Why Have to Buy Health Insurance?

These are some of the follow up questions thatexpertise to do so. For this reason, many group
people have regarding health insurance for theinsurance purchasers do not deal directly with
average consumer, it is easy to become baffledinsurance company underwriters or group
by the process; but, learning about the process,insurance representatives, preferring instead to
educating yourself, gives you much moredeal with an intermediary.
purchasing power.Smaller employers need a qualified professional to
1. What is an HMO?act as intermediary because they lack the
A health maintenance organization HMO is anresources and expertise to handle their group
organization that provides comprehensive healthinsurance needs. An intermediary can help them
care to a voluntarily enrolled population at adefine their needs and objectives, design a plan to
predetermined price. Members pay fixed, periodicmeet those criteria, select the proper purchasing
fees directly to the HMO and in return receiveand funding vehicle, obtain competitive quotes
health care services as often as needed.from insurers and service the plan.
2. What is a PPO?4. What is a risk?
A preferred provider organization PPO is anThe risk an insurance company assumes when it
association that contracts with a group ofagrees to cover a particular group is the possibility
doctors, dentists, hospitals or other health carethat claims will exceed the expected level. It is
service providers to provide care at prearrangedthe chance of financial loss inherent in the group.
rates or discounts.Insurance companies use it to determine whether
3. Can an employer work directly with anthey will underwrite an insurance policy on a
insurance company?particular group.
It is possible for an employer to deal directly withThe spread of risk is necessary not only because
an insurer through a group sales representative toof the expected variations in a populations health
purchase group insurance. Premium rates andbut also because some policy holders particularly
underwriting practices vary considerably from onevery small groups purchase group insurance to
insurer to another, however. In addition, thecover certain individuals with known health
coverage provided is rarely identical. This meansproblems. This is a more costly way to obtain
that comparison shopping is often beyond thecoverage for those high risk individuals, but often
capability of all but the most sophisticatedthe only way possible, given the evidence of
purchases, for example, the very large companyinsurability requirement for individual policies.
that has sufficient internal employee benefits