In 2006, almost 43 million Americans had no health insurance, which translates into nearly 15 percent of the American population. This might be attributed to the fact that health care costs can be very expensive, and the cost of even the most basic care is steadily rising. Today, the amount Americans spend on health care is four times as much as the government spends on national defense. So it's no surprise that along with increased health care cost comes increased health insurance premiums. Employers typically bear the brunt of the expense for health insurance, but individuals are paying more and more each year as well. In 2006, employer insurance premiums increased 7.7 percent, twice the rate of inflation.

Doctor and patient
© Photographer: Photoeuphoria | Agency: Dreamstime
Health insurance can help offset the cost
of expensive medical bills.

But what exactly is it you're paying for? Where does your monthly premium go if you don't get sick or go to the doctor? What do you do if you're not working or you're self-employed? What's the difference between all of the various plans there are to choose from? The maze of information you have to wade through about claims, co-pays, co-insurance, deductibles and more is enough to make your head swim.

In this article, we'll break down the main types of plans and explain their differences. Keep in mind that there are always variations in individual plans, but we'll at least give you a head start when you're trying to select the right plan and coverage for you.

Health Insurance History
The earliest form of health insurance (aside from life insurance) was "accident" insurance. Accident insurance typically paid a specific, pre-determined amount to the policyholder in the event of an accident. It really worked more like today's disability insurance. This was the sole type of insurance available in the United States until the mid-19th century.

The true precursor to modern health insurance began in 1929 in Dallas, Texas. Justin Kimball created Blue Cross as a way for local teachers to pay a hospital 50 cents each month, so that when they later went to that hospital to have children, they wouldn't be charged. This was actually pre-payment rather than insurance, although some of them probably never had children.

This hospital maternity plan evolved to include sickness and injury care as it does today. It still only covered the hospital charges. Then Blue Shield was created to cover the growing expense of doctors' care. For more information about the history of health insurance, check out this encyclopedia article.