The term health insurance is generally used to describe a form of insurance
that pays for medical expenses. It is sometimes used more broadly to include
insurance covering disability or long-term nursing or custodial care needs. It
may be provided through a government-sponsored social insurance program, or
from private insurance companies. It may be purchased on a group basis (e.g.,
by a firm to cover its employees) or purchased by individual consumers. In each
case, the covered groups or individuals pay premiums or taxes to help protect
themselves from high or unexpected healthcare expenses. Similar benefits paying
for medical expenses may also be provided through social welfare programs
funded by the government.
Health insurance works by estimating the overall risk of healthcare expenses
and developing a routine finance structure (such as a monthly premium or annual
tax) that will ensure that money is available to pay for the healthcare
benefits specified in the insurance agreement. The benefit is administered by a
central organization, most often either a government agency or a private or
not-for-profit entity operating a health plan