RichDayHealthPlans explains the concept of "Trading Dollars":
- What is the concept of "Trading Dollars"? Insurance companies are businesses. They have overhead expenses like salaries, mortgages, supplies, telephone, employee benefits just like other businesses do. In addition to their business expenses, they have to pay your claims!
- Just like any company, insurance companies engage in business to make a profit. If you choose a plan that pays your small bills, such as copays, it can be very expensive for the company to provide the coverage. The premium the insurance company charges must cover the medical bills plus their overhead expenses - plus their profit. They cannot predict how many copays you will use, so they have to build in a cushion so that they charge you enough to cover whatever number of copays you use.
- That is why “Dollar Trading” with an insurance company, or “paying extra premium dollars to them so that they can pay your small bills”, is expensive, and is usually a losing proposition! Insure ONLY what you must. Insure against the catastrophic expense of a dreaded illness, etc. That is what insurance is designed to protect against. You are much better able to pay for the small expenses yourself and save premium dollars while you do it. Also consider: there are no limits to the amount of copays. If you have a serious continuing illness, for example, the copays continue even after you have met your “maximum out-of-pocket” levels. Every doctors’ office copay, every prescription drug copay, every specialist copay, every copay for lab tests, X-rays, MRIs, CAT scans, PET scans and more, can add up to an unlimited amount of money.
Consider this: What would happen to your premiums for your HOMEOWNERS policy if you asked it to paint your house, cut your grass and provide water and electricity?
- What about your AUTO insurance? What if you wanted it to cover replacement and rotation of your tires, provide tune-ups and regular maintenance, change your oil, etc?
- That is what has happened to our HEALTH INSURANCE COSTS. We asked insurance to pay small expenses? Compare a “Dr. Office copay” to the tires and rotation, and the “drug card” to the free oil change and tune-up? As you can see, this plan design has contributed to our escalating health care costs!
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