What is a premium in the context of medical insurance?

In the context of medical insurance, a premium refers to a periodic payment made by the policyholder to maintain an active insurance policy. This payment is typically made monthly, quarterly, or annually, and is required to ensure that the insurance coverage remains in effect. The premium is a fundamental part of how insurance works; it enables the insurer to provide coverage against potential healthcare expenses.

Understanding this concept is essential because the premium is distinct from other costs associated with healthcare insurance, such as deductibles, co-payments, or costs for specific services. Unlike a co-payment, which is a specific dollar amount paid at the time of service, or a one-time fee for particular procedures, the premium is an ongoing commitment that allows the insured to access benefits when they need medical care.

This knowledge is vital for medical coders and billers, as it helps them understand the financial aspects of insurance policies and the overall healthcare billing process.