Understanding Health Insurance Plans
In a country such as the United States the individual is a primary source for paying his medical costs. Until Social Security began in 1937, the individual was virtually the only source for funds to meet medical costs - and decades later he still financed most of the costs.
At the start of the 1970's governmental sources accounted for about one third of the health-care expenditures in the United States. Nongovernmental sources paid for the rest of the health care, and about one third of that sum was met by health insurance benefits. Economists calculated that individuals were spending almost 7% of their income on health care.
The costs of medical care and methods of financing it are constantly changing. The multiplicity of financing methods in the United States provides much automatic basic coverage for many segments of the population, particularly the aged, the poor, and workers in most occupations (where there is Social Security coverage, or where the employer arranges for a commercial insurance plan, or both). But there is virtually no automatic basic coverage for the young, for those who are not employed, and for workers in certain industries. Persons in these latter groups may either pay their medical expenses themselves or they may seek one of the many kinds of voluntary individual policies.
A clear trend has developed in the United States toward payment of most medical costs by governmental agencies or by private insurers, usually through some form of group insurance policy. In the second half of the 20th century the reliance on government insurance grew more rapidly. The growth apparently stemmed in large part from the ability of government coverage to encompass vast segments of the population who might not otherwise be able to finance their own medical needs.
At the start of the 21st century a major overhaul is taking place. Whether the changes will make for a better health care system remains to be seen.
Types of Health Insurance
Voluntary health insurance contracts in the United States and Canada protect against a variety of medical expenses and also against loss of income due to inability to work.
- Hospital. Most commercial plans and some Blue Cross plans provide a room benefit of, say, $20 a day, and also, say, $300, for miscellaneous hospital services, such as drugs, operating room, and laboratory services. Some commercial plans and most Blue Cross plans provide coverage of all costs in a semiprivate room.
- Surgical. Surgical coverage is typically provided through a schedule that establishes specified amounts for various procedures. An appendectomy may carry a benefit of $200 and a tonsillectomy a benefit of $75 toward the surgeon's bill. Panel physicians of Blue Shield and other medical plans provide operations for low-income subscribers without any additional charge.
- Regular Medical. This form of insurance provides benefits toward meeting physicians' fees in cases not involving surgery. Such care may be given in the home, physician's office, or a hospital. Regular medical insurance also may cover laboratory expense and diagnostic X-rays.
- Major Medical. Generally, major medical plans provide that after the insured has incurred a certain level of expense for an illness or injury, say $200, the insurer will pay 80% of all remaining expenses but not more than some maximum.
- Comprehensive. Comprehensive coverages are really a combination of hospitalization, surgical, and major medical into one contract with little or no deductible being applied to hospital and surgical charges.
- Dental. Dental insurance is offered either in a basic or a comprehensive type plan. The basic plan provides a schedule of allowances for each procedure subject to an annual maximum of, say, $500. The comprehensive plan pays 80% of the expenses above, for example, $50 per year and subject to a maximum that may increase each year to, perhaps, $5,000. Orthodontic treatment is generally excluded.
- Special Perils. Coverage may be attained for a host of miscellaneous special perils, including vision care, cancer, and polio.
- Auto and Travel. Commercial insurers provide contracts with large benefits arising from accidents in an automobile or in other kinds of travel. Benefits are generally paid only if death or dismemberment results.
- Income. Loss-of-income protection enables a person to receive a flow of cash benefits if his salary or wages cease due to inability to work. If a commercial policy limits coverage to accidental disability, it generally costs much less—or greater benefits can be provided—than if benefits are also paid for income loss due to illness. Not only is illness disability more frequent; it is also easier to feign than accidental disability. Generally the monthly income for accidental disability continues for Me; in contrast, the income payments for illness disability may be limited to 6, 12, 24, 60, or 120 months. Disability income benefits in the United States are paid both by corporate insurers and by the federal Social Security program.
With rising incomes and with rising favor for this type of coverage, disability income insurance has increased rapidly in volume in the United States. It may be viewed as more necessary than hospitalization coverage. If a person returns to work after incurring heavy medical expenses, he can frequently pay off his debts from his resumed income. In contrast, if he is totally and permanently disabled and lacks insurance that will maintain a flow of income, he probably cannot pay his debts, and he also needs income to survive.