What is Healthcare Insurance?

wiseGEEK Writer

Healthcare insurance or simply, health insurance, provides for some medical care, and charges customers a monthly fee or premium for this service. Some countries offer health insurance to people and do not deduct a premium for coverage. When people have private insurance, as many do in the US, they pay money to a health insurance company in exchange for some coverage of health care as needed. The amount paid and coverage offered is extremely variable, though certain states may mandate that some things always be covered.

Many no-deductible health insurance plans are employer-based health care plans.
Many no-deductible health insurance plans are employer-based health care plans.

In some countries, all people have access to basic medical care through health care insurance provided by the government. Taxpayers may still contribute via taxes to help to meet these costs, and some countries have hybrid forms of government and private insurance. Canada, for instance, provides basic care to all its citizens but allows people to purchase private insurance to help pay for things not covered by the government plan. These things include prescription drugs, cosmetic procedures, and other voluntary but not medically necessary surgeries.

A healthcare insurance agreement.
A healthcare insurance agreement.

Other countries provide significantly more in healthcare insurance. France covers a wide range of treatment, and even most forms of alternative medicine. As in Canada, the tradeoff to receiving government health care is usually paying higher taxes.

The US does have some forms of government healthcare. These are programs that are either subsidized and allow people to pay a smaller amount for health insurance, like Medicare programs for senior citizens and the Children’s Health Insurance Program (CHIP) for families of lower incomes. Some insurance is fully provided by the government like Medicaid, but people must qualify for this by having a very low income.

More frequently, people in the US must purchase healthcare insurance, which they may do privately. Many get their insurance through employers and pay a share of the cost, which can still be significant. It is not unusual for a family to pay about $200-$800 US Dollars (USD) monthly for shared cost insurance with an employer. As of 2008, average cost of many comprehensive health care plans was about $10,000 USD for a family per year.

There are a number of types of healthcare insurance offered in the US. The most common used to be major medical insurance. People would see doctors and be reimbursed about 80% of costs. Many types of major medical insurance did not spend much time approving or denying claims, and simply had an 20%/80% agreement with clients.

To save costs, companies developed Health Maintenance Organizations (HMOs). HMOs work by having a network of doctors, and medical facilities participating in the health care plan. People chose one primary care physician from that network, and need referrals to see specialists contracted with the network. This type of healthcare insurance is sometimes less costly, but some people don't like limitations to seeing in-network providers.

An alternative type of healthcare insurance, the PPO (preferred provider organization) arose to allow people more choice. In PPOs, patients can see out of network providers, though they pay more for this. They can also see in-network specialists and pay a lower share of cost. Some prefer the flexibility of this plan, but usually have to pay more in premiums to get it.

Typically, when insurance is not obtained through an employer, the best and usually least expensive plans are with HMOs. Employers may try to offer a range of types of insurance, so that employees have a choice and a price range to choose from. Smaller employers may only be able to offer one kind of insurance to their employees.

Other types of healthcare insurance may help with the costs of things not covered by typical medical insurance. Some people obtain dental insurance or vision care insurance too, and these are usually much less expensive when purchased through an employer. They won’t cover everything, but they can help lower costs of major dental work or eye exams and prescription eyewear.

A HMO benefits summary.
A HMO benefits summary.

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