The Basics

Private Medical Insurance - How It Works

CIGNA Internationals basic business is to provide private medical insurance to expatriates and other globally mobile individuals. We have learned over the years that many of our new members, particularly those who come from countries with government-run national health services, can find the mechanics of their new coverage quite confusing.

What is a deductible, or excess? What is coinsurance? And why should I care?

This page is designed to answer those questions, and a few others. But first a little background.

Like government-sponsored health systems, private medical insurance is a product of the twentieth century. It developed to answer a need. Doctors had for many centuries operated in a fee-for-service system, in which the doctor treated the patient, and the patient then paid directly out of his own pocket for the services rendered.

As medical science improved (a process that got started in the nineteenth century), many new treatments became available that were highly effective but also quite expensive. A gap developed between the services available and the ability of people - including the wealthy - to pay for them.

The solution was to replace the fee-for-service system with a third-party payer system. The system could be government run, in which case the money came from tax revenue, or it could be private, in which case the money came from premiums, which could be paid by the individual or the individuals employer.

Different countries went different ways. In Great Britain, the National Health Service was launched in 1948 to provide free (that is, tax-funded) health care to all. About the same time, in the United States, private medical insurance offered through employers - known as group insurance - began to grow very rapidly. (One of CIGNAs predecessor companies was a major player in the development of this industry.)

Over the years, many countries have moved away from a purely government or purely private model. In the 1960s, the United States launched Medicare and Medicaid, government-run systems that cover the old and the poor, respectively. In the UK, meanwhile, private medical insurance grew up to supplement the services provided by the NHS. Australia looks a lot like the UK, with private insurance supplementing the government-run Medicare Australia.

The coverage that CIGNA International provides is designed to work with all the different systems that exist around the world.