Final answer:
Insurance Terms
Premium: The amount paid for an insurance policy to keep it active.
Deductible: The amount policyholders must pay out of pocket before insurance coverage begins.
Co-insurance: The percentage of medical costs that policyholders must pay after meeting their deductible.
Co-payment: A fixed fee policyholders must pay for certain medical services.
HMOs: Health Maintenance Organizations that provide healthcare and are paid a fixed amount per person enrolled in the plan.
PPOs: Preferred Provider Organizations that provide discounted healthcare costs through a network of preferred providers.
Step-by-step explanation:
Insurance terms such as premium, deductible, co-insurance, co-payment, HMO, and PPO, define various aspects of insurance policies and are designed to ensure policyholders understand their financial responsibilities and options within their plans.
Insurance Plan Terms Defined
When dealing with insurance plans, several terms are crucial to understand how these plans work and how they affect the policyholder financially. Below are the definitions of the key insurance terms:
Health Maintenance Organization (HMO): An organization that provides health care for a fixed annual fee with an emphasis on prevention and primary care.
Preferred Provider Organization (PPO): A type of health plan where policyholders pay less if they use providers in the plan's network and more for providers outside of the network.
Understanding these terms is essential to navigating and choosing the right insurance plan. Each of these mechanisms, especially deductibles, co-payments, and co-insurance, can help reduce moral hazard by requiring policyholders to share in the cost of their healthcare and thereby discourage overuse of insurance benefits.