Health insurance
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Health insurance is a type of insurance whereby the insurer pays the medical costs of the insured if the insured becomes sick due to covered causes, or due to accidents. The insurer may be a private organization or a government agency. Market-based health care systems such as that in the United States rely primarily on private health insurance.
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History and evolution
The concept of health insurance was proposed in 1694 by Hugh the Elder Chamberlen from the Peter Chamberlen family. In the late 19th century, early health insurance was actually disability insurance, in the sense that it covered only the cost of emergency care for injuries that could lead to a disabilityTemplate:Fact. This payment model continued until the start of the 20th century in some jurisdictions (like California), where all laws regulating health insurance actually referred to disability insurance.<ref>See California Insurance Code Section 106 (defining disability insurance).[1] In 2001, the California Legislature added subdivision (b), which defines "health insurance" as "an individual or group disability insurance policy that provides coverage for hospital, medical, or surgical benefits."</ref> Patients were expected to pay all other health care costs out of their own pockets, under what is known as the fee-for-service business model. During the middle to late 20th century, traditional disability insurance evolved into modern health insurance programs. Today, most comprehensive private health insurance programs cover the cost of routine, preventive, and emergency health care procedures, and also most prescription drugs, but this was not always the case
Private health insurance
A Health insurance policy is a legal, binding contract between the insurance company and the customer. The largest difference between private sector health insurance and life insurance is that for life insurance, a person may purchase guaranteed renewable insurance for the whole of the insured's life at a constant premium rate, while health insurance is generally purchased year by year with generally no assurance of renewability and if renewable no guarantee that premium rates will not increase.
With health insurance, the policy-holder pays a deductible plus coinsurance (for instance, the policy holder pays 20% after a $1000 deductible. Usually there is a maximum out-of-pocket payment per year, and there is usually a lifetime maximum.
Prescription drug plans are a form of insurance offered through many employer benefit plans, where the patient pays a copay and the prescription drug insurance pays the rest.
Some health care providers will agree to bill the insurance company if the patient is willing to sign an agreement that he will be responsible for the amount that the insurance company doesn't pay, as the insurance company pays according to "reasonable" or "customary" charges, which may be less than the provider's usual fee. The "reasonable" and "customary" charges vary according to the geographic location where the patient lives, but usually are determined as a multiple of the amount payable by Medicare.
Health insurance companies also often have a network of providers who agree to accept the reasonable and customary fee and waive the remainder. It will generally cost the patient less to use an in-network provider.
Publicly funded health insurance
With publicly funded health insurance the good and the bad risks all receive coverage without regard to their health status, which eliminates the problem of adverse selection and amplifies the problem of moral hazard.
National Health Service
The National Health Service (NHS) is the "public face" of the four publicly funded health care systems of the United Kingdom. The organisations provide the majority of healthcare in the UK, from general practitioners to Accident and Emergency Departments, long-term healthcare and dentistry. They were founded in 1948 and have become an integral part of British society, culture and everyday life: the NHS was once described by Nigel Lawson, former Chancellor of the Exchequer, as 'the national religion'. Private health care has continued parallel to the NHS, paid for largely by private insurance, but it is used only by a small percentage of the population, and generally as a top-up to NHS services.
Health insurance in the United States
According to the latest United States Census Bureau figures, approximately 85% of Americans have health insurance. Approximately 60% obtain health insurance through their place of employment or as individuals, and various government agencies provide health insurance to over 29% of Americans.<ref name="Census">"Income, Poverty, and Health Insurance Coverage in the United States: 2005." U.S. Census Bureau. Issued August 2006.</ref> In 2005, there were 41.2 million people in the U.S. (14.2 percent of the population) who were without healthcare insurance for at least part of that year.(ibid) For many people, however, this does not boil down to a simple question of affordability. Part of this population might include young and healthy individuals with low risk of serious illness who don't believe that health insurance would be cost-effective. In fact, approximately one-third of these 41.2 million live in households with an income over $50,000, with half of these having an income of over $75,000.<ref>Income, Poverty, and Health Insurance Coverage in the United States: 2005. U.S. Census Bureau.</ref> Additionally, one third of these 41.2 million are eligible for public health insurance programs but have not signed up for them.<ref>According to Dr. David Gratzer, senior fellow at the Manhattan Institute. Interviewed in the Sun, in the article Momentum Grows on Health Care.</ref> People living in the western and southern United States are more likely to be uninsured.<ref name="Census"/>
Medicare
In the United States, government-funded Medicare programs help to insure the elderly and end stage renal disease patients. Some health care economists (Ewe Reinhardt of Princeton and Stuart Butler among others) assert that (the third party payment feature) these programs have had the unintended consequence of distorting the price of medical procedures. As a result, the Health Care Financing Administration has set up a list of procedures and corresponding prices under the Resource-Based Relative Value Scale.
Starting in 2006, Medicare Part D provides a program for the elderly to buy insurance for the purchase of prescription drugs.
Medicare Advantage
Medicare Advantage plans expand the health care options for Medicare beneficiaries. The option for Medicare Advantage plans is a result of the Balanced Budget Act of 1997, with the intent to better control the rapid growth in Medicare spending, as well as to provide Medicare beneficiaries more choices.
Medicaid
While Medicaid was instituted for the very poor, beginning in 1972, the number of individuals in the United States who lacked any form of health insurance for any period during the year increased each year, every year with the exceptions of the years 1999 and 2000.Template:Fact It has been reported that the number of physicians accepting Medicaid has decreased in recent years due to relatively high administrative costs and low reimbursements. <ref>Cunningham P, May J. "Medicaid patients increasingly concentrated among physicians." Track Rep. 2006 Aug;(16):1-5. PMID 16918046.</ref>
The shift to managed care in the U.S.
Through the 1990s, managed care grew from about 25% of U.S. employees to the vast majority.
| Year | Conventional plans | HMOs | PPOs | POS plans |
|---|---|---|---|---|
| 1988 | 73% | 16% | 11% | NA |
| 1993 | 46% | 21% | 26% | 7% |
| 1996 | 27% | 31% | 28% | 14% |
| 1998 | 14% | 27% | 35% | 24% |
| 1999 | 9% | 28% | 38% | 25% |
| 2000 | 8% | 29% | 41% | 22% |
| 2001 | 7% | 23% | 48% | 22% |
According the Centers for Medicare and Medicaid Services, nearly 100% of large firms offer health insurance to their employees.<ref>http://www.cms.hhs.gov/TheChartSeries/downloads/private_ins_chap4_p.pdf</ref> Although much more likely to offer retiree health benefits than small firms, the percentage of large firms offering these benefits fell from 66% in 1988 to 34% in 2002.<ref>http://www.cms.hhs.gov/TheChartSeries/downloads/private_ins_chap4_p.pdf</ref>
Health insurance in Canada
Until recently, private health insurance was illegal in all of Canada. All insurance was supplied by the government. Recently, the Supreme Court of Quebec ruled, in Chaoulli v. Quebec that private business must be allowed to offer health insurance and compete with the public program.
See also
- COBRA
- Government ownership
- Health economics
- Health maintenance organization
- Healthcare reform
- Health Insurance Portability and Accountability Act
- Self-funded health care
- List of insurance topics
- Public health
- RAND Health Insurance Experiment
- Social security
- Social welfare
- AHIP
Private health insurance • Group health insurance • Social health insurance • Comprehensive major medical insurance
Disability insurance • Accident insurance • Critical illness insurance • Terminal Illness Insurance • Dental insurance • Vision insurance • Workers' compensation
See also: Life insurance • Property insurance • Auto insurance • Business insurance • Travel insurance
