How Health Insurance Works

how health insurance works
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The insurance industry is filled with diverse kinds of insurance policies and one of them is health insurance and many wonder how health insurance works.

Oftentimes I have seen people confuse health insurance for life insurance. Many believe they are similar while some assume you can choose either one of the two.

In this article, I will be explaining what health insurance is about, how health insurance works, and the difference between health insurance and life insurance.

You will understand the provisions of health insurance and how it is different from life insurance.

One of the goals I intend to achieve is to correct the idealogy that you can choose to have either one of health insurance or life insurance.

Truth is, neither health insurance nor life insurance is sufficient enough. Having one does not negate the need to have the other. And this is primarily because of their differences.

As an added bonus, I will show you some of the best health insurance companies in the United States where you can purchase health insurance.

Without further ado, what is health insurance?


What Is Health Insurance?

Health insurance is an insurance policy that pays for medical expenses arising from prescription drugs, dental problems, surgeries, and general medical care.

It will typically reimburse a policyholder when they incur expenses from bodily injuries and illnesses.

The reimbursement can be done by the health insurance company directly to the policyholder or the healthcare provider.

In the United States, health insurance is sometimes added to an employee’s benefit but premiums are paid in part from employee’s wages.

How Health Insurance Works

Health Insurance is not as hard as it seems. Trying to establish what it is about only gets hard due to the already existing misconception surrounding the insurance type.

Here’s how health insurance works.

If you purchase health insurance from a particular company, there is a network of healthcare providers you must seek care from.

Going outside of the network of healthcare providers as stipulated by your health insurance provider will result in higher payments.

Some companies will not pay for services policyholders get outside of their network of healthcare providers.

Obtaining healthcare services without pre-authorization is not allowed by most insurance companies.

An insurance provider may refuse to pay if a policyholder purchases certain drugs at a high rate when a generic version of the drug is available at a lower cost.

Every health insurance company has their modus operandi and rules. They are captured in policy documents handed to intending policyholders.

Due diligence must be adopted in reviewing the provisions and coverage of each health insurance company.

Furthermore, there is something called co-pays in health insurance. Co-pays refers to set fees that the insured must pay for services.

They are deductibles that must be paid in full by policyholders before the insurance company will be entitled to pay for any cover or claim.

Together with health insurance, qualified individuals can also enjoy the following insurance covers:

  • Critical illness Insurance
  • Long-term care insurance (LTC)
  • Disability insurance


Difference Between Health Insurance and Life Insurance

If you have prior knowledge on life insurance and have an understanding of what health insurance is about (as I have highlighted already), you will be able to differentiate between these two insurance types.

Is health insurance and life insurance similar? Absolutely not.

They are two different insurance policies and can not be substituted for each other.

Health Insurance like I stated earlier on caters for medical expenses while life insurance is a cover for the family or beneficiary of an insured individual after their death.

When a person gets life insurance, they do not benefit from the insurance policy. No one does except the person who buys the policy dies.

After the death of a life insurance policyholder, the life insurance company pays a compensation to the family of the deceased or any beneficiary they choose before they died.

While life insurance works only after the death of the policyholder and is enjoyed by others, health insurance covers for a person’s medical expenses.

You see why you can not substitute one for the other. While one works during the insured lifetime (health insurance), the other works after the death of the insured (life insurance).

If you already have life insurance in place, there is no harm getting health insurance also.

Health Insurance Companies in the United States

There are about 900 health insurance companies in the United States. It can be difficult sorting through the numbers.

Here are some of the best health insurance companies you should consider buying your health insurance policy from.

  1. Aetna
  2. Blue Cross/Blue Shield
  3. Cigna Health Insurance
  4. Humana
  5. Kaiser Foundation Health Plans
  6. United Healthcare Services Inc.
  7. HealthPartners
  8. Harvard Pilgrim Health Care
  9. Capital District Physicians’ Health Plan (CDPHP, CDPHN)

Any of the nine (9) health insurance companies listed above can provide excellent health insurance in the United States.



I am optimistic the confusion about health insurance and life insurance has been tackled and you would not join in mixing them up.

We are encouraged to add health insurance to our bank of insurance policies even though we already have life insurance.

There are so several rules in the health insurance market and one needs to play by all of them in order to get the best out of their policy.

These rules are contained in the policy document issued by health insurance companies and careful review is recommended.

And that is on how health insurance works. I trust you got value.

Brodrick Emmanuel Ebube
Brodrick Emmanuel Ebube is the content manager at He works with other contributors from the ideation of content and down to its execution. He ensures that all articles published on our blog meet international standards, and are well-optimized for search engines. Connect with him on Twitter - @gospelcaster_ng

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