Wednesday, October 10, 2018


In theory, insurance is easy to understand. A group of people facing the same potential risks come together. They assess how much they might have to pay and divide that amount among the group members. Think of it as like saving enough money for that rainy day. They all enter into a contract, now called a policy, and that's where it starts to get difficult. Once lawyers are involved, what's simple is lost in complicated language. It's as if the insurers want to hide exactly what's on offer. Well, here's what should be a straightforward explanation of the choices you have to make when looking for cheap private health insurance coverage.

The policy or plan is a contract between you and the insurance company. The price you pay for the coverage is called the premium. You need to read the small print to find out exactly what is included in the coverage and how much you have to pay. That way, you see which policy is the best value for money.

All policies or plans use the "indemnity" principle, i.e. when you are expected to pay expenses or bills for your health care, the insurer steps in and pays it for you. The extent of the coverage is fixed by the companies and depends on how you incur the liability. All policies are no-fault, i.e. they pay out no matter why you need treatment.

The most expensive policies are full indemnity, i.e. the insurer pays out no matter how the bills arise. This gives you complete freedom to pick the hospital or doctors to treat you. With this policy, you pay all the bills in full as you go along and then claim the money back from the insurance company. All the other policies limit your freedom in some way. The more limited your choices, the lower the premiums charged.

The most popular policies are called HMOs (Health Maintenance Organizations). This gives you access to a network of doctors and hospitals. One doctor is nominated as your primary healthcare physician and this person acts as a gatekeeper. To get access to others in the network, your primary physician must approve. With a referral, you can then go anywhere inside the network. Note that any care given by an organization or person who is not a member of the network will be at your own expense! The advantages of an HMO are that premiums are generally lower with reduced co-payment requirements and smaller deductibles.

A POS (Point of Service) has a physician to act as a gatekeeper but, if you declare yourself willing to pay the additional costs of a referral outside the network, you have the freedom to choose.

A PPO (Preferred Provider Organization) is an HMO without a nominated physician acting as a gatekeeper. This gives you more freedom to pick your own healthcare professionals but the premiums are higher. If you stay within the “preferred” network, costs are generally lower. Once you go out of the network, the charges will rise. This may expose you to higher co-payments and deductibles.

There are other policies and plans available to cover you against disability. If you have an accident or disease leaving you unable to work, you can claim a proportion of your loss of earnings and the cost of longer term nursing care. These policies can be quite expensive so always ensure you read the small print before buying.