developed a health condition or required a surgery. It protects people from financial ruin if something happens suddenly.

What are the main types of policies available?

Currently there are 3 umbrella types of medical insurance available. These include consumer-directed, indemnity plans and managed care. Depending on the type of plan one has chosen, these cover hospital expenses, surgical costs, medical costs, prescription costs, mental as well as dental health coverage.

Under the indemnity plan, the health care professional will take a fee for each of the health care service that has been provided to the policy holder. Policy holders can consult with doctors of their choice and the claim can either be filed by the patient or the doctor.

Under the managed care plans, policy holders have to see only those health care professionals who belong to the insurance company's network of health care professionals. This type of plan provides coverage for comprehensive health care services as well as financial incentives which results in lower out of pocket costs for the insured.

What is understood by health insurance premium?

This is the amount of money that you will have to pay the insurance company on a regular basis. This can either be quarterly or monthly.

What is a co-payment?

This is a specified amount that you will be required to pay in connection with the benefits that is being offered. There are certain plans which have co-payments in place for services such as prescription costs, hospital stays, doctor's visit, etc.

What does out of pocket cost mean?

These include co-payments, premiums, co-insurance, deductibles and any other fee that you may have to pay outside of the health benefits plan.

How to pick the best insurance plan?

If you have a number of options through your employer or you are purchasing a plan on your own, it is important that you consider some very important factors. Considering these factors will ensure that you choose the right plan that is suitable for your individual needs. Some of the essential questions that you must ask yourself before making the final decision are:

- What would the monthly premium be?
- Is the cost of care affordable?
- How much are the deductibles?
- How much co-payments and deductibles will you be required to pay?
- How much would the total out of pocket expenses be?
- What is the reimbursement procedure?