What Is Health Insurance?
Health insurance is a type of insurance that covers part or all of a person’s healthcare bills. Typically, health insurance provides coverage for medical and surgical expenses incurred by the insured.
Insurance is a legal contract between two parties – an insurance company (insurer) and an individual (insured). The insurer promises to compensate the insured for specified losses, damages, illness, or death in return for premiums (an amount paid by the insured or their sponsor to purchase health coverage). In simple words, insurance offers individuals financial protection from risks or losses due to unforeseen events. There are many types of insurance policies, and health insurance is one of them.
Health insurance covers the risk of a person incurring medical expenses. The Health Insurance Association of America defines health insurance as “coverage that provides for the payments of benefits as a result of sickness or injury. It includes insurance for losses from accident, medical expense, disability, or accidental death and dismemberment”. In essence, health insurance protects against the costs of health care services.
Depending on the insurance company or type of coverage, the insured may pay their health care bills and receive reimbursement from the insurer afterward. The insurer may also cover the bill by paying directly to the provider. The term “provider” refers to the pharmacy, hospital, doctor, or healthcare practitioner that provides the treatment.
You may group health insurance into two categories based on the entity providing the insurance:
- Private health insurance: An entity is responsible for providing this insurance, besides the state or federal government. There are two major ways to obtain this insurance: You can purchase it through a private health insurance company, or your employer can offer you it as part of employee benefits.
- Public health insurance: The federal, state, or local governments are responsible for providing this insurance. In this insurance, people have some or all of their healthcare costs paid for by the government.
Health Insurance Example
Medicare is a federal health insurance program created in 1965 by the United States government for citizens aged 65 and older, regardless of their income. It is also available for younger people who meet specific eligibility criteria and dialysis patients in general. Medicare is an example of a public health insurance plan.« Back to Glossary Index