Health insurance is an insurance plan that covers all or part of health care expenses. We also refer to it as medical insurance or health coverage. Health insurance ensures that if you need medical treatment, you will not have to worry about the cost of treatment. Just like car or house insurance, the policy-holder agrees to pay a specific amount each month. We call those payments ‘premiums.’
In return for the premiums, the insurer agrees to pay all or part of your medical costs.
The term is ambiguous because it may refer to private insurance companies or the state. In all cases, it refers to covering the costs of health care. Health care includes everything doctors, nurses, clinics, etc. do to restore our physical, mental, and emotional well-being.
Medicare Interactive has the following definition of the term:
“Health insurance (sometimes called health coverage) pays for some or all of the cost of the health services you receive, like doctors’ visits, hospital stays, or visits to the emergency room.”
“It helps keep your health care costs predictable and affordable.”
‘Affordable’ means ‘within the budgets of most people.’
Health insurance – United States
The US health care system depends heavily on private medical insurance. In fact, private insurance is the main source of coverage for most American citizens. This is because unlike other advanced economies, the US does not have universal health coverage.
In 2012, the CDC reported that approximately 61% of Americans had private medical insurance. CDC stands for the Centers for Disease Control and Prevention.
Medicare and Medicaid are the primary sources of coverage for most low-income children, families, and senior citizens. Specifically, they are the primary sources for those who meet certain eligibility requirements.
In 2011, Medicaid and Medicare represented about 63% of the country’s inpatient hospital costs.
Some children and families who are not eligible for Medicaid have CHIP coverage. CHIP, which stands for Children’s Health Insurance Program, is a federal-state partnership.
Health insurance – United Kingdom
The UK’s NHS is a healthcare system that covers all Britons. NHS stands for the National Health Service. The state fully funds the NHS. In other words, the NHS’ source of income is the British taxpayer.
Technically, the NHS is not medical insurance because there are no premiums. However, according to Wikipedia:
“It does achieve the main aim of insurance which is to spread financial risk arising from ill-health.”
The NHS provides most of Britain’s health care, including in-patient care, primary care, long-term health care, dentistry, and ophthalmology.
Even though the UK has universal health coverage, private health care also exists. The UK’s private health care’s source of income is private health insurance.
However, less than 8% of the country’s population uses private health care services. Individuals who have private medical insurance have it as a top-up to the National Health Service.
Health insurance – Canada
Canada, like the UK, has universal health care coverage. It is mainly a constitutional, provincial government responsibility.
However, the health of aboriginal peoples and military personnel is a federal government responsibility. The health care of the Royal Canadian Mounted Police is also a federal government responsibility.
Consequently, each of the country’s provinces administers its own health insurance program.
The Federal Government transfers money and tax points to the provinces to help them cover health care costs.
In Canada, everybody has free access to ‘medically necessary services.’ The constitution defines those services as the care that doctors deliver in hospitals. Medically necessary services also includes the nursing component of long-term residential care.
Additionally, the Federal Government subsidies many chargeable medical services.
Private health insurance exists in Canada. However, in six provinces it only covers services that public health plans do not.
Private rooms in hospitals, for example, are covered by private health insurance plans. Some medical insurance plans cover prescription drugs.
Health insurance – Australia
Medicare provides free universal access to hospital treatment. It also provides access to subsidized out-of-hospital medical services and treatments.
Medicare gets its income from Australian taxpayers. In fact, there is a 2% levy on all taxpayers, plus a 1% levy on high-income individuals.
Several private health insurance organizations fund the private health care system. Medibank Private Limited is Australia’s largest health insurance company. Until 2014, it belonged to the state. In that year, the Government floated it on the Australian Stock Exchange.
There are for-profit as well as not-for-profit medical insurance companies in Australia. Most of them have open membership. Police Health, and a few others, however, restrict membership to particular groups.
Video – Understanding health insurance
Understanding health insurance, particularly medical costs, can be confusing and complicated. If deductibles, premiums, and out-of-pocket maximums confuse you, this Consumer Reports video may help.