The Basics

Private Medical Insurance - How It Works

Private insurance essentially collects premiums and then pays money for medical services rendered. In the beginning the system was pretty simple, but over the years, and for good reasons, it has become more complex.

When private medical insurance arrived, the financial relationship between the doctor and the patient did not initially change that much. The patient still paid the doctor out-of-pocket. What changed was what happened next. Instead of absorbing the cost, the patient filed a claim with the insurer for reimbursement. Depending on the terms of the coverage, the insurer would reimburse the patient for all or part of the expenses. This is known as the "pay-and-claim" approach.

Pay-and-claim works well for smaller charges, but a major expense - say a hospital admission - can leave the patient with eye-popping credit-card charges. Insurers recognized that they could serve the patient and the doctor better if they set up a system whereby they would pay the provider directly, leaving the patient responsible only for coinsurance and similar items.

In the international arena, CIGNA often arranges to pay providers directly. It is even prepared to issue a Guarantee of Payment to the provider, promising the provider that it will pay for the proposed course of treatment. The rate of acceptance of these GOPs, as theyre called, is very high. CIGNA International does have a sterling reputation with doctors and hospitals around the world, both for prompt and accurate payment, and for being easy to work with. Members benefit from this reputation on a daily basis, when they walk in to the doctors office, or the emergency room, and present their CIGNA International ID card.

As the passing reference to coinsurance above indicates, there are many ins and outs to modern medical insurance. Insurers offer a variety of different plans, with different features. Employers can choose among these plans, and they will often offer their employees a choice among several plans.

Employers may also choose to pay the whole premium, or cost of the insurance, themselves, or they may require the employee to pay part of this cost as a regular payroll deduction.

Employees may generally choose to cover only themselves; or they may also choose to cover some or all of their dependents.