What is the main purpose of a health insurance premium?

The main purpose of a health insurance premium is to ensure that the policyholder retains active insurance coverage. A premium is the amount an insured individual pays to the insurance company, typically on a monthly basis, to maintain their health insurance policy. By paying this fee, policyholders can secure access to benefits and coverage for various health-related expenses as outlined in their policy.

While premiums do help in covering costs associated with medical services and administrative expenses, their primary function is tied to maintaining the policyholder's active status within the insurance program. Without the payment of premiums, an individual's coverage could lapse, leaving them without insurance benefits when they need them most. This structure is foundational to how health insurance operates, ensuring that individuals can receive medical care when necessary, thus safeguarding their health and financial stability.