Healthcare Technology Featured Article

May 17, 2011

Health Insurance and What It Means For You

Health insurance is insurance against the risk of incurring medical expenses. The benefit is administered by a central organization such as a government agency, private business, or not-for-profit entity. Sounds simple but choosing the right insurance policy, with the right deductibles and coverage, can sometimes seem a daunting task.

Believe it or not, the concept of health insurance goes all the way back to 1694 when it was first proposed by Hugh the Elder Chamberlen, a British midwife (men were midwives in those days) and a member of the family which invented the obstetrical forceps. In the late 19th century, "accident insurance" began to be available, which operated much like modern disability insurance. Accident insurance was first offered in the United States in the 1850s.

Hospital and medical expense policies were introduced during the first half of the 20th century. During the 1920s, individual hospitals began offering services to individuals on a pre-paid basis, eventually leading to the development of Blue Cross organizations. The predecessors of today's health maintenance organizations (HMOs) originated in 1929, and continued through the 1930s and on during World War II to what we know today.

Before the development of medical expense insurance, patients were expected to pay healthcare costs out of their own pockets, much like those who are uninsured today.

Over time traditional disability insurance evolved into modern health insurance programs as we know them today. A health insurance policy is a contract between an insurance company and an individual or his sponsor (sometimes, an employer). The contract can be renewable annually, monthly or be lifelong. The type and amount of healthcare costs that will be covered by the health insurance company are specified in advance. Most comprehensive private health insurance programs cover the cost of routine, preventive, and emergency healthcare procedures, and most prescription drugs, but not always.

The United States healthcare system relies heavily on private health insurance, which is the primary source of coverage for most Americans.

According to the Centers for Disease Control, approximately 58 percent of Americans have private health insurance. Public programs provide the primary source of coverage for most senior citizens and for low-income children and families who meet certain eligibility requirements. The primary public programs are Medicare, a federal social insurance program for seniors and certain disabled individuals, and Medicaid, funded jointly by the federal government and states but administered at the state level, which covers certain very low income children and their families.

Because not everyone is covered in the U.S., the Obama administration worked to create universal health insurance and in 2010 President Obama signed into law the Patient Protection and Affordable Care Act. This Act included a main provision that every American must have medical insurance (or pay a fine) in exchange for the dropping of unpopular features of America's health insurance system, such as premium weightings and exclusions for pre-existing conditions and the pre-screening of insurance applicants.

Deborah DiSesa Hirsch is an award-winning health and technology writer who has worked for newspapers, magazines and IBM in her 20-year career. To read more of her articles, please visit her columnist page.

Edited by Stefania Viscusi
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