Understanding Insurance – The basic concept behind health insurance is a community approach to cost-sharing. In insurance lingo, this is called a "pool," which includes others who have also purchased health insurance coverage.
The premiums people pay go into a pool.
A pool is a collection of premiums used to pay claims for all members in the pool.
When someone receives medical care, money is used from the pool to pay the bills.
As health care costs rise...
... and health care use increases...
... the amount of money in the pool decreases as claims are paid.
Your premiums go up because the amount of money in the pool must increase to pay all the bills.
This ensures that there is enough money in the pool ...
... to cover the potential health care expenses and prevent a catastrophic event from bankrupting an individual or a family.