A health insurance premium is a sum of money paid to a health care provider in order to secure health care coverage from that provider for a fixed period. By collecting premiums, insurance providers create a pool of funds from which benefits can be paid. In many cases, additional fees known as deductibles and copays must be satisfied before benefits are paid. Depending on the circumstances of an individual’s employment and the policies of the country in which he lives, a health insurance premium may be paid by the individual’s employer or by the individual himself.
Essentially, a health insurance premium is a base fee paid to a health care provider in exchange for a fixed period of health care coverage. The length of this period varies depending on policy type. Short-term policies can last for as little as a few weeks, while long-term policies are generally renewed on an annual basis.
By collecting a health insurance premium from each customer, health insurance providers create a pool of funds from which benefits can be paid to those who file claims for eligible medical expenses. These providers must generate enough revenue to pay benefits while remaining profitable. Thus, total premiums paid in to an insurer are intended to exceed the amount paid out to policy holders in benefits.
It is important to note that, in most cases, payment of a health insurance premium alone does not automatically qualify a policy holder to receive benefits. Generally, each policy holder must satisfy a fixed out-of-pocket sum known as a deductible before an insurance provider will begin paying benefits. Insured individuals may also be responsible for a copay, or a fixed fee paid to a health care provider for routine services at the conclusion of an office visit.
The exact cost of a health insurance premium can vary widely. Factors which can influence premium costs include the extent of coverage offered by a policy, the length of the policy, the amount of the deductible, and the health status of the insured individual. A premium may be paid in regular installments throughout the life of a policy or may be paid in one lump sum at the time that coverage begins. Often, discounts are offered to those who pay their premium in one sum.
Depending on the circumstances of an individual’s employment and the policies of the country in which he lives, he may or may not be responsible for paying his own health insurance premium. Employers who offer health insurance to their employees often partially or fully pay premiums on their employees’ behalves. Those who are self-employed or unemployed must generally pay their own premiums. Individuals living in countries that offer universal health care may pay a health care tax, and thus may not be required to pay a separate health insurance premium.
