What Is Medical Health Insurance?

Going to the doctor for a checkup or a sprained ankle is taken for granted as rights by many. Medical health insurance is the type of insurance that pays benefits when a person is sick or injured and normally covers office visits and hospital costs. Medical health insurance is necessary today as the cost of procedures is on the rise. A hospital stay of a few days can cost $10,000 or more.

History

Medical health insurance as an industry has a relatively short history. Prior to the U.S. Civil War, people paid the doctor at the time services were rendered based on rates or goods for services the doctor defined. The first insurance plans came about during the Civil War to cover railroad or steamboat accidents during travel. In 1929, the first modern medical health insurance plan formed in Dallas, Texas, between a group of teachers and Baylor Hospital. By the 1930s and 1940s, some life insurance companies were offering health insurance, and in 1932, the first Blue Cross and Blue Shield plan was implemented. Throughout the 1940s and 1950s, employer-sponsored plans came about with the help of unions.

Costs

Medical health insurance has four main costs associated to what the consumer pays. A copay is a fixed amount the consumer pays for services at the time they are rendered. Copays are typically applied to office visits, prescription benefits or hospital admissions. A deductible is the dollar amount that must be met by the insured party with allowable charges before a health care company will begin payment for medical services. Co-insurance is the percentage of the charges that a consumer is responsible for paying when he receives care. Co-insurance is applied after the deductible is met. A premium is the amount the consumer pays each month or quarter to the health insurance company to be a member or enrollee.

Types

Three main types of medical health insurance are used: PPOs, HMOs and POS. A preferred provider organization, or PPO, is a plan in which contracts are established with certain doctors. This plan usually has fewer and/or lower co-pays for services received from preferred providers. Seeing a nonpreferred, or participating, provider means higher copays. A health maintenance organization, or HMO, emphasizes preventive care, meaning lower costs for covered health and wellness services. HMOs have a prepaid premium for services. This results in reduced out-of-pocket costs and little to no paperwork. A point of service, or POS, plan allows members to choose to receive medical services from affiliated or non-affiliated providers. Using non-affiliated providers means higher out-of-pocket costs.

Coverage

Medical surgical coverage is often referred to as hospital-surgical coverage or basic medical expense. This type of insurance will state and define the medical services covered under the policy, such as office visits, room and board at the hospital, associated miscellaneous expenses in the hospital such as X-rays and outpatient expenses. Major medical health insurance is normally a broader range of coverage that includes more kinds of expenses with fewer limitations.

Considerations

Medical health insurance is often offered through an employer to help defray the cost to the consumer. Individual plans can be customized based on need. The federal government also has programs such as Medicaid and Medicare to provide coverage to the poor, disabled and elderly. The passage of the Affordable Care Act in March 2010 sets in motion changes to the health care system that affect medical health insurance in terms of options and coverage mandates. The act will be rolled out in phases over a three-year period.