Health Insurance: A Primier

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Abstract:

People buy insurance to protect themselves against possible financial loss in the
future. Such losses may be due to a motor vehicle collision, natural disaster, or other
circumstance. For patients, financial losses may result from the use of medical
services. Health insurance then provides protection against the possibility of
financial loss due to health care use. In addition, since people do not know ahead of
time exactly what their health care expenses will be, paying for health insurance on
a regular basis helps smooth out their spending.
While health insurance continues to be mainly a private enterprise in this
country, government plays an increasingly significant role. Especially during the
latter half of the 20th century, the government both initiated and responded to
dynamics in medicine, the economy, and the workplace through legislation and
public policies. For example, the Internal Revenue Service clarified that employer
contributions to employee health benefits are exempt from taxation, which
encouraged the growth of employment-based health coverage. Given the frequent
introduction of legislation aimed at modifying or building on the current health
insurance system, understanding the potential impact of such proposals requires a
working knowledge of how health insurance is designed, provided, purchased, and
regulated. This report, which will be updated, provides basic information about those
topics.
Persons and families without health coverage are more likely than those with
coverage to forgo needed health care, which often leads to worse health outcomes
and the need for expensive medical treatment. Since uninsured persons are more
likely to be poor than insured persons, the uninsured are less able to afford the health
care they need. Uninsurance can lead to health care access problems for
communities, such as overcrowding in emergency rooms. Furthermore, individual
states and the nation as a whole are affected through increased taxes and health care
prices to cover uncompensated care expenses.
Americans obtain health insurance in different settings and through a variety of
methods. People may get health coverage through the private sector, or from a
publicly funded program. Consumers may purchase health insurance on their own,
as part of an employee group, or through a trade or professional association. A small
minority of employees get health insurance at no up-front cost because their employer
pays the total insurance premium. However, 45 million Americans did not have
health coverage for the entire year of 2003.
Health insurance benefits are delivered and financed under different systems.
The factors that distinguish one delivery system from another are many, including
how health care is financed, how much access to providers and services is controlled,
and how much authority the enrollee has to design her/his health plan. To illustrate,
managed care is characterized by predetermined restrictions on accessing services,
whereas individual decision-making regarding use of health benefits is a hallmark of
consumer-driven health care. And as economic conditions change, a specific
delivery system may gain or lose the interest of affected parties.