HEALTH INSURANCE

system for the advance financing of medical expenses by means of contributions or taxes paid into a common fund to pay for all or part of health services specified in an insurance policy or law. The key elements in health insurance are advance payment of premiums or taxes, pooling of funds, and eligibility for benefits on the basis of contributions or employment without an income or assets test. Health insurance may apply to a limited or comprehensive range of medical services and may provide for full or partial payment of the costs of specific services. Benefits may consist of the right to certain medical services or reimbursement of the insured for specified medical costs and may sometimes include income benefits for working time lost owing to sickness or maternity leave. A health insurance system that is organized and administered by an insurance company or other private agency, with the provisions specified in a contract, is private, or voluntary, health insurance. Private health insurance is usually financed on a group basis, but most plans also provide for individual policies. Private group plans are usually financed by groups of employees whose payments may be subsidized by their employer, with the money going into a special fund. Insurance of hospital costs is the most prevalent form of private health insurance coverage; another type is major medical expense protection, which provides protection against large medical costs but avoids the financial and administrative burdens involved in insuring small costs. If a system is financed by compulsory contributions mandated by law or by taxes and the system's provisions are specified by legal statute, it is a government, or social, health insurance plan. (See social insurance.) This type of medical insurance plan dates from 1883, when the government of Germany initiated a plan based on contributions by employers and employees in particular industries. In the United States, Medicare (medical insurance for the elderly) and Medicaid (medical insurance for the poor) are government health-insurance programs. The distinction between public and private programs is not always clear because some governments subsidize private insurance programs. Quite different, however, are socialized medicine and government medical-care programs. In these systems, which are usually financed from general tax revenues, doctors are employed, directly or indirectly, by a government agency, and hospitals and other health facilities are owned or operated by the government. The National Health Service in the United Kingdom and the hospitals operated by the Department of Veterans' Affairs in the United States are examples of such systems.