Health Insurance, just like many other types of insurance, works by collectivism; that is, a number of people together collectively pool their risk, with the risk in this case being the possible incurrence of medical bills.
Health insurance varies from country to country around the world; sometimes the collective is publicly owned and sometimes it is managed by profit-making companies. The type of health insurance we are accustomed to in the UK is the latter type, with many companies offering various forms of insurance.
The concept of this kind of insurance has existed since 1694, and by the late 19th century, ‘accident insurance’ was available, first offered by the Franklin Health Assurance Company of Massachusetts in the US. Founded in 1850, this firm insured customers against railroad and steamboat accidents and injuries, and by 1866 there were 60 different organisations that offered accident insurance, although consolidation took place shortly afterwards.
Policies covering medical expenses and hospitals followed later in the first half of the 20th century.
How it works
Health insurance is a bit of a gamble, like any other insurance. The gamble is that you will gain more from the insurance company in what it pays out for your medical costs than you have to pay out to them yourself.
You set up an agreement between yourself and the insurance company as to what it will pay for should you get ill, and then you pay a regular premium to them.
In the UK we are lucky to have the National Health Service (NHS) which entitles everyone to free healthcare and so it isn’t necessary to have health insurance to foot medical bills, but many people choose to buy separate insurance anyway.
With private insurance, in general, waiting times are shorter to see specialists and even have operations. Many people argue that the standard of care provided is higher than if a patient relied on the NHS to provide care, and there is of course access to certain drugs which aren’t available on the NHS.
If a patient has to spend an extended period of time in hospital, facilities are generally better if the patient is paying, for example they may be given a private or semi-private room in which to recuperate, and may have a dedicated nurse attend to them.
Many people find that taking out health insurance is an affordable way of having peace of mind that if something should go wrong with a family-member’s health the problem will be dealt with in the best possible way and there won’t be any lengthy delays in treatment should any be needed.