Private Medical Insurance (PMI) refers to health insurance services provided by private companies. In the United States, Private Medical Insurance plays a major role in providing healthcare services.
Private Medical Insurance has become quite popular nowadays because the maximum number of extensive Private Medical Insurance Programs offer coverages for routine healthcare costs, emergency medical treatment processes and preventive care, and maximum prescription drugs. However, this is not the case every time. There are exceptions.
There are two underlying difficulties in case of Private Medical Insurance. They are:
Adverse Selection: This term is used by the insurance companies to denote the propensity for those people who would be benefited from purchasing Private Medical Insurance. In case of Private Medical Insurance, people who are not healthy are more inclined to buy medical insurance in the anticipation of huge medical expenses. Contrarily, people who are healthy do not get interested to buy medical insurance because they consider it unneeded. In case of Private Medical Insurance, the expenses are balanced among a big number of individuals. If an individual falls ill and the others are healthy, the insurance company can treat the sick individual with the money contributed by the healthy individuals. Adverse Selection disturbs this balance. It may turn out that an insurance company has a large number of sick policyholders and their medical expenses cannot be balanced with a big number of healthy individuals.
Moral Hazard: This denotes the mentality and change in conduct resulting from an individual's cognition that if anything bad is going to happen, the out-of-pocket expenditures will be lessened or reduced by the Private Medical Insurance Policy, for example a policy which offers reduced expenses for healthcare.
Private Medical Insurance is provided in the following forms:
HMO (Health Maintenance Organizations): In an HMO, an insurance company regulates every healthcare aspect of the insured person. In this plan, a PCP (Primary Care Physician) has the responsibility of the total treatment of members who have been alloted to him.
PPO (Preferred Provider Organizations): In this plan, a third party organization makes a contract with a healthcare providers group who offers healthcare facilities at lower than normal prices in exchange of timely payment and a fixed number of patients.
POS (Point of Service): This type of plan implements some characteristics of both the plans above. The POS members can choose a system only at that particular point of time when that service is provided.
