Health Insurance

Insurance Companies provide various types of health care insurance, including coverage for hospital stays, visits to physicians and surgical procedures. They serve as intermediaries between the health care providers and receipients of health care. Since the cost of health care is so high, individual seek health care insurance as a form of protection against conditions that cause them to incur large health care expenses.

Types of Health Care Plan:

Insurance Companies provide two types of health care plans : managed health care plans and indemnity plans. The primary difference between the two types is that individuals who are insured by a managed care plan may choose only specified health care providers ( hospital  and physicians) who participate in the plan. Individuals who are insured under an indemnity plan can usually choose any provider of health care services. The payment system of two types of plans also distinctly different. The premiums for managed health care plans are generally lower, and payment is typically made directly to the provider. In contrast, indemnity plans reimburse insured individuals for the health care expenses they incur. 

Exposure to Risk:

The major types of risk faced by health insurance companies are:

a. Interest rate risk,

b. Credit risk, 

c. Market risk and

d. Liquidity risk.

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