The functions of private health insurance companies to consumers

2007-03-08 10:33:40

( Health )



Health care around the world mainly consist of two types of service, the private health care and the public health care. Private health care would require that you pay for the medical service you had received. On the other hand, the public health care is supported by the government so you need not pay for the services rendered except for the medications and some miscellaneous fees.

But despite the public health care being free, many people still choose to avail of private health care, thus private health insurance companies became popular. But you also need to distinguish private health insurance from life insurance. Basically, in life insurance, you are insured for life because your insurance is guaranteed renewable. Meanwhile, the private health insurance companies would charge you on a yearly basis. Another major difference between life insurance and private health insurance is their consistency in rates. Life insurance charges a constant rate that is guaranteed not to increase while private health insurance companies cannot offer to guarantee the same amount would be charged to you annually.

Private health insurance companies also faces the challenge of adverse selection over its clients meaning that only people who anticipate that they will benefit from the insurance will purchase the coverage. On the other hand, the people who decide that they are healthy enough don’t avail of the insurance since they conclude that they have no need of it. So the private health insurance ends up losing a large amount of money for the medical bills of its clients.

Also, the charges of private health insurance are quite high in developed countries because the populations in these countries generally have a longer life span. If people get older then they would need more medical care and thus private health insurance has to increase their rates. But most governments are aware of the benefits health insurance can bring to their people so they offer tax benefits to people who purchase the coverage.


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