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Health Insurance Defined

Health insurance is one of the most controversial forms of insurance because of the conflict between the need for the insurance company to remain solvent versus the need of its customers to remain healthy, which many view as a basic human right. This conflict exists, in a liberal healthcare system, because of the unpredictability of how patients respond to medical treatment; hypothetically, if a large number of customers of a particular insurance company were to contract a rare disease costing 100 million dollars to fight for each patient, then the insurance company would be faced with the choice of either charging all its future customers astronomical premiums (thus losing customers and going out of business); paying all claims without complaint (thus going out of business); or fighting the customers in an attempt to deny the costly treatment (thus outraging patients and their families, and becoming a target for lawsuits and legislation).

Many countries have made the societal choice to avoid this important conflict by nationalizing the health industry so that doctors, nurses, and other medical workers become state employees, all funded by taxes; or setting up a national health insurance plan that all citizens pay into with tax payments, and which pays private doctors for health care. These national health care systems have their problems, too, however; many countries have citizen groups which protest bureaucracy and cost-cutting measures that delay medical treatment unduly.

Some common complaints about private health insurance companies include:

Insurance companies do not normally announce their health insurance premiums more than a year in advance. This means that, if you get sick, you may find your premiums raised a lot. This defeats the purpose of having insurance in the first place.

If insurance companies try to charge different people different amounts based on your health, people will feel they are unfairly treated.

Some states require that insurance companies cover all who apply at the same cost; this rule has the effect (called adverse selection) that healthy people subsidize sick ones, and thus only really sick people buy insurance and the premiums are very expensive.

By the time a claim is made, it is in the best interest of the insurance company to use lots of paperwork and bureaucracy to attempt to deny the claim. Some percentage of people will give up, leading to lower costs for the insurance company.

Health insurance is only available at a reasonable cost through an employer-sponsored group plan. This means that unemployed individuals and self-employed individuals are at a big disadvantage.

Experimental treatments are generally not covered. This is especially criticized by those who have already tried, and not benefited from, all "normal" medical treatments for their condition.

The Health maintenance organization ("HMO") type of health insurance plan has been criticized for excessive cost-cutting policies, the least popular of which is having accountants or other administrators essentially making medical decisions for customers by deciding which types of medical treatment will be covered and which will not.

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