Expert Guide of Medical Insurance
Medical, or health, insurance is a contract under which a private medical insurance company or a government agency promises to pay for or provide health-care services. In most cases the people who are insured pay a set monthly amount, called a premium, for medical insurance. The insurance company compensates customers (called the insured) for qualifying medical expenses or sometimes pays the health-care provider directly. The insurance contract often must be renewed every year, at which time the premiums may go up. Medical insurance is a form of financial protection for the insured, who, though they must pay monthly premiums, will be guaranteed against significant monetary loss in case of illness or injury.
Medical insurance exists in every country in the world, though the form it takes varies. The United States is the only developed, industrial nation without a universal health-care system (one in which all residents have access to health care regardless of their ability to pay or of their medical condition), though 27 percent of the population is insured by tax-financed government programs, such as Medicare and Medicaid. Under a fully public medical insurance system, the national government serves as an insurance company, collecting health-care fees (in taxes and government subsidies) and paying out costs. In contrast, private medical insurance companies are generally for-profit businesses that work with providers (physicians, hospitals, and others who supply health-care services) to offer several options in insurance plans. The financial goal of private-sector insurance is to end up with a profit after customers’ claims (requests for payment of medical expenses) are paid out of the premiums the company takes in.
The United States has a market-based system in which the private sector rather than the government provides most of the health care and insurance and in which costs are determined by market forces, such as supply (what providers are willing to provide and at what price) and demand (what consumers want and are willing to pay for). The federal government allows individual states to regulate the health-insurance system, including the insurance companies’ conduct in marketing (advertising and selling their services), underwriting (selecting who and what they will cover and, conversely, which policyholders and risks they will deny for coverage), and rate setting.
About 60 percent of Americans obtain medical insurance through their workplace, which subscribes to and partially funds a group plan for employees. Insured employees pay a small part of the premium and, for a higher amount, can also cover spouses and children up to the age of 21, if the children are still in school. Federal law does not require workplaces to provide medical insurance packages to employees, though many states require employers to buy workers’ compensation insurance, which pays for care related to injuries suffered when a worker is on the job. Part-time workers and those who work for businesses with few employees often cannot get medical insurance through their workplace. State teachers associations, bar associations (for lawyers), and other work-related support groups sometimes provide insurance for members who qualify. Nine percent of Americans subscribe to individual medical insurance plans, which are costly and offer more limited options. Other people qualify for government-sponsored insurance (Medicare or Medicaid). Approximately 16 percent of Americans (more than 45 million people) are uninsured.