What Is Health Insurance, And How Does It Work?

 Health insurance plans pay for medical and surgical expenses incurred from certain life events by the insured. These policies can reimburse the insured for costs incurred from illness or injury or pay the health care provider directly. In addition, it is often included in employer benefit packages as an employee incentive.

Insurance generally works by either reimbursement or direct payment to the provider. In the former case, the insurer reimburses the insured after the latter incurs medical expenses, while in the latter case, the insurer pays the provider directly for covered services. Some plans also cover lost wages and other non-medical costs incurred due to an accident or sickness.

Many plans are available, each with different essential health benefits and coverage levels. The most common types of programs are Fee-for-Service (FFS) plans, Preferred Provider Organizations (PPO), Health Maintenance Organizations (HMO), Point of Service (POS), Exclusive Provider Organizations (EPO), and Consumer-Driven Health Plans (CDHP).