Health insurance is the insurance that pays all or part of a patient’s hospital expense. It may be provided through a government-sponsored social insurance program, or from private insurance companies. It is sometimes used more broadly to include insurance covering disability or long-term nursing or custodial care needs.
Similar benefits paying for medical expenses may also be provided through social welfare programs funded by the government. In each case, the covered groups or individuals pay premiums or taxes to help protect themselves from high or unexpected healthcare expenses
Health plan vs. health insurance
A health plan refer to a subscription-based medical care arrangement offered through HMOs, preferred provider organizations, or point of service plans. Historically, HMOs tended to use the term “health plan”, while commercial insurance companies used the term “health insurance”.
Scheduled health insurance plans are not meant to replace a traditional comprehensive health insurance plans and are more of a basic policy providing access to day-to-day health care such as going to the doctor or getting a prescription drug. Comprehensive health insurance pays a percentage of the cost of hospital and physician charges after a deductible (usually applies to hospital charges) or a co-pay (usually applies to physician charges, but may apply to some hospital services) is met by the insured.
The basic concept of insurance is population solidarity.[dubious – discuss] There are inherent risks in a population but the population absorbs the cost of risks to an individual by spreading the impact of incurred costs amongst the insured population. Insurance systems must then typically deal with two inherent challenges: adverse selection and ex-post moral hazard. Some national systems with compulsory insurance utilize systems such as risk equalization and community rating to overcome these inherent problems
Insurance companies use the term “adverse selection” to describe the tendency for only those who will benefit from insurance to buy it. People who consider themselves to be reasonably healthy may decide that medical insurance is an unnecessary expense; if they see the doctor once a year that’s much better than making monthly insurance payments. Specifically when talking about health insurance, unhealthy people are more likely to purchase health insurance because they anticipate large medical bills.