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What is health insurance about?

woman thinking about health insuranceHealth insurance provides coverage for an individual’s medical, hospital, pharmaceutical and other health related expenses. Insurers make payments to doctors and other medical practitioners for services provided to policyholders, or they reimburse policyholders for amounts they have spent for these services, out of their own pockets.

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Today’s health insurance products are descendants of the popular “health and accident” type policies of a generation or two ago. Accident policies came into being as a response to employees being hurt or disabled on the job. Without the ability to work, the employee would be without the means to support his family.

To better support the families of injured workers, mutual assurance societies, or mutual insurance companies were initiated. Once organized, these groups began selling protection to their own workers in a variety of industries. Benjamin Franklin started the very first mutual insurance group, in America, in 1752.

Mutuals were business enterprises that had no shareholders and were owned and operated by their policyholders. These early forerunners of our modern insurance companies weren’t as interested in profits as they were in providing affordable protection to as many members of the community as possible.

When did health insurance begin?

Health coverage as we know it today began about one hundred years ago. In 1911, the first group health policy was issued to a U.S. employer. Since that time, the health insurance industry has gone through several major shifts and changes. In the 1920s and 1930s, local hospitals stepped up, offering services on a pre-paid basis. This eventually led to the development of Blue Cross groups around the country.

Prior to the advent of health insurance, Americans were expected to pay for doctor and hospital services out-of-pocket. Those that could afford to pay for their medical care received it; other, less fortunate individuals did not. Those without the means to pay had to forgo routine treatments for illness or injury, only visiting a doctor or hospital in the case of an extreme emergency.

Little has changed in that regard, as the costs of medical care and health insurance have skyrocketed over the last few decades. Over time, the U.S. government stepped in with legislation creating several new programs designed to provide insurance coverage and protection to those least able to afford it.

The most important of these efforts resulted in the creation of Medicare and Medicaidin the 1960s. Medicare, for those 65 and over, provides basic health coverage for seniors at low, subsidized rates.

Medicaid is for the lowest income Americans, those at or below federal poverty guidelines. Medicaid covers 100% of eligible expenses for its recipients.

Most Americans however, are able to take advantage of one of many private health insurance programs offered through their employers or purchased on their own.

What is group insurance?

Group insurance programs bring down the cost of insurance, and group health coverage serves the needs of a majority of Americans. Health insurance has been a long-standing benefit for American workers. Most Americans sign on for this coverage at their workplace and while insurance costs have increased, most employers still contribute a significant share of the monthly premiums.

Do I have options with group insurance?

Yes and no! Your employer will select a provider and a program or programs that they are willing to sponsor and offer to their employees. However, there are usually coverage options, including regular or high deductible, dental, vision, or other services. Prescription drug coverage can also be added or deleted from most group programs depending on the policyholder’s needs and budget.

How does Medicare work?

Turning 65 automatically qualifies an individual for Medicare benefits; however, a person must enroll during an open enrollment period. This year, 2011, that period runs from October 15 to December 7. The enrollment process requires that several decisions be made as to coverage. Those decisions are based on individual need and of course the ability to pay.

Once coverage is determined, it cannot be changed until the next open enrollment period, and will remain in force for the entire year. In most communities, there are agencies that provide information and support services to older adults that can be very helpful in sorting out the various options offered by Medicare.

Does Medicare cover everything?

No, Medicare does not pay for 100% of covered expenses. There are co-pays and deductibles as there are with any private insurance program. Because of this, many insurance companies now offer Medicare supplemental products, which cover the portion of medical expenses that Medicare does not.

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