Merritt Personal Lines Manual: Health Insurance Basics Introduction

If you've ever been sick or injured, you know that it's important to have the right kind of health insurance. Going without health insurance is risky. What if you get injured and require surgery? The cost of a hospital stay can be as much as $400 a day. Or what if you or your significant other becomes pregnant? Even through a clinic, the price of prenatal care and delivery can exceed $5,000 today.

Insurance is designed to help you in these situations to assume the risk of paying your medical bills for a fee, of course.

If you have to pay for your own health insurance, you know it isn't cheap. But one major medical expense can make one or two or even 10 years' worth of premiums pay for themselves.

In the United States, many people get their health insurance from their job. Health insurance first became an employee benefit in the U.S. during World War II. "Many companies found that offering health care coverage was an effective way to attract scarce workers without violating the wartime freeze on salaries," Kathleen Sebelius, former insurance commissioner for the state of Kansas, has written. "After the war, full health care coverage soon became an expected benefit of big-business jobs."

Today, full health care coverage, for the most part, remains the domain of large businesses, with an estimated 41 million Americans still going without. According to the Washington Insurance Council, data from a survey of 3,322 firms show that only 40 percent of employers offer health coverage although their employees account for 77 percent of the work force in this country.

Many small employers cannot afford to offer health insurance to their workers. And plenty of mid-size and even large firms can do so only if the employees pay part of the cost.

Still, if you already have at least some health coverage through your employer, you're in pretty good shape even if you have to pay part of the price. You also may have the option of paying those costs with pre-tax dollars, which reduces your taxable income for the year and shrinks the bite Uncle Sam takes out of your paycheck. Sometimes, the tax benefits wind up making your health insurance virtually free for you, anyway.