Different
Types
There are four main
types of health insurance. Traditional indemnity
plans are at one end of the spectrum and health
maintenance organizations (HMOs) are at the other.
Preferred provider organizations (PPOs) and point-of-service
plans (POS) combine features of both indemnity
plans and HMOs, but are generally considered managed
care plans.
It's important to understand
the differences between the four main types of
plans, and we urge you to read through this section
to familiarize yourself with each. But you should
also bear in mind that distinctions among plans
grow increasingly blurred everyday. Almost all
indemnity plans (also called fee-for-service plans)
apply managed care techniques to contain costs
and guarantee appropriate care. Likewise, an increasing
number of managed care plans contain fee-for-service
elements. The most important thing to keep in
mind is that there are more health insurance options
available today than ever before, and that's good
news for consumers.
PPO'S
A preferred provider organization
(PPO) is the form of managed care closest to an
indemnity plan, which typically allows you to
see any doctor, any time. A PPO negotiates discounts
with doctors, hospitals and other providers, who
then become part of the PPO network.
When you see a physician in the
network, you typically make a copayment
a fixed fee for service, such as $25 and
pay some coinsurance. For example, the insurer
may reimburse you for 90 percent of the cost of
the doctor’s visit if you go to a provider
within the network. So after an office visit,
you’ll owe 10 percent of the total bill,
plus your copayment.
When you see a physician out
of network, you usually still receive coverage,
but at lower levels. For instance, the insurer
might only reimburse you for, say, 70 percent
of the cost, and require a higher copayment. You
may also have to pay the difference between what
the provider charges and what the plan considers
reasonable.
One of the things people
like about PPOs is the ability to make self-referrals.
That means you can see any doctor you want, including
specialists inside and outside the PPO network,
without a referral. Also, premiums are usually
lower than indemnity plans because of the negotiated
provider discounts.
HMO'S
With a health maintenance organization
(HMO), instead of paying for each individual service
that you receive, you pay a set monthly or quarterly
premium. In return, HMOs offer you a range of
health benefits, including preventive care.
With an HMO, you choose a primary
care physician affiliated with your plan, usually
a general practitioner, to coordinate your care.
Generally, you must receive a referral from your
primary care physician before visiting a specialist
in your provider network. With rare exceptions,
your HMO will require that you seek care within
its network of providers doctors, hospitals,
and labs -- with whom your HMO has negotiated
a fee schedule. Negotiating discounts from providers
is one of the main ways HMOs keep healthcare costs
in check.
In addition to your monthly or
quarterly premiums, most HMOs require a copayment
for certain services, for example, $10 or $20
for an office visit. Some, but not all, HMOs will
apply copayments to hospitalizations as well.
One of the interesting
things about HMOs is that they deliver care directly
to patients. Patients may to go to an HMO’s
medical facility to see the nurses and doctors.
Another common model is a network of individual
practitioners. In these individual practice associations
(IPAs), you will get your care in the office of
a physician who may accept patients from different
health plans.
POS Plans
A point-of-service plan (POS)
combines elements of both a health maintenance
organization (HMO) and a preferred provider organization
(PPO). The plan allows you to use a primary care
physician to coordinate your care, or you can
self-direct your care at the "point of service."
When medical care is needed,
you generally have to two or three options, depending
on the particular health plan:
1. You can go through a primary
care physician, in which case the services will
be covered under HMO-like guidelines (i.e., usually
just a copayment will be required).
2. You can access care through
a PPO provider and the services will be covered
under in-network PPO guidelines (i.e., usually
a copayment and coinsurance will be required).
3. You can obtain services
from a provider outside of the HMO and PPO networks.
These services will be reimbursed according to
out-of-network rules (i.e., usually a copayment
and higher coinsurance charge will be required).
Indemnity Plans
With an indemnity plan, you can
go to the doctor of your choice, and you, your
doctor or your hospital submits a claim to your
insurance company for reimbursement. Just note
that you will only be reimbursed for "covered"
medical expenses, a list of which can be found
in your benefits summary. The good news is that
the vast majority of procedures will be covered
under an indemnity plan.
Indemnity plans pay a sizable
percentage of what they consider the "usual
and customary" charge for covered services
in your area. The insurer generally pays 80 percent
of the usual and customary costs and you pay the
other 20 percent, which is known as the coinsurance.
If the provider charges more than the usual and
customary rates, you will have to pay both the
coinsurance and the excess charges.
For example, if your insurer
determines that the usual and customary fee for
"X medical service" is $100, the insurer
will pay $80 and you will be required to pay the
remaining $20. However, if your doctor charges
more than the usual and customary fee, $105 for
example, you would be required to pay the additional
$5, making your total expense $25. Many indemnity
plans reimburse at the 80/20 level, but some reimburse
at other levels, such as 70/30.
In addition to the coinsurance,
most indemnity plans have deductibles. These are
amounts of covered expenses you must pay before
the insurer will start reimbursing you for your
medical bills. These might range from $250 to
$500 per year per individual, or $500 or more
per family. Generally, the higher the deductible,
the lower the premiums, which are the monthly,
quarterly, or annual payments for the insurance.
Indemnity policies typically
have an out-of-pocket maximum. This means that
once your covered expenses reach a certain amount
in a given calendar year, the insurer will pay
the usual and customary fee in full. However,
if your doctor charges you more than the usual
and customary fee, you still may have to pay a
portion of the bill.
Some policies also have
lifetime limits on benefits. Most experts recommend
that you look for a policy that has a lifetime
limit of at least $1 million.
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