About Medical Insurance

With the debate raging over the 2010 Health Care Reform Act, health insurance has been on Americans' minds. However, few people really understand how health insurance works. Many people don't have health insurance in the first place. Those who do often note the deduction from their paycheck and visit the doctor without really thinking about the process behind it.

The Basics

Medical insurance is an agreement between a policyholder and an insurance company. The policyholder pays the insurance company an amount of money each month. In exchange, the insurance company agrees to cover a portion of the insured's medical expenses.Medical insurance is intended to help make health care affordable for working families.

Types

Medical insurance plans usually fall under three different models. Preferred provider organizations (PPOs) get member doctors to offer services at a discount. Subscribers to these insurance plans receive less expensive medical care, offered because the PPO brings more clients to the doctor's door. Point of service plans (POS) cover most or all treatment within a network of independent doctors. They will still help with expenses outside of the network, but pay for a significantly lower proportion. Health maintenance organizations (HMOs) maintain a staff of medical professionals. Members visit the HMO staff for procedures, paying a nominal on-site feet, or copayment, after each appointment.

Deductibles

Most medical insurance carries a deductible, an amount of money the insured pays out of pocket before the insurance company begins paying out. For example, a policy with a $200 deductible would pay $300 of a $500 bill, $800 of a $1,000 bill and none of a $100 bill. Many policies will name different deductibles for different kinds of procedure, such as a $100 deductible for doctor visits and a $500 deductible for emergency medicine. Most policies also carry an annual out-of-pocket limit, over which the insurance company will pay 100 percent of additional qualifying medical expenses.

History

The first medical insurance began in the mid 1800s, according to an article by the Northern California Neurosurgery Medical Group. These plans were accident insurance, written to pay for expenses associated with riding trains and steamboats. From those roots, medical insurance grew through the late 19th and early 20th centuries to the health coverage understood today. In the U.S., medical insurance is primarily a work-related benefit, paid for or subsidized by employers. In many other countries, medical insurance is provided by the government.

Health Care Reform Act

The 2010 Health Care Reform Act makes sweeping changes to the landscape of health care and health insurance, specific changes to take effect between 2010 and 2014. Some of the major changes include eliminating pre-existing condition penalties, providing tax subsidies to help small businesses and individuals buy insurance, and legally requiring all Americans to carry health insurance.