Are there any limitations on what an insurance company can charge for coverage?
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UPDATED: Jan 28, 2009
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The cost of premiums for health care insurance is generally left to the marketplace or negotiation between insurers or plans and employers, associations or labor bargaining units.
One exception is in the Medicare assignment situation. There persons eligible for Medicare insurance are permitted to enroll in private insurance or health service plans (HMO’s) at fixed premiums and the Medicare benefits are assigned to the insurer or plan. The insurer or plan promises to provide coverage and benefits that may exceed, but cannot be less than that mandated under Medicare.
Through a combination of the effect of supply and demand in the marketplace or by the effect of collective bargaining, health insurance premiums have developed a certain hierarchy of cost. Traditional fee-for-service insurance generally involves the highest premium rate and also the highest rate of growth of premium over time. The next lowest premiums are generally associated with insurance or plans that offer some choice of providers with limits, such as Preferred Provider Organizations (PPO’s) or Independent Practice Associations (IPA’s). The lowest premiums and rate of growth of premiums have been associated with health service plans or HMO’s as a result of their limits on choice of health care provider and choice and amount of coverage and benefits.
New variations or hybrids are developing. Point of Service Organizations (PSO’s) are essentially a hybrid between limited choice plans and HMO’s where each insured or member has a choice to determine the cost to them of the health care at the time the service is to be provided, by either selecting from a part of the plan fixing the health care provider s/he may see or from a limited choice part of the plan.