Health Insurance Overview

Health insurance covers the medical costs of the insured in the event of illness due to insured causes or accidents. It can be provided by either the government or a private agency. There are several types of health insurance available to citizens of the United States, which include Medicare, Medicare advantage, and Medicaid.

The price paid for health insurance is based on many factors. Because of an aging population, health costs are higher since the aged require much more medical care than the younger population. As a result, health care costs have increased. Many other factors include unhealthy lifestyle choices such as use of drugs and alcohol, smoking, eating unhealthy foods, lack of exercise and obesity. These all lead to an increase in the cost of providing health care. A lack of doctors in the area can also cause an increase in cost.
When it comes to private health insurance, most providers must face a dilemma of two major problems; adverse selection and ex-post moral hazard. Specifically when dealing with health insurance, those who are unhealthy are much more likely to purchase health insurance because of greater incurred medical costs. On the other hand, those who consider themselves to be fairly healthy may decide that health insurance is an unneeded expense because paying a visit the doctor once each year will cost them much less than making health insurance payments in the long run. The term adverse selection describes the likelihood that only those who will actually benefit from health insurance are going to bother to buy it.
Due to adverse selection, insurance companies now use a patient's medical history in order to screen out people with known medical conditions. Before purchasing health insurance, a person usually fills out a comprehensive medical history form that asks whether the person smokes, how much the person weighs, whether the person has been treated for any of a long list of diseases and so on. In general, those who appear to be possibly large financial burdens are denied coverage or charged higher premiums in order to lower the risk. Healthy applicants however are likely to be given discounts if they don’t smoke and are pretty healthy. A moral hazard is the state of mind and difference in habits that occurs when someone has the knowledge that if something bad were to happen to them, their personal expenses would be softened by their health insurance.  
Insurance companies have been known to really dig hard for pre-existing conditions in-light of a large payout for care. The recent release of the movie Sicko, by the famous directory Michael Moore has focused a spotlight on some of these ‘dirty’ practices within the health care industry.

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