Medical insurance, or health insurance, is a form of risk management that helps pay for medical expenses. It is a type of insurance that covers the cost of some or all of the risks of incurring medical expenses in exchange for a premium, a periodic payment, or a lump sum settlement. It is generally available either through a private insurer, a group plan offered in connection with employment, or a government program like Medicare and Medicaid in the United States.
A typical insurance policy covers only a specific set of costs and conditions, usually defined in a contract between the insurance provider and the insured individual or his/her sponsor (e.g., a company or government) and specified in a member contract (Evidence of Coverage booklet for private insurance or national health policy for public insurance). Most countries have some form of universal or mandatory medical insurance.
Depending on the country, some forms of health insurance are known as “socialized medicine” and are financed by compulsory contributions or taxes from all citizens and/or employers to provide a range of comprehensive medical care services. Examples include the National Health Service in the United Kingdom and the Veterans Health Administration program of the United States.
Many privately purchased health plans use a managed care model, with providers being part of a network and following negotiated rates and other rules to control costs. Some examples are health maintenance organizations (HMOs), preferred provider organizations (PPO), and exclusive provider organization (EPO).
While having health insurance protects against expensive medical bills, it also helps keep people healthy by encouraging regular screenings and preventive healthcare, which can help identify problems early and make treatment less costly. Studies show that people who have health insurance are twice as likely to get preventive care than those without it.
Having health insurance can help you afford the care you need when you need it, even if you have to wait until your annual deductible is met. And it can keep you out of debt — according to a 2019 study, two out of three Americans who file for bankruptcy cite medical bills as a contributing factor.
All major medical insurance plans sold in the individual market are regulated under the Affordable Care Act (ACA, or Obamacare) and must meet its requirements. However, some states have their own laws that may apply to certain types of coverage. Most ACA-compliant major medical insurance plans offer guaranteed issue, meaning that no one can be turned down for coverage. In addition, people who purchase a major medical insurance plan during an open enrollment period or special enrollment period triggered by a qualifying event can’t be turned down for pre-existing condition protections. Learn more about getting health insurance.