Insurance: Answers to Basic Questions

Insurance: Answers to Basic Questions

The basic concept of insurance asks the provider and the insured to weigh the odds that the unthinkable will happen. In essence, insurance protects customers, not against the plethora of natural disasters and health-related crises that could occur, but against the harsh ramifications of these crises in the modern world. From boat insurance to fire insurance to pet insurance, as many types of insurance exist as do possible emergencies. A look at an example -- health insurance -- however, will make understanding the basic concept of insurance much easier. Customers buy health insurance armed with the hope that they will never have to use it and the reality that statistics suggest most people will require a hospital stay during some part of their lives. Should the customer become ill, the insurance company would pay all or most of the cost of medical treatment, often including preventative care, such as doctor's visits. Should the customer remain healthy, however, he or she would pay the insurance company for nothing. Thus, the basic concept of insurance is similar to the basic concept of the lottery -- both sides bet on the probability of an event happening or not happening during a certain time period ("How does insurance work?" n.d.).

When healthcare organizations choose an insurance company and policies for their organization, they must consider several factors. Most businesses have two primary options for insurance offerings -- traditional insurance and managed care plans. Managed healthcare plans offer services from a select network of providers and are often less expensive than traditional healthcare plans, which are more flexible. Deciding which option to offer depends on what the business can afford and if the healthcare organization wants to offer other benefits, such as vision and dental insurance, or to extend benefits to employees' family members. Once the healthcare organization has considered these factors, it can make an informed decision about its budget and the type of healthcare offering that best fits that budget and allows the organization to offer the options it has valued as important ("Choosing the right health plan for your employees" 2008, "managed health care plans" 2008).