Certified Application Counselor Practice Test

What does "premium" refer to in health insurance terms?

1. The amount paid quarterly

2. The fixed payment made for a covered service

3. The monthly payment for a health insurance plan

4. The total out-of-pocket maximum

The correct answer is: The monthly payment for a health insurance plan

In health insurance terminology, "premium" specifically refers to the monthly payment made for a health insurance plan. This is the amount that an individual or employer pays to the insurance company to maintain coverage, regardless of whether any services are used in a given month. It is a critical component of health insurance costs, as it secures the policyholder's access to healthcare services throughout the policy term. Understanding what a premium entails is important, as it is distinct from other costs associated with health insurance, such as copayments for services or deductibles that must be met before the insurer starts to pay. The other options represent different aspects of health insurance: the amount paid quarterly relates to a payment structure that may exist but does not define premiums, the fixed payment for a covered service refers to copayments, and the total out-of-pocket maximum is the cap on total costs that a policyholder would incur.