What Is the Major Purpose of Health Insurance?

Health insurance is designed to provide financial help in the event of accident, injury or illness that leads to high medical bills, the inability to work or other financial complications. Premiums are paid to the insurance company every month in exchange for an agreement to cover medical costs. The extent of coverage can vary widely depending on the plan.

National Health Insurance

• In most developed countries, all citizens receive health coverage that is provided by the government. This is not the case in the United States, a fact that has caused much debate and led to extensive reform of the health care system by the Obama Administration in 2010. National health coverage is provided by many countries as a means of developing a healthier population and ensuring that lack of funds is not a barrier to receiving necessary care.

Prevention

• One advantage of health insurance, whether it is provided by the government, an employer or a personal plan, is that it encourages the insured person to deal with health issues quickly, rather than allowing them to worsen before seeking help. People with no insurance tend to ignore illness, because they don't want to pay for a doctor or hospital. If the issues turn out to be serious, they are more severe by the time they are addressed, requiring more extensive and expensive intervention.

Co-Payments and Deductibles

• A co-payment is an agreement by an insured party to pay a certain percentage of the costs for treatment. Co-payments are designed to reduce the cost of health care, and to deter people from seeking medical treatment on a whim. Deductibles are amounts that an insured party must pay prior to receiving coverage. A plan with a $1,000 deductible, for example, requires the individual to pay $1,000 in health care costs per year, after which the health plan is activated and covers the rest of the cost.

Group Coverage

• In the United States, many people are provided with health coverage by their employers. Employers do this as a benefit to attract good employees, and as a means of ensuring that their employees remain in good health. Group coverage, which covers both employees and their families, helps make up for the lack of national coverage, to some extent. Comprehensive care for children is particularly important, as ill health suffered during youth can have lifelong effects.