Definition of Health Insurance Coverage

Medical expenses can be costly. Health insurance is a type of insurance coverage that will compensate specific sums for medical expenses. A health insurance company can offer various coverage options.

Function

• Health insurance is a policy that pays for medical treatment and surgical expenses for the insured party. Health insurance either reimburses or directly pays the care provider, and is often included in employee benefits by employers.

Terminology

• Common options for employee health care coverage include fee-for-service coverage, health maintenance organizations (HMOs) and preferred provider organizations (PPOs). Fee-for-service coverage means the insured can receive the services of a hospital or doctor with total or partial reimbursement with most insurance companies offering 80/20 plans, where the insurance company pays 80 percent and the employee pays 20 percent of the bill. HMOs provide benefits at a fixed price and minimal contribution from the insured, but certain doctors and hospitals are specific to the plan. PPOs are basically managed fee-for-service plans with restrictions used to limit the cost and frequency of health care.

History

• The Merriam-Webster dictionary reveals that the first known use of the term "health insurance" was in 1901. The Public Broadcasting Service (PBS) states that this is around the time when the American Medical Association (AMA) became a powerful national force and of the onset of "organized medicine."