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Health insurance business in US

Updated on July 1, 2017

What is Health insurance?

Health insurance is the type of insurance which pays for medical expenses incurred by a person. It may be provided by private insurance companies or through a social insurance program sponsored by government. A Health insurance can be purchased by individual consumers or on a group basis. For example a company can organize a group health insurance policy to cover its employees. The individual persons or groups pay premiums to protect themselves from unexpected medical expenses. Most health insurance policies extend the cover to include disability (partial or permanent) and long-term nursing requirements.

Before the mid 20th century people used to pay all their expenses on health care out of their own pockets. Hospital and medical expenses schemes were initially introduced by individual hospitals during 1920s. Today, most comprehensive health insurance policies are designed to cover routine, preventive, and emergency health care expenses, and sometimes cost of drugs and laboratory investigations prescribed by medical consultants.

The functions of a Health insurance policy

A health insurance policy is designed by an insurance company for a particular period of time according to the requirements of the purchaser of the policy. The policy is renewable annually or monthly. A health insurance policy is a contract between the insurance company and an individual or his sponsor such as the employer or a provident or other fund etc. The type of expenses and amount of health care costs which will be covered by the insurance company and exclusions to the policy are specified in the policy document. A premium has to be paid by the policy holder or his sponsor to the insurance company monthly, quarterly, half yearly or annually to obtain the health coverage and keep it in force.

General terms in a health insurance policy include:

  • Benefits:

A schedule is attached to explain what was covered for a medical service and the amounts of payments and patient responsibility amount.

  • Exclusions:

These are the expenses which are not covered and insured person is expected to pay the full cost of these services out of their own pocket.

  • Coverage limits:

Most health insurance policies pay for the expenses only up to a certain amount of dollars. In these cases, the insured person has to pay for any expenses in excess of the maximum payment limit. Some insurance schemes impose maximum annual coverage limits or even maximum lifetime coverage limits and the policy-holder must pay the excesses.

  • Out-of-pocket maximum:

When the insured person reaches the out-of-pocket maximum, his payment obligation ends and thereafter the health company pays all further covered costs. Out-of-pocket maximums can be limited to a specific benefit category or can apply to all coverage provided during a specific benefit year.

  • Deductible amount:

This is the amount to be paid by the insured out-of-pocket before the health insurer pays its share.

  • Co-payment:

This is the amount to be paid by the insured out-of-pocket before the health insurer pays for a particular visit or service.

  • Coinsurance:

This is a percentage of the total cost that insured person may pay while the insurance company pays his percentage.

Comprehensive health insurance

Comprehensive health insurance policy pays a percentage of the hospital bill and physician charges after a deductible amount or a co-payment is met by the insured. These plans are generally expensive because of the high potential benefit payout and wide range of benefits covered.

Scheduled health insurance

These plans may provide for hospitalization and surgical benefits, but these benefits will be limited. Scheduled plans cost much less than comprehensive health insurance. They generally pay limited benefits amounts directly to the service provider, and payments are based upon the plan's schedule of benefits.

Health Insurance in US

The health care system in United States relies heavily on private health insurance not-for-profit health insurance. It is the primary source of coverage for most Americans. According to the United States Census Bureau, approximately 85% of Americans have health insurance, nearly 60% obtain it through an employer, while about 9% purchase it directly. Various government agencies provide coverage to about 28% of Americans.

Public programs provide the primary source of coverage for most seniors citizens and for low-income children and families who meet certain eligibility requirements.

Private health insurance may be purchased on a group basis or purchased by individual consumers. Health insurance sponsored by employers is paid for by businesses on behalf of their employees as part of an employee benefit package. Most private health coverage in the US is employment based.

The HealthMarkets Companies one of the insurance companies in US, founded in 1985, offer a broad and flexible array of health insurance products to suit the needs of customers including the self-employed, individuals and families, as well as small businesses.

They offer three main types of health insurance plans:

  • Basic Coverage Plans
  • Basic PPO Plans
  • Catastrophic Coverage Plans

Several other supplemental insurance plans are also offered by HealthMarkets Companies such as Dental Coverage, Vision Coverage, Accident Insurance, Critical Care, Cancer Insurance, Hospital Indemnity.

Explaining about a personalized approach designed with the customer in mind, HealthMarkets say "Unlike typical, 'one-size-fits-all' insurance plans, our products can be personalized to fit your specific needs and budget. This means you can get the health protection you need, without paying for things you don't need or want. It's a smart way to look at health insurance and may save you money. Whether you're an individual, part of a family, have a small business or are self-employed, one of our local agents can build a customized protection plan that's just right for you."

Aetna Inc., one of the leaders in health care, dental, pharmacy, group life, and disability insurance and employee benefits, offer various plans to individuals & families and employers & organizations. "Medical insurance helps you pay for health care. That’s why it’s important to understand your medical plan. If you’re buying coverage on your own, choose the plan that’s right for you," the company says. 

Some of the plans offered by Aetna Inc. are:

  • Medical insurance
  • Dental insurance
  • Health expenses funds
  • Pharmacy plans and services
  • Medicare insurance
  • Dissability insurance
  • Vision insurance

Another leading insurance company Assurant provides different products to its customers. Individual Health Insurance, Small Group Health Insurance, Health Savings Accounts, Short-Term Health Insurance are some of the plans offered by the company.


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    • tipstoretireearly profile image

      tipstoretireearly 5 years ago from New York

      It'll be interesting to see how things change under the Affordable Care Act. How many insurers in the list will thrive under the new rules?

    • HealthExchange profile image

      HealthExchange 5 years ago from Midwest

      The MLR, from recent legislation, now rebated back excess premiums to policyholders. A step in the right direction.

    • profile image

      CarriD 6 years ago

      I am an RN who handles prior authorizations in an oncolgoy setting. I must say there is a special place in hell for the ceo's, and share holders involved with insurance companies. Shame on you all. I invite you to spend a day with me to see your graphs,statics, and profit margin analysis in action.