Hassle-Free Health Coverage: Commercial Insurers

Many of the major life and health insurance companies market various forms of hospitalization coverage, including both group and individual policies. Your insurance company may issue one or more types of hospitalization insurance.

The structure of the commercial insurer offering hospitalization policies generally includes a marketing department, underwriting department and a claims and administration section.

These are organizations which provide prepaid medical and health benefits. The best example of this type of provider is Blue Cross/Blue Shield. This system began in 1939 as part of the California Physicians' Service. This early plan was designed to pay doctors' fees. The American Medical Association was closely involved with the early development of medical association service plans.

Most Blue Cross-Blue Shield plans are organized in accordance with state laws which recognize them as nonprofit service organizations and exempt them from state premium taxation. Depending on the state, Blue Cross-Blue Shield may or may not technically operate as an insurer. Regardless, they are regulated by the state insurance departments.

Normally, Blue Cross pays hospital expenses and Blue Shield covers physician charges. Unlike a commercial insurer, which issues a policy and has a contractual relationship with the insured, service organizations have a contractual relationship with the providers of health care, namely doctors and hospitals. Subscribers to this health care service then use the services of the contracted doctors and hospitals commonly referred to as participating providers. All claims are settled directly with the providers by Blue Cross-Blue Shield.