Health Insurance: An Overview

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Health insurance is a mechanism to ensure protection of individuals against financial risk in case of illness, when the disease robs the person of the capacity to work.

Health insurance may be handled by the state, private insurers or can have a mixed system. The user enjoying state insurance may also purchase private insurance from a mutual company (supplemental health insurance) which provides full reimbursement or access to a network of complementary care.

In most Western countries, a large share of health insurance is supported by the state. This is one of the fundamental components of social security and duty of the state under the Universal Declaration of Human Rights of 1948. A state health insurance system can be managed by a state agency, delegated to private organizations, or jointly.

Under state health insurance, the premium paid by the insured does not necessarily follow the rules of private insurance. The state system satisfies both a pure insurance function and distribution function in which the wealthy pay more.

In some countries, all insured persons pay the same for state health insurance, regardless of whether they are old or young, permanently sick or healthy. When the health insurance contribution rate is set by the state, it is not risk-based, but based on income or occupational status. The contribution includes a component redistribution in favor of low-and non-contributory insurance.

The state health ‘pay as you go’ insurance provisions for the higher costs associated with senior citizens. The insured will receive insurance benefits in kind. For the insured person receives an insurance card, to be replaced in future by the health card.

The reform of the insurance required by the U.S. President Barack Obama, and voted by the Senate and by the House of Representatives. Requires all Americans to take out insurance before 2014 under penalty. It prohibits denial of insurance cover to policyholders because of their medical history.

It provides financial assistance to families with incomes below $ 88,000 per year. The reform is expected to cost $ 940 billion over ten years. Its funding should be provided by taxes on high incomes.

In countries such as South Africa, low income and senior citizens enjoy free basic health services offered by the state. While households with higher income thresholds typically make use of private insurers whose packages vary.

With the private health insurance, the service is based on the reimbursement principle. That is, the treatment and therapy is not stipulated in the statutory health insurance, but the doctor can be in consultation with the patient.

Comprehensive health insurance remits part of the expenses related to hospital and physician charges after a  co-pay or deductible is settled by the insured. Such programs are normally steeply priced due to the high potential benefit payout, which can reach as much as five million dollars.


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