Insurance is a tool for protecting oneself from risk. Life insurance, for example, pays the dependents of a deceased person, generally as a replacement for earnings of the decedent. Health insurance can be viewed as a hedge against high medical bills, though in many cases it is actually the main source of funds for all medical expenses. In the United States, the picture is complicated by the historical linkage of coverage to employment. Here are some of the basics of this subject.

Early forms of coverage appeared in the nineteenth century. In its current form of medical expense coverage, which pays for hospitalization and other medical expenses, it first became available in the early twentieth century. There are many variations on what is and is not covered, and the extent to which different expenses are reimbursed.

The provider may be a private company, or it may be a government agency, as is the case with Medicare. Payments may either go to the insured party, or directly to the provider of services. The premium may be paid by the insured party, a government agency, an employer, some other organization such as a labor union, or some combination of the above.

An odd feature of medical coverage in the United States is that many people are covered by plans provided by employers. This became common in World War II when labor shortages caused employers to compete for scare employees. Wages were frozen, but a loophole allowed employers to compete by improving employee benefit packages. At one time, employers paid all or most of the cost. In recent times, as medical expenses have rapidly increased, employees have had to pay more and more of the cost themselves. The burden of this is reduced by tax rules that exclude the employee’s share of the cost from their taxable income.

Health plans are offered by health maintenance organizations as a replacement for conventional coverage, though they could be considered to be insurance. They generally have a fixed payment that covers all medical expenses. It is not clear if they work better than conventional plans, though many people advocate their use. They have the advantage of being biased towards preventive care. On the other hand, they have been accused of rationing, i. E., limiting access to health care.

The large number of Americans lacking medical coverage is a major social issue today. This is partly due to its high cost. The cost is worse for those who don’t have employer subsidized plans available. Even a non subsidized plan is better than nothing, because the group rates that employers can get are usually much lower than individual rates.

In 2010 the United States enacted major health care reforms. Many of the changes will not be effective for several years, and thus may possibly be modified before they take effect. One change effective now is that parents can continue to cover their children till they reach the age of 26. Also, coverage of pre-existing conditions is now required. Both of these changes will tend to increase the cost of insurance while they also extend its coverage.

There is still a lot of discussion about this subject in the United States, and it is likely that more changes will be coming. The Medicare model, where a single payer, the government, provides the coverage, is favored by many. On the other hand, many are opposed to this kind of increase in the size of the government. It is hard to imagine what health insurance will be like in ten years.

Get the low down on what health insurance is all about now in our complete review of top UK private medical insurance cover.

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