What is the function of health insurance?

The primary function of health insurance is to pay those covered expenses, as outlined in the policy, incurred as a result of an accident or illness. It often has two elements, one being hospitalization expenses and the other being for the medical care rendered by a physician or other health care professional.

The vast majority of health insurance is employer-based, meaning that people have access to it through their employment. Not all employers offer it, and for those whose employers do not, they are free to obtain individual/family policies on their own.

Health insurance comes in a variety of types. These include traditional indemnity plans, which are becoming less common, and an array of managed care plans, including Health Maintenance Organizations and Preferred Provider Organizations. Both of the latter provide medical care on a prepaid basis, but differ in their delivery models, including by the degree of choice of provider that the member retains.

Most health insurance plans have deductibles and co-payments, although different terminology may be used. A deductible is an amount that the insured/member must pay before the insurer's liability for payment is triggered. A co-payment is a form of cost-sharing such that the insurer pays a percentage of a covered expense, and the insured pays the remainder. The size of the deductible and co-payment has an impact on premium.