What Is Medical Insurance?

Medical insurance is a form of health care risk management that helps people pay for medical expenses. It involves the payment of a monthly premium in exchange for a promise by the insurance company to pay for certain healthcare services in the event of illness or injury. There are two basic types of medical insurance: private and public. Private medical insurance is generally purchased through an employer or individual; whereas, public medical insurance is provided by government-sponsored programs such as Medicare and Medicaid.

Medical Insurance Coverage

The scope of coverage of a particular medical insurance plan is a key consideration when choosing a policy. A wide range of benefits may be available, but the specifics depend on the type of policy purchased. For example, some plans might not cover maternity, while others might require prior authorization for certain procedures or tests. In addition, the availability of in-network versus out-of-network providers is another factor to consider. In-network doctors and hospitals have contracts with the insurer that offer rates that are often lower than the “usual and customary” charges for the service.

Out-of-network doctors and hospitals have no such agreements with the insurance company, so their prices are typically higher. Many medical insurance plans require that a patient choose an in-network doctor or hospital for a procedure, or at least agree to pay a higher coinsurance rate for out-of-network services.

One of the challenges with current American health care is that it is fragmented. Patients see different doctors for acute care, preventive services, and testing; and the information gathered in each setting is not always shared. As a result, unnecessary procedures and duplication of tests occur. For example, a doctor may prescribe medicine that interacts negatively with other medications the patient is taking or send blood work to a lab that already sent it to another lab.

The other major challenge with current health care is that it is expensive. Many people cannot afford the high cost of the care they need, and a significant number are in debt due to medical bills. This leads to a vicious cycle in which medical costs and insurance premiums continue to increase faster than incomes. This, in turn, makes it even harder for individuals to obtain quality health care. Fortunately, there are ways to protect against these rising costs, such as purchasing a medical insurance plan that offers comprehensive coverage at an affordable price.