What does “policyholder” mean for health insurance?
The policyholder is the legal owner of an insurance policy. The policyholder may or may not be the beneficiary, but he or she has the power to determine the beneficiaries. The policyholder is usually the signatory on the insurance contract with the insurance provider. The importance of the policyholder cannot be overstated.
As the contracted party, the policyholder decides who can benefit from the terms of coverage and insurance protection. In group insurance, there is a group policyholder.
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What is a health insurance policy?
The health insurance policy is a contract that contains agreements to provide insurance coverage for health and medical care for a price, usually a monthly premium. The insurance provider agrees to pay for medically necessary treatment and services that fall under the terms of the contract.
The Affordable Care Act changed the essential content of all health insurance contracts to provide::
- A minimum actuarial value of 60 percent (“What is acturial value?”)
- Minimum essential coverage
- Essential health benefits
Ownership of insurance policies was far more involved and difficult before the Affordable Care Act. Obamacare requires insurers to accept all applicants; it also requires applicants to get and keep qualified health insurance.
Policy ownership is a right to all eligible applicants, and they can exercise the right to buy a policy during the annual open enrollment period. Those that miss the open period may have to find a reason to get a special enrollment period.
Learn more about the open enrollment period here.
Ownership is the Key
The structure of health insurance in the US puts ownership at the center of the transaction. Insurance companies offer health insurance plans. Among their offers, they provide one type for groups and another kind for individuals and families.
In every case, there is an insurance provider and a policyholder or policy owner. These parties make the policy agreement; it is the contract for insurance.
The policy sets terms ta include the fee for the contract and any conditions that the policyholder must meet before insurance benefits begin.
As stated above, in most individual cases the policyholder is the insured person; the owner has the power to name others as the beneficiary or insured party.
Policyholder versus Beneficiary
There is an important distinction between policyholder and beneficiary. The beneficiary is the person with authority to use the policy for its benefits. This person is the insured person under the policy.
The policyholder is the owner of the policy. He or she is the party to the contract with the insurance provider.
In most cases, the policyholder is the beneficiary. Also, many policyholders use the open enrollment to purchase insurance for another person. A common situation is when a parent purchases a policy for an infant or minor.
Beneficiary and Policyholder Benefits
The insured party or beneficiary has rights granted by the policyholder to use the policy and get insurance benefits, cost sharing, and other protections of coverage. This includes meeting the requirements of the individual mandate of the Affordable Care Act.
The policyholder is legally responsible for the payments of the premiums and other costs incurred. They can make agreements that the beneficiary will pay deductible, copays, and coinsurance as a condition of getting the insurance coverage.
Confused by all the health insurance lingo? Click on the following to learn the language.
Group policyholders are often companies or organizations that sponsor or promote health coverage for a class of individuals and their dependents. A familiar example is an employer-sponsored coverage plan for its employees.
The policyholder may be a beneficial association, labor organization, or some special entity organized for the purpose of handling the group’s insurance. The group policyholder assigns benefits to the employees or members by a certificate of insurance.
The certificate is proof and authority to get health benefits from the insurer. Typically, group members have an ID card that proves they are eligible for coverage.
Comparison shopping is particularly valuable in times of rapid change in the insurance markets. If you don’t want to use your employer’s health coverage, you can use a site like ours to compare free health insurance quotes from private carriers in your state.
The Basics of Group Policies
Group health insurance is the primary way most Americans get heath coverage. Employer-based plans offer employees financial security and employers use these benefits to attract and retain talented workers.
In a group plan, the employer pays some or all of the premiums. They often provide further assistance to cover out-of-pocket expenses and deductibles.
The coverage is essentially the same for all group members, and the Affordable Care Act reforms have improved the content of all health plans.
- Group ID Numbers – The insurers set the plans for each employee group or other types of groups through a sponsor. The insurer provides a group ID for each purchaser of its group policy plans.
- Member ID Numbers – Each member of the group gets a unique number to identify the account and determine eligibility. When presented for a service, the service provider can quickly confirm that the card is valid and the named person is entitled to benefits.
- Payment – The member must pay the out-of-pocket expenses until reaching the deductible. The deductible triggers the costs sharing and reduces the beneficiary payments to copays and coinsurance.
Recommended reading: “What does ‘out-of-pocket expense’ mean in health insurance?”
Facts to Remember
The policyholder is an important role whether in a large group, small group, family or individual coverage. The policyholder is the person named on the contract for insurance, and the terms apply to the holder or the persons he or she selects as beneficiaries.
Health insurance beneficiaries are the insured parties that use the insurance policy to get health services. The policyholder is usually the insured person in family and individual coverage, the individual policyholder or group policyholder is always the owner.
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