Understanding What Health Insurance Actually Is

I have read and heard many opinions about health insurance recently as a result of the passing of the Affordable Care Act. One realization has struck me as undeniably true.

Many people do not understand the definition of health insurance.

First of all, health insurance IS NOT health care. Care is the actual treatment, and insurance is a method of paying for it.

Secondly, health insurance DOES NOT provide a "discount on care", and there is no such thing as "free health care". Insurance is a method of paying for the costs of treatment over a period of time rather than all at once when you need it. The cost of health care is very high and is nearly impossible to predict when it will be needed. Health insurance is simply designed to decrease that volatility.

The following are the three normal items an insured person pays for.

• Rate - (monthly, semi-annually, or annually) whether you use any health services or not.
• Co-Insurance - for the usage of a doctor or hospital’s time to diagnose and recommend treatments, if necessary.
• Deductible - The cost of using health services beyond recommendations
• Prescriptions - The cost of any medications you are instructed to take.

There may be other fees as well depending on the treatment required, but for most issues, those are the three items you pay for.

Those who choose to go without health insurance are fully liable for all expenses involved in treatment. The upside is that they do not have to pay a rate to an insurance provider regularly. And that is their choice. As long as that person understands the possible implications of not being insured, plans accordingly, and is accountable to their payment obligations, there is no issue.

The definition of health insurance and what it is designed to do is a very important thing to understand. All too often I hear terms used incorrectly, and definitions skewed. Only when we understand what these items are can we enter into a discussion about how to make the system more efficient.