Health care is financed from the Estonia's state budget under health insurance budget funds through health insurance fund, also from rural municipality and city budgets, by the patients and from other sources as direct appropriation. Compulsory health insurance was established in Estonia in 1992.
Health insurance is a system for covering health care costs for the prevention and treatment of an insured person, financing the purchase of medicinal products and medical equipment and for payment of benefits for temporary incapacity for work and other benefits.
The insured person is a permanent resident of Estonia or a person living in Estonia under temporary residence permit for whom the employer or the state pays social tax, or who pays the social tax on his or hers own behalf.

Persons on whom social tax is not paid, and who are equal persons covered by health insurance are:
1) pregnant woman whose pregnancy has been determined by the physician or midwife;
2) a person under 19 years of age;
3) a person who receives a state pension assigned in Estonia;
4) the insured person's dependent spouse, who has up to five years until the retirement age; 
5) a basic education student in education institution established and operating under the laws of Estonia or in foreign country equivalent institution until they are 21 years of age, secondary education student until the age of 24, vocational education student enrolled in formal education system and higher education student who is a permanent resident of Estonia.

Estonian health insurance fund takes over from an insured person:
- the payment obligation for health services that are included in the list of health services for the health insurance fund and have been provided for medical reasons;
 - the payment obligation for medicinal products needed for outpatient treatment and in the list of medicinal products for the health insurance fund and for the retail sale of special foods to be used for medical reasons.
- the payment obligation for medical equipment which is included in the list of medical equipment for the health insurance fund.

Financing of health care is regulated by Health Insurance Act.