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California is known for its varied climate and geography, as well as for its ethnically diverse population. By 2007, California's population has reached 37,700,000, making it the most populated state, the 13th fastest-growing in US. Having these numbers in mind, it is very clear why health insurance in this part of the world is so important. With growing hospital waiting lists and hygiene under scrutiny, health insurance is now vital and important for all the people that leave in this state. The personal income was $38,956 in 2006, ranking 11th in the US nation. Great number, one might say, meaning that Californians can afford to spend a few bucks on health insurance, for the peace of their minds.
In California, health insurance may be provided through a government-sponsored social insurance program, or from private insurance companies. Also, health insurance may be purchased on a group basis (e.g., by a company to cover its employees) or purchased by individual consumers. In each case, the covered groups or individuals pay premiums or taxes to help protect themselves from high or unexpected health care expenses.
But how exactly does this work? Health insurance works by estimating the overall risk of healthcare expenses and developing a routine finance structure (such as a monthly premium or annual tax) that will ensure that money is available to pay for the healthcare benefits specified in the insurance agreement. The benefit is administered by a central organization, most often either a government agency or a private or not-for-profit entity operating a health plan. Things are great so far. But what if man people get sick suddenly? Well, all the risks are calculated, operating with such big numbers leave almost no room for error. Basically, all insurance companies have great profit from this activity. Insurance companies use the term "adverse selection" to describe the tendency for only those who will benefit from insurance to buy it. Specifically when talking about health insurance, unhealthy people are more likely to purchase health insurance because they anticipate large medical bills. On the other side, people who consider themselves to be reasonably healthy may decide that medical insurance is an unnecessary expense; if they see the doctor once a year and it costs $300, that's much better than making monthly insurance payments of $450. But this was also taken into consideration by the insurance companies.
The U.S. market-based health care system, so the Californian system as well, relies heavily on private and not-for-profit health insurance, which is the primary source of coverage for most Americans. According to the United States Census Bureau, approximately 85% of Americans have health insurance; some 61% obtain it through an employer, while about 8% purchase it directly. Various government agencies provide coverage to about 27% of Americans, and these numbers are similar for California as well.